Market divergent & chaotic, unwilling to move either way
Sectorally, the market is divergent and chaotic and no single inference can be drawn upon.
Sectorally, the market is divergent and chaotic and no single inference can be drawn upon. FMCG is in a sideways to consolidation phase, pharma is in a downtrend but bottoming out, IT is into a topping process, metals are bottoming out and oil & gas and realty are in an uptrend but are correcting.
Above all, midcaps and small caps are still under pressure. Such a divergent behaviour signals one thing that the market is unwilling to move either way. Nifty could test the gap created by the election day results in the worst-case scenario, which could be a good starting point for the bulls.
Globally too, the mood of the market is similar to that in India – not responsive to news events, moving sideways to consolidate and awaiting big triggers. Energy-based commodities are experiencing continuous selling pressure. Crude and natural gas, hopefully, have begun a major multi-year downtrend, which can even halve crude oil prices. That being the case, equity bulls will rejoice worldwide and India will not be far behind.
Event of the Week
Auto giant Tata Motors reported a massive decline of 23% in global sales, Indian passenger vehicles and two-wheeler makers are reducing production in double digits and inventories are at record high levels. Despite these moves, stock prices are refusing to go down, which indicates that the stock prices have already factored in the weakness in numbers. Therefore, very little room is left for downside for the time being.
Nifty50 is moving lower steadily, after making failed attempts to rise intermittently during the week. Volumes and volatility were low throughout the week, indicating that this is only a corrective fall and not the beginning of a bear market cycle. The gap of past month is the most likely support area. The 11,650 -11,450 range is a good support area for the market to find its feet. The current fall may not offer shorting opportunities, but traders should be watchful for any buying setups at lower levels.
Expectations for the Week
Next week, US Fed is likely to announce its rate policy and President Donald Trump’s reaction to this would create some stir in the global investor community and, in turn, in markets. Growth is the backbone of any investment and a weak commentary on growth although a positive for interest rates to come down further would be bad for global markets, which are mainly riding on growth expectations.
Investors are going around in circles trying to figure out a strategy to play this lacklustre market. Buy on dips should be the strategy in the FMCG and good quality private sector retail-focused banks.
Nifty50 ended the weak at 11823, down 0.4 per cent.