INSUBCONTINENT EXCLUSIVE:
Rally in gold prices prima facie sending out bearish signals for equitiesBond prices are indicating the preference for equities has gone
downNifty Smallcap index breaches the gap of the day of election results within a monthTime cycle correction suggests Budget could be a
turning point for the marketThis week gone by saw the biggest speculative displacement in stocks like Jet Airways, which were fundamentally
weak but witnessed spine-chilling movements on both directions
once.
To add to it, some of the NBFCs joined the convoy
Such volatility in debt-laden companies was unheard of, and was record breaking in a way
Jet rose over 120 per cent in spite of having negative value for equity shareholders
This is how equity markets behave at times.
From a macro perspective, a massive rally in gold prices in international markets prima facie
sent out a bearish signal for equities
currently not pricing in certain risks that the gold investors are aware of and have started to price in, and there will be a time when
either one of them will be proved wrong.
Bond prices, too, are indicating that the preference for equities has gone down
NBFCs are likely nearing the end of the capitulation period, at least for now
Piramal Enterprises had to sell its stake in Shriram Transport, which speaks a lot about the underlying crisis in the sector
When such transactions happen, it shows that pain is at its peak and its culmination is imminent
Just the way investors sell shares at the bottom, corporate investors also sell assets at or near the bottom.
Event of the WeekDuring the
week, something interesting happened with the Nifty Smallcap index, which breached the gap that it had formed on the day of election results
Previously in 2014, it had taken two long years for the index to fill such a gap
Surprisingly, the gap got filled within a month this time, which may be the precursor to an underperformance by the equity market going
ahead.
Technical OutlookNifty50 continued to correct with intermittent rallies, which was later met by declines
Once the 11,600 level is broken, the next likely support point would be 11,400, which is also the gap that needs to be filled for the market
to again begin a healthy rally.
Time cycle correction suggests Budget could be a turning point for the market, which would require the
market to take support at the lower trend channel
Avoid trading in this corrective market.
Expectation for the WeekNext week, the market will start speculating on Budget outcome, which
usually gets magnified by the media, but stocks may not really see wild swings the way it happened this past week
Global factors may affect the domestic market and any flareup in West Asia would prove a dampener for the equity market.
Investors and
traders are advised to maintain status quo and avoid highly volatile sectors such as airlines, NBFCs and other debt-laden companies
From a valuation perspective, quality largecap stocks have now turned expensive after a massive rise in the past few months, and therefore,
should also be avoided at this stage.
The Nifty50 closed the week 0.83 per cent lower at 11,724.
