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Below is the Views On Markets mirroring Global Indices despite No Economic Stimulus by Mr. Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote.
Markets opened this week with bulls marching with all their might. Indian indices jumped higher taking significant cues from its global peers, mainly from the US bourses. The confidence returned with reduction in the number of daily Covid cases in some countries. Sentiments are changing from ultra-pessimistic to mildly pessimistic which is driving markets higher. However, one must not forget the trillions of dollars of economic stimulus packages in the US, Japan and other economies that have boosted confidence to a large extent. But contrary to that, Indian bourses have defied gravity by merely reacting to the global peers as India is still working on the second tranche of economic package to combat the COVID-19 effects - first being only a $22.50Bn stimulus. It is also pertinent to note that barring the cautionary commentary by management of one of the fastest growing NBFCs on various scenarios of lockdown, markets still went higher implying the worst is discounted in the current scenario.
In general, it seems that once the lockdown is lifted markets will initiate taking notice of the ground reality and react accordingly as the aftereffects of the lockdown will start to emerge only then. And this may help the bears to take charge once again for the possible second round of fall in the markets. However, till then emulating global indices would be the general trend for our markets.
Event of the Week
The Pharma sector was trending this week as the Government approved partial export of two key drugs to fight novel coronavirus. Taking cues, the pharma index was up 35 % during the week. As this sector remained undervalued for the longest period of time, this week’s rally has brought the index to comparatively fair valuations. However, investors should not jump the gun and should stay away from this space for now as pharma is a crowded trade and situations can change very quickly depending on the US FDA approvals or if a foreign player starts manufacturing the same drug. Due to the event driven nature of the sector, investors should wait. However, traders can place contra bets in this counter.
Nifty formed a bullish candlestick during the week with broader market participation, positive market breadth and closed almost 20% off recent lows. However, we assume the ongoing rally is a bear market rally and is least likely to be sustainable. In fact, the market may witness strong resistance at the cluster of Fibonacci retracement of 38% at 9300-9400 Nifty50 levels. Going ahead, we have a mildly positive outlook for the next week with the support and resistance placed at 7900 and 9400 respectively.
Expectation for the Week
The COVID-19 situation remains fluid and uncertainty still looms on the possible economic impact of the outbreak. However, in the coming week it is expected that market will be guided by global sentiments with sudden gap ups or gap downs. Any negative surprises with respect to the lockdown will also have an impact on bourses. Additionally, it would be sound for investors and traders to keep a watchful eye on India VIX. If India VIX falls below 30 levels, it would be a good starting point to go long and accumulate stocks, nonetheless buying on dips is advisable. Nifty50 closed the week at 9111.90, up by 3.6%.
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