Stay liquid, especially when the markets are at near all time highs

Nov 13, 2017, 11:17 IST | Alex K Mathews

Best to exercise prudence and be cautious, especially when witnessing all-time highs

Best to exercise prudence and be cautious, especially when witnessing all-time highs. After testing Nifty at around 10,500 we saw huge profit booking along with high volatility. Going forward, Nifty may once again try to test 10,500 or even 10,551 but sustainability is the big issue. US markets are heavily over bought and now many of the analysts have words of caution about the present situation.

Union FM Arun Jaitley addressing a press conference after attending the 23rd GST Council meeting in Guwahati
Union FM Arun Jaitley addressing a press conference after attending the 23rd GST Council meeting in Guwahati

Few of them predicted more 40 per cent correction in the equity markets in the US in the days to come. As the correlation between US equity markets and Indian markets is positive, one should exercise extreme caution at higher levels.

It is prudent to stay liquid, especially when the markets are at near all time highs. Resistance is at 10,376 and it has support at 10,304 and 10,232. Major support for the Nifty lies at 10,119. India VIX and S&P500 in US moved up sharply in the last week, which indicates highly volatile movements in the markets.

Good move
The Govt has simplified GST filing. It has also slashed GST over 200 items. This is a very positive move. Today, (Monday) we expect gap up opening but profit booking can trim its opening gains, because of weak international cues, especially from US. Wall Street is showing high volatility over delay in corporate tax cut. This delay in corporate tax cut from 35 per cent to 20 per cent may stall the market rally, which is widely expected to boost corporate profits and new job creations.

Positive move
Crude is positive and it is all set to move above $58.23 due to geo-political tensions, especially in the Gulf. OPEC and its allies are expected to meet on November 30 to discuss possible oil production cut also kept the crude prices higher. Crude has support at $54.00 per barrel. Nifty PSU Banking Index is likely to move up towards 25,677 and 25,930 in the short term. On the contrary Private sector Banks stocks will face heavy sell-off in the first two days of the next week.

Pressure zone
Pharma Index once again turned to be negative and more selling pressure is expected, like Pharma Nifty Metal Index is also showing weak trends. So it is prudent to avoid investing in these two sectors for a short term perspective. Nifty IT and Nifty FMCG sector stocks are likely move up, especially Nifty FMCG stocks. The recent decision to reduce the GST in many sectors will be beneficial for the FMCG sector, which includes chocolates, soap powder etc. Automobile stocks are likely to remain sideways in the short term because of absence of major triggers.

Data due
Companies like Britannia, Appolo Hos, BGR Energy, Gillette, Good Year, Ind Hotel, Rajesh Exports, Shivam Auto, Spice Jet, Tata Chem, Bank of Baroda, BASF, BATA, Corp Bank, COX and KING, GAIL, HDIL, INTERGLB, IPCA Lab, JP Associates, Rel Cap, Sun Pharma and Wonderla will come out with their numbers. From US, US Consumer Inflation Expectation OCT, US Core Inflation Rate, US Inflation Rate, US Retail Sales YoY, and from India Inflation rate YoY Oct, WPI Food, WPI Manufacturing, WPI Inflation and Balance of Trade Oct, are the macro data which is due.

Alex K Mathews is the founder of www.thedailybrunch.com

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