Developments ratchet up India-Pakistan tension
Director General Military Operations (DGMO), Ranbir Singh arrives to attend an all-party meeting in New Delhi following Indian army's surgical strikes. Market reactions to the strikes will be in evidence this week, too
We saw heavy sell-off recently, especially on Thursday, on the day of F&O expiry because investors are afraid to roll out their net long positions. This is especially true from the current period and is due to tension between India and Pakistan. Investors lost nearly Rs. 2.45 lakh core on Thursday. Investors experienced the same situation during the Kargil war; faint-hearted investors booked losses and many others reduced commitments because of fear. The market had tanked.
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What happened at the end of the day when the market corrected, it was evident that valuations became attractive, foreign and domestic institutional investors accumulated stocks and market smartly recovered! So it is prudent to buy good quality stocks when there is an uncertainty at a phased manner.
It all figures
Last week, Nifty closed lower at 8611. It has support at 8552 and 8479. Resistance levels are at 8751 and 8791, a decisive move above this can cause huge short covering. The roll-over figures are too low, which indicates huge short positions created by investors on fear. If Nifty moves above 8751, then these short sellers are forced to cover their shorts which can take Nifty to further higher levels. India VIX moved up sharply on Thursday, but declined marginally and finally settled at 17.18 per cent, which gives hopes for further appreciation on Nifty. VIX in US is also sharply declined by around 5.21 per cent and closed at 13.29, is also a positive indication that can give strength to the equity markets.
Look at stocks
Banking, metal and selected cement stocks are expected to move up sharply. Under performance is likely to continue in pharma, IT and FMCG stocks. Banking Nifty closed at 19285 and it has support at 19035 and 18689, and resistance at 19496 and 19737. Many front line PSU banking stocks are likely to outperform private sector banking stocks, because of huge shorts in this sector.
Crude recovered on expectation of oil production freeze by OPEC, and it is likely to move up further towards $50 per barrel. Strong dollar kept the prices slightly under pressure, but still crude looks very strong in the near term.
There is a large amount of macro -economic data expected from US next week. Amongst that is the US Market Manufacturing PMI, US Balance of Trade, Non-Manufacturing PMI, Continuing Jobless Claim, Initial Jobless Claims, Non-Farm Pay Rolls and unemployment rate, which is key data, which can affect market sentiment.
From EURO Zone Unemployment data, Markit Manufacturing PMI, Industrial Production, Consumer Confidence, Retail Sales, Inflation Rate and Balance of Trade are expected this week.
Eyes on Guv
On the domestic front, the RBI policy meet to decide interest rate decisions, CRR, Nikkei Service PMI, Nikkei Manufacturing PMI data’s is expected. Investors are expecting a moderate rate cut from the new RBI Governor Urjit Patel.
It is prudent to take long positions on Nifty options segment than writing options. Investors should reduce their long and short positions considerably at lower levels till the market settles.
Macro data like Nikkei Manufacturing PMI, Nikkei Service PMI, Foreign Exchange and from China, data which can influence the market is Foreign Exchange Reserves, is due. CCL, Prime Securities, GM Breweries, Goa Carbon and South Indian banks are expected to come out with numbers.
Alex K Mathews is the founder of www.thedailybrunch.com
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