The domestic equity market fell steadily everyday during the week gone by in spite of positive global cues.
Despite good numbers from Sun Pharma (PAT up by 75 per cent), United Breweries (profit jumped two-fold to Rs 109 crore), MMTC (348 per cent growth in PAT), the market succumbed to profit booking on political uncertainty and higher valuation in frontline stocks like Asian Paints, Reliance, Nestle, HUL - all met with selling pressure which kept the bourses lower.RBIs sudden change of stance on Yes Bank has raised many eyebrows but the clean chit given to the bank has been widely cheered by the market participants.
However, investors should wait for a correction before entering Yes Bank as one-off events cannot change the underlying trend of the stock.Moreover, surprisingly, the volatility on D-Street was extremely low, which indicates that the bears are losing their grip and the bulls are gaining strength.
Market-wide open interest is on the lower side as major participants are out of the market awaiting clear direction.Additionally, crude oil is rising since the last few weeks, but such a bounce will eventually resolve into lower prices again, which will later help the bulls to take the indices higher.Event of the WeekIBC is indeed helping banks to recover their dues from corporate sharks.
One more example being Jet Airways, wherein banks in all likelihood will take control of the company, but if they do, then such an action can lead to faster recovery of NPAs and most importantly it will act as a deterrent for other doubtful accounts, which will bring in a lot of prudence in the credit market.Technical OutlookAfter witnessing heavy selling, the Nifty50 recovered by the close of the week, taking support at the lower trend line.
A 50 per cent retracement will take Nifty50 back to 10,870 level, after which a declining trend is expected to resume.
Too much pessimism has created a short-term emotional bottom for the time being but when the level of 10,600 is broken, Nifty50 will fall violently.
In the meantime, traders can go short on rise and take aggressive short positions only when Nifty50 decisively falls below 10,600.Expectations for the WeekSince the earnings season is nearing its dull end, the market will most likely remain rangebound with a lower bias.
However, some bounces are expected after the current weeks fall, but they will only prove to be a dead cat bounce and, therefore, should be ignored.
The political climate is expected to further alleviate the pitch for the parties given the terrorist attack in JK.
Whatever be the responses, the market will be impacted negatively.
Investors are advised to remain on the side lines till a decisive direction is visible while traders can avoid trading.Nifty50 ended the week 2 per cent lower at 10,724.