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  • Jimeet Modi

    CEO, Samco Securities & StockNote
    The founder & CEO of SAMCO Securities, StockNote and the Indian Trading League Company, Modi believes that price is the most important factor in investing. He is credited with developing the AIRM (TM), an approach to screening stocks and businesses in a scientific manner. His role model is Warren Buffett.

Markets may be heading into a major speedbreaker in mid-May

The domestic equity market began the week in full zest & attained lifetime new highs, but participation from Dalal Street players was subdued considering the uncertainty over the election outcome. From a macro perspective, with a decline in US treasury yields, emerging markets started experiencing strong inflows from FIIs.

Right from February, India started the rally and there seems to be no pause considering the strong level of Put writings seen at 11,800. The primary market is also witnessing a sudden surge in IPOs after a long lull through the whole of 2018.

Polycab and Metropolis Healthcare got listed this week with a premium of 17.6 per cent and 9 per cent, respectively, which proved the positive sentiment of market participants. The sentiment towards India has turned hugely bullish from a short-term perspective. However, a speed-breaker is expected around mid-May, when the election outcome will decide the direction for the Indian market. Till then, the correction phase will continue.

Fundamentally too, the earnings season has kicked off on a cheery note, with TCS recording a March quarter PAT growth of 17.7 per cent and an ROE of 35 per cent. With a market cap of close to Rs 8 lakh crore, TCS has again proved to be the frontrunner of IT sector, surpassing the likes of Infosys and Wipro with spectacular quarterly performance.

Event of the Week
The aviation space is going through tumultuous time with Jet Airways temporarily stopping operations and SpiceJet and Indigo cashing in on Jet’s woes, leading to a sudden spurt in their stock prices. SpiceJet has risen by a higher margin compared with that of Indigo and it expects faster growth given the slots garnered from Jet, better regional connectivity due to more non-metro routes and improved pricing.

It is in a strong position to meet the valuation gap with IndiGo. But all of it comes at the cost of grief for consumers, who are facing a surge in airfares thanks to limited supply and an ever-increasing demand.

Technical Outlook
Nifty50 is currently in an unchartered territory and touched a new high of 11,856. Charts show previous resistance levels have formed a new support for Nifty at 11,730 level and if the market continues to weaken further, it would mean Nifty’s failure to cross the new highs. Traders must book profits on the overbought counters and not initiate any fresh longs at current levels.

Expectations for the Week
Markets are expected to remain subdued and under pressure at least till the election season gets over. However, volatility will continue on the higher side as knee-jerk reactions are expected due to the ongoing earnings season. Investors must stay on the bylanes and not rush in to ride the current rally till the current uncertainty fades away.

The financial services industry will be on the radar next week as important earnings from companies such as Indiabulls Housing Finance, YES Bank, M&M Financial, Axis Bank and SBI Life are lined up.

Nifty50 closed the week 0.9 per cent higher at 11,752.

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