During the week gone by, the market witnessed nerve-wrecking volatility alongside extreme fear.
The reasons for the fear may be different when seen from a historical perspective, but the very same history vindicated the fact that those times were opportunities to buy, certainly not situations to sell.It succinctly reflects that the more things change, the more they remain the same.
This is what investors should keep in mind while sailing through such uncertain times.
It was widely felt by market participants that the US Feds recent 50 bps rate cut was a pro-active step.
But it was actually the reverse.
Mr Markets behaviour dictated the Fed to reduce interest rates, which can be inferred from the 10-year US treasury yields that started to fall from 1.50 per cent since mid-February to nearly 1 per cent when the Fed formally reduced the rate.Market forces were so swift and fast and the Fed had no other option but to trim rates in line with the markets expectation.
Hence the saying: market forces are above all.In spite of such massive fear psychosis, open interest in the F-O segment on Dalal Street has not reduced significantly at an aggregate level.
This means we are somewhat away from making a major bottom, which most likely can be witnessed during the March 2020 expiry.
It can also be hoped that by that time most the untouchable word coronavirus would have possibly been obliterated.
This will give April a fresh start for the bulls into the new financial year.Event of the WeekMarkets witnessed an IL-FS-type crisis during the week.
When such an NBFC crisis hit the market due to DHFL, IL-FS issues, the market took around 2-3 weeks to adjust to the liquidity spillover effects.
The Yes Bank saga, which is unfolding currently, is expected to settle in the coming 2-3 weeks.Hopefully March-end would end the fear, which will give the new financial year a fresh beginning.Technical OutlookAfter witnessing heavy selloff, the index trades at the lower end of a Rising Channel, which has supported multiple selloffs in the past and will, therefore, act as a strong support in the 10,800-850 zone, which is evident on the daily charts.
The current situation is properly aligned with the short-term panic bottoms; the channel support along with deep oversold levels will act as strong support for the bears to cover their short positions and give the bulls a chance to stage a short-term comeback.Guest contributor and other agenciesExpectation for the WeekGiven the volatility and fear psychology, market participants are likely to drift away and reduce their exposure to equities till clarity emerges on the financial distress (Yes Bank and Covid-19).
RBI might deliver a surprise rate cut and Yes Bank will be taken care off by the bellwether and mother of all financial institutions of India, SBI and LIC.
This should calm the nerves of the market.
Markets are expected to remain low with subdued interest with little activity from active investors.However, investors and high taxpayers will have a very good opportunity to invest in ELSS funds before the year-end to take advantage of the 10-12 per cent correction in frontline stocks.
Investors should also accumulate respective leaders from private sector banks, NBFC, FMCG, IT and pharmaceutical sectors, as these will provide good returns on investment from a 3-5 years perspective.Warren Buffett says, Be fearful when others are greedy.
That should be the principle guiding all investors.Nifty closed the week at 10,989, down 5.5 per cent.