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Published on 26/04/2019 5:50:15 PM | Source: SAMCO Securities

Nifty50 is trading cautiously near its all time high - SAMCO Securities

Posted in Expert Views| #Expert Views #Nifty

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Below is the views on Weekly Note by Jimeet Modi, Founder & CEO, SAMCO Securities

Markets during the week traded largely sideways with an upward bias although Nifty went up during the week; but the small and mid-cap indices were still languishing indicating that the markets are in no hurry to set a decisive path for themselves yet. Such divergent behavior of the Indian bourses will generate no meaningful direction for the markets. However, in the meantime there are certain risks emerging from the global markets. In the US itself there is also such divergence. Dow Jones is sitting near its all-time highs with far lower momentum strength while S&P 2000, the small cap version of the US market, is far below its all time high showing the unlikeliness that the bull rally will continue in the US.

Despite months of efforts, China and US still haven’t been able to resolve their trade dispute. Additionally, the US blanket sanction on Iran not to lift crude oil is also a destabilizing initiative which can derail the global bull markets if conflicts escalate and most likely they will. Although economically, the world is at its best time but politically, we are in our worst phase. This is the biggest risk to the bull markets which no one is factoring in currently.

Events of the Week

A mixed sentiment from the quarterly results of companies kept the markets on its toes this week. Among the banks, HDFC bank, Axis Bank and AU Small Finance Bank gave strong bottomline growth. Sterlite Tech reported a growth of 68% and Ultratech Cement grew 131% in PAT this quarter compared with the previous year quarter. There were certain companies which disappointed analyst expectations such as Maruti which experienced a degrowth of around 5%, ACC grew only 38% while ICICI Securities degrew by 11%.

Technical Outlook

Nifty50 is trading cautiously near its all time high. Nifty50 had made a failed attempt to cross its all-time high but since then it is languishing around those levels. Such consolidation is expected to last longer but any decisive breakout above 11900 will signal resumption of an uptrend. However, in order to protect the long positions, one needs to keep a stop below 11500 in Nifty50 which can take the market much lower if such lower support is broken.   

 

Expectations for the Week

Open interest is consistently reducing in the futures market given the already elevated levels and the uncertainty on election outcome. Status quo is expected to be maintained going forward. Therefore, markets are expected to move either 2/3% up or down from the current levels. On a sectoral level, FMCG, capital goods and healthcare are largely sideways with very little volatility. Whereas, realty, mid-cap, auto, metal, power and small-cap are in a corrective mode with further downward pressure going ahead. This further vindicates our stance of a non-bullish case in the immediate time frame of the markets. Investors must therefore not rush into the markets in this indecisive phase and go shopping not atleast till 23rd May when the election results come out. Nifty 50 closed the week flat at 11754.

 

Above views are of the author and not of the website kindly read disclaimer