Published on 27/11/2021 10:36:50 AM | Source: Samco Securities Ltd

Nifty 50 index closed strongly negative after volatile trading throughout the week By Ms. Yesha Shah, Samco Securities

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Below is quote on Bears Run Riot on D-Street! by posting a strong bearish candle By Ms. Yesha Shah, Head of Equity Research, Samco Securities 

Markets experienced Friday blues with bear crushing grip and erased the long standing gains made till lifetime highs of 18600. Although the sell-off eased a bit as the week passed by, the nervousness among market participants only escalated at the end. FPIs offloaded more than Rs. 15,300 Crs worth of Indian equities in the week signifying valuation concerns, turning markets upside down. The focus seems to be shifting from premium Indian equities to relatively cheaper markets. In addition to this, the cautiousness was heightened by the unenthusiastic response towards India’s largest IPO to date and a resurgence of Covid concerns across Europe. Investor sentiment had turned tepid at the fag end of the second quarter results, post the fanfare in topline growth of companies due to rising demand as economies continue to open up. The result season was mostly divided with companies showing strong signs of demand growth but at the same time high raw material and input costs adding pressure on margins. Highly commoditised and cyclical businesses such as oil and gas, metals etc. saw bumper revenue and PAT growth although most of it was already captured in the price movement. Banks also delivered improvement in asset quality and collection efficiency while autos, chemicals, consumer durables, and FMGC witnessed stress on their margins owing to inflationary pressure. While investor expectations were more or less in line this time, further damage on the margin front is possible in the coming quarters. Companies have begun passing on the price hikes to the consumers to save their margins but the struggle is far from over, so investors must be careful of such stocks and should assess wisely before jumping in. 

Event of the week

Since over a week, brent crude prices have steeply declined by around 9% from highs of $85/bbl to a low of $77/bbl, at which point it took support and a U turn towards $82/bbl. Any further upside post this steep one day’s move was collectively capped by major economies across the globe. They released millions of barrels of oil from their respective Strategic Petroleum Reserve in anticipation to quell the high oil prices. Such a bold move by the participating nations is expected to put pressure on OPEC and its allies to pump more oil supply to match the ever increasing demand. The volatility in crude is of major concern as it fuels inflation and India, being a major net importer is at risk. The strategy to tame prices seems sustainable in the short term but if OPEC+ fails to join in, the prices could rally even further. 

Technical Outlook

Nifty 50 index closed strongly negative after volatile trading throughout the week. The index posted the biggest weekly decline in last 10 months and is now trading below the crucial support level as well as the rising trend line, which had been supportive throughout the secular up move. This can be interpreted as the price action confirmation for a pause in the ongoing major uptrend. We suggest traders maintain a bearish outlook on the market as there is downside potential after the recent bull run. A short-covering bounce cannot be ruled out but with further time correction. On the downside, the next major support is now placed at 16500. 

Expectations for the week

Post Q2 result season, Dalal Street will look towards macros for hints to move the needle in broader markets. Inflation being a key factor will be at the centre of all news in the next two weeks since the RBI MPC meet is scheduled in Dec. Further, a slew of listing flops in IPOs in the coming weeks could also indicate the slow drying up of liquidity from the markets in general. November monthly auto sales number can be a trigger to drive some movement in the coming week. Nifty50 closed the week at 17026.45 down 4.16%.


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