Buy the dip! Donald Trump COVID positive status could fuel volatility on Monday

Indian market could witness a knee jerk reaction when trading resumes on Monday tracking a fall in US markets on Friday after US President Donald Trump tested positive for COVID-19 that put investors in a risk-off mood.

Indian market rallied by over 3 percent for the week ended October 1, and was shut on Friday on account of a public holiday. Hence, Friday’s price action will induce some volatility on Monday but experts feel that green shoots owning to GST collection, Unlock 5 guidelines, and robust auto sales numbers will lend support.

“Dow has closed lower due to news of a delay in the expected fresh Stimulus package.  We expect on Monday Dow should perform better as markets should resume their up move after digesting the news. Our markets were closed on Friday so the effect of Friday should be visible at the open,” Sanjeev Agarwal, Founder & CEO, Alpha Quantum Capital Management Ltd told Moneycontrol.

The US President Donald Trump tweeted late Thursday that he had contracted the coronavirus and would be placed under quarantine, compounding the unknowns for an already volatile market, said a Reuters report.

The Dow Jones Industrial Average fell 134.09 points, to 27,682.81, the S&P 500 lost 32.36 points, to 3,348.44 and the Nasdaq Composite dropped 251.49 points to 11,075.02.

Experts are of the view that volatility could rise but investors can look to buy the dip amid positive micro news from the economic front, and on the global front, any announcement with regards to a stimulus will nullify the pessimism in the short term.

“Certainly some spike in volatility could spark up in the global markets due to this development over the weekend, but further clarification would be awaited from the White House itself about the course of action in case POTUS is absent due to self-isolation protocol,” Sacchitanand Uttekar, DVP – Technical (Equity), Tradebulls Securities told Moneycontrol.

“On the domestic front, the fatality rate in India has been the lowest so far, the impact of pandemic certainly doesn’t look denting our aspirations as GST Collections look better,  Auto Industry as a whole has a major share in our GDP & the current Sales numbers have been far better than expected,” he said.

Uttekar further added that with the Unlock 5 mode been deployed just at the beginning of the festive season would add on to these numbers as life is expected to be back on track & running soon.

The Goods & Services Tax (GST) revenue in September increased to Rs 95,480 crore from Rs 91,916 crore in the year-ago period.

GST collections for September were the highest since April, pointing to a pick-up in economic activities ahead of the festival season and return of demand as lockdown restrictions are rolled back.

Also Read: Hope floats for Indian economy as manufacturing activity, GST collections, vehicle sales pick up

The S&P BSE Sensex rose 3.5 percent while the Nifty50 was up 3.3 percent in the week ended October 1. S&P BSE Midcap index and the S&P BSE Smallcap index closed with gains of about 3.3 percent each in the same period.

“All the major US indices managed to attain gains for the majority of the week. As investors don’t like uncertainty, this news could increase volatility if the situation escalates further. However, any announcement regarding the fiscal stimulus could nullify the fire,” Umesh Mehta, Head of Research, Samco Group told Moneycontrol.

“Without any further significant update on his health, this news could have already been factored in by bourses. Hence, Indian markets might not imitate the US in the coming week. Monday could witness high volatility compared to the average,” he said.

Shah further added that traders should expect a bullish outlook on markets for the coming week and maintain a buy on dips strategy as long as the index does not fall below the 25% retracement support.

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