The week gone by witnessed another bloodbath on Dalal Street taking along with it all the heavyweights like Reliance Industries, whose AGM effect withered away in no time. Strong bastions such as ICICI Bank, Bajaj Finance and the like also witnessed heavy selling, but by the close of the week, a smart recovery in broader market established that the peak of the fear is behind us for now and it is hopefully time to become greedy.
The domestic market fell 2.6 per cent in August. However, the Chinese market which is considered to be the most affected by the trade war fell only 0.39 per cent. The quantum of selling has also reduced, albeit it is still on. Everywhere front page headlines are fairly pessimistic, which makes a reasonable case that being on the short side would lead to being caught on the wrong side. And Finance Minister Nirmala Sitharaman’s mini-Budget like announcements post market hours on Friday have just paved the way for a turn around. It is, therefore, time to set yourself apart from the herd and create longs in some of the beaten-down stocks.
Investors need to think clearly and not get influenced by the commentaries of corporate managements. To assume that a Rs 5 biscuit is not being bought due to economic slowdown on the pretext of high taxes is a big joke as FMCG companies recorded sound single-digit volume growth even in June quarter. Such news spread fear, but at the same time opportunities do surface in companies like Britannia when you think unbiasedly. Hence, during negative sentiments investors need to take every statement with a pinch of salt.
Event of the Week
Companies such as CG Power voluntarily came out with wrongdoings only during extreme pessimism. In a way, this phase will bring out all the dirty linen in the open and clean up the system for the next bull
run. Currently, every smallcap and midcap stock is beaten down on the presumption that there could be some mischief in them as well.
Technical Outlook
Nifty50 swiftly made an intraday V-shaped recovery on Friday which pointed out to a sustained bounce in the short to medium term. It has most likely taken support in its January lows, which has multiple support levels. A recovery up to 11,100 level can be reasonably expected as long as international markets do not play spoil sport. Traders can go long by keeping Friday’s lows as stop losses.
Expectations for the Week
The FM’s announcements on Friday has surely created conditions for a turnaround in the both the economy and the market. But global factors remain adverse, with the US announcing a new heap of tariffs on Chinese goods. The market seems to be coming out of a fear spell that had gripped them since the beginning of August. Indian bourses would now offer opportunities to both short-term traders as well as long-term investors at the current levels. Conservative investors can look at FMCG, private bank and pharma sectors while investors with a higher risk appetite can look to buy select metal plays and cement stocks.
Nifty50 closed the week at 10,829, down 1.97per cent.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)Not making enough money in stocks? Click here for real-life stories of successful investors.
(Ukrainian metal)