INSUBCONTINENT EXCLUSIVE:
The domestic equity market has become super volatile and converted the psychology of every market participant into fear
Greed and fear continue to alternate in the market, like the two sides of a coin
To a seasoned player, there seems to be nothing new as such instances of panic-selling often occur time and again.
Since demonetisation,
herd mentality had jacked up financials, banks and NBFC stocks to great heights on the pretext of financial inclusion and formalisation of
This caused the financials gain disproportionate share in Nifty50 at 35 per cent of the free float market capitalisation, which was unheard
of in the past.
Reality has finally dawned on investors and the financial sector has started to correct
For instance, DHFL has undergone a complete cycle and is now close to its lows of demonetisation days, although still above the low of
November 2016, which is not a cause of grave concern, as is proclaimed in media.
Similarly, there are other stocks that are currently
available at reasonable valuations and give good opportunities to accumulate, but somehow the market scare created by crowd behaviour has
overpowered rational thinking and hijacked the sensibilities of investing at cheaper valuations
Investors should, therefore, make use of this opportunity to accumulate shares rather than selling.
Event of the WeekThe US Fed increased
interest rates by 25 bps, which now stands at 2.25 per cent
It has further guided for a graded increase by next year, which might take the rates to the 3.25 per cent level
Considering a 2 per cent inflation in the US, rates at 3.25 per cent could be a big barrier for continued economic growth
Next few quarters may be bleak for global equities, which might not witness sustainable bull markets
Therefore, investors need to rebalance a part of their portfolio from equities to debt.
Technical OutlookThe domestic market seems to be
deeply oversold and can rebound on any good news
The Nifty50 has taken long-term support at the three-year trend line, which makes a case for the correction to near its end
However, if the long-term trend line is broken, then the situation will worsen
For the time being, it looks like the Nifty 50 has taken support at these levels.
Expectations for the WeekNext month, hopefully, will be
rosier than the previous month, as all the weak hands are out and the worst has already been priced in, which is known to all
kneejerk reaction, if it decides to increase interest rates by 0.25 per cent
A rate increase could trigger a rally, which logically seems unlikely
If interest rates are hiked, the exodus of dollars would be controlled and the Indian rupee will start appreciating, which could be the next
trigger point for equities.
Investors, therefore, should not panic and sell off shares
Instead they should do the reverse and gather the courage to pump in more money into the market by picking quality stocks or investing in
ETFs for more stable returns
The Nifty50 ended this week at 10,930, down 1.9 per cent.
