The key takeaway from Friday's trading was that we did not breach the levels of 9,640 on a closing basis. This week is going to be a trend decider week, Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor, said in an interview with Moneycontrol’s Kshitij Anand.
Q) India market snapped two-weeks of positive close. What led to the fall on D-Street especially when it started off on a bullish note?
A) Weak global cues made Nifty50 breach its immediate support range between 9,950 and 9,920. The US Fed’s projection of a long road ahead for repairing the economic damage from COVID-19 was not received positively by Asian markets.
The domestic equity market took a sharp corrective move on Thursday, as the weekly options expired and ended the session with a sizable cut.
Asian markets fell sharply lower in Friday’s morning trade following a plunge on Wall Street in overnight trade amid growing concerns of a second-wave resurgence of the coronavirus pandemic.
Markets have corrected this week after the hefty rally seen in the previous two weeks.
Q) What is the way ahead for markets? Do you think we can retest 7,500? If not, which are the crucial supports which one can watch out for on the downside, and on the upside, which are the levels that could put bulls back in charge of D-Street?
A) Indian markets made an intra-day comeback to end higher on June 12, 2020. A volatile day came to an end with the Nifty recovering around 400 points from the day’s low.
Following an overnight 5 percent fall in the US markets and a consequent sell-off in other Asian markets, the NSE Nifty50 index and the benchmark S&P BSE Sensex fell more than 3.5 percent, each, earlier in the day on concerns over a surge in domestic Coronavirus cases and a global sell-off in riskier assets.
A positive start in European markets, coupled with strong gains in index heavyweight Reliance Industries, powered the recovery.
The key takeaway from Friday's trading day was that we did not breach the levels of 9,640 on a closing basis. Next week is going to be a trend decider week.
Either we would achieve an upside target of 10,200-10,250 or go back down to 9,550-9,600. The continued rise in new coronavirus cases is a major cause of worry for easing strict lockdown measures this month.
Global markets move will be closely watched as the domestic market is expected to take cues from them.
Q) Do you think we are staring at another nationwide lockdown in June as COVID-19 cases continue to rise?
A) The rising cases are obviously infusing fear of another lockdown, but it must be seen that the recovery rate has also risen, and active cases have reduced.
Therefore, another lockdown seems quite unlikely as it seems people have learned to live in these situations. In case of a further lockdown, the index may go for correction up to 9,200 but it is unlikely that the bottom of 7,500 will be tested anytime soon.
Q) OECD sees 7% contraction in India’s growth – if a second wave hits the conutry. Do you think there could be another stimulus announcement from the government?
A) The first two quarters of FY 2020-2021 are expected to contract as the impact of COVID-19 and if the second wave hits it may hamper the demand and economy again.
In such circumstances, a stimulus announcement becomes imperative to keep the economy on track. In recent times, central banks across the world have pumped up huge funds in order to stimulate the economy.
Even RBI had come up with interest rates reduction and therefore expecting such relief measures from the government is only natural.
Q) Small and midcaps outperformed slightly in the week gone by --- some stability was there as major selling was seen in the top overbought stocks?
A) Small and the Midcap segment has outperformed in the bygone week as they have been undervalued and it posed better value than the top-notch stocks which have been overbought and therefore with considerable selling there, which did not let Nifty break 10,300 and closed below 10,000 at the end of the week.
The last two sessions pushed Nifty below 10,000 but the last session saw a rapid recovery and closed with a strength which is a good sign and it seems that 9,900-10,200 would be a fair range for Nifty.
Q) What is your call on financials? How should investors trade NiftyBank in the coming week?
A) The week has been volatile with mixed feelings in the market. The benchmark index has been following global cues and closely moving with global sentiments.
The government has been introducing various financial packages focused on different sectors to uplift the economy and whenever the government announced something, we got to see momentum in the finance-related stocks.
In the coming weeks, NiftyBank might trade in the range of 19,000- 21,500 with support at 19,500 and 19,000 and resistance at 21,000 and 21,500.
On Friday, the Supreme Court had directed the Finance Minister and RBI to hold a meeting within three days to decide on the waiver of interest on deferred payments during the moratorium period which was announced earlier.
The decision might play a key role in the next week as a waiver of interest rate might hit the banks and financial institution hard and result in losses worth lakhs of crores. Investors may trade from lower points or buying on dips.Q) The most abused phrase is ‘It’s different this time’. But, this time it is actually different, and history might just rhyme and not repeat. This time the only thing which is certain is uncertainty. What are your views?
A) The present market conditions are justifying the phrase “This time the only thing which is certain is uncertainty”. The Indian benchmark index started plunging from January to March by wiping around forty percent of the wealth in just two months.
The market started to recover from the low of 7511 and it took almost three months to reach 10300 levels. But, the increasing number of Covid-19 cases in India and unlock 1.0 are keeping the market volatile.
Apart from this, the fear of the second wave in the US has led to more negativity in the markets. But surprisingly, on 12th June 2020, the market opened with a gap down around 350 points but by end of the session, the market closed on a positive note.
The road ahead is unclear, and uncertainty may be prevalent in the coming weeks. As India has reached the fourth spot in the number of cases, how exactly is the government trying to control the spread of the virus is still a mystery for many.
Apart from the domestic cues, global sentiments like US-China trade news, the fear of the second wave may impact the market in the coming weeks.
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