After a strong rally in the previous month, the Indian benchmark indices declined and ended an eventful month in the red. Initially despite positive global cues, domestic markets remained subdued largely due to rising coronavirus cases as well as lacklustre earnings season. Further much awaited stimulus package was announced by Indian government and RBI, but it failed to meet high investors’ expectations. On the global front, geopolitical tension between US-China weighed on the sentiments. However towards the end of the month, markets recouped majority of its losses as news of easing of restrictions and the gradual re-opening of the economies across the world including India, raised investors’ hopes of the economy getting back on track. Nonetheless, Sensex and Nifty ended the month lower by 3.8% and 2.8%, respectively.
Given the recent up move in the past few sessions across Indian indices, we believe markets may witness some profit booking, going forward. While easing of lockdown conditions would lead to re-opening of the economy in phases and normal monsoon forecast from IMD is a positive sign. Nonetheless, the rising number of cases and subdued earnings season would continue to weigh on sentiments and cap the upside. Further on the global front, any rise in tension between US-China would keep the global indices on edge. Hence, volatility is expected to remain high and so we would suggest maintaining a positive yet cautious approach towards the Indian markets in the near term. In these times of high volatility, we would advise traders to keep their position hedge while investors should focus on fundamentally sound stocks.
Outlook for Nifty 50 (9979.10)*
* Nifty consolidated in the passing month and settled lower, indicates a pause after the recent recovery. In the first three week, Nifty traded with negative bias however sharp recovery in the last week pared losses considerably and finally the index closed at 9580.30; down by 2.84%.
* Mixed trend was witnessed on sectoral front where in auto, pharma and FMCG posted decent gains while banking and financial services were the top losers despite the sharp recovery in the last week. However, buying interest in the broader indices eased some pressure and kept the participants busy.
* Technically, Nifty has been pointing towards further recovery ahead and might take a pause around its next immediate crucial resistance zone around 10,250 levels. We advise keeping positive yet cautious stance and suggest traders to adopt stock specific trading approach and focus on trade management.
Outlook for Bank Nifty (20,530.20)*
* Bank Nifty underperformed the benchmark index and settled with cut of over 10 % last month. In the first three weeks, it plunged sharply lower however strong buying in the banking majors in the last week of the month pared some losses and finally settled closer to 19297.25.
* Much to the expected line, the decline was largely led by PSU banking counters while strong recovery in private banking majors restricted the damage.
* We believe Bank Nifty holds the key for next directional move in the benchmark index and needs decisive breakout from its crucial resistance zone around 22,000. We reiterate our preference for selective private counters like Axis Bank, ICICI Bank, Kotak Bank for buying while the rebound in PSU pack should be utilized for reducing the long positions.
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