Adopt a ‘buy-on-dip Approach
The week gone by was action-packed even as both, the bulls and the bears had an equal opportunity to make money in the equity markets. The global market trends once again dominated the market moods even as locally, in the Indian markets, the equity markets were seen trending strongly to be in favour of bulls. Market experts believe that the valuations are stretched and equities are clearly in the overbought zone. However, because of the high liquidity situation in the markets, every dip is getting bought in. Hence, it is clearly a ‘buy-on-dips’ market.
Unabated buying is seen from FPIs in the Indian markets and there is no sign of liquidity drying up. Hence, the liquidity push may keep the markets in a healthy mood. However, the volatility may continue to remain high in the short-term. Quality stocks across the board with earnings’ growth visibility and some value are attracting loads of risk capital. Defensives along with high-beta cyclical stocks are catching investors’ attention. Going ahead, the trading range is expected to widen for Nifty.
We expect the markets to face resistance in the range of 13,780 to 13,880 while the support for Nifty can be seen in the range of 13,200 to 13,120. Going ahead, the Brexit deal is going to be a great positive event for the markets even as the death toll in South Korea and the UK will keep a check on bulls.
On the sectoral front, looking at the last week’s data, BSE IT index was up by 4.9 per cent while BSE Healthcare index gained by a mere 0.95 per cent. IT stocks staged a good rally with the industry leaders wherein, they announced about bagging mega multi-year contracts along with analysts’ expressing positive growth for the sector awaiting a multi-year growth cycle. Meanwhile, BSE Auto index and BSE Power index slipped by 2.19 per cent and 1.71 per cent, respectively, in a week’s time. Amid volatility in the markets, Nifty declined by 0.03 per cent during the last week whereas, Sensex surged up by a mere 0.02 per cent in the same time period.
In the Sensex basket, Infosys, HCL Technologies, Dr Reddy’s Laboratories, Asian Paints and TCS turned out to be the top gainers. On the other hand, ONGC, IndusInd Bank, NTPC, HDFC twins i.e. HDFC Bank & HDFC, Bajaj Finance, and Maruti Suzuki emerged as some of the top losers.
The buzz in the broader markets seemed to have cooled down as BSE Small-Cap and BSE Mid-Cap indices continued to underperform the benchmark indices. Apart from profit booking seen in the broader markets, exposure of auto-related companies to the UK and the EU markets slowed the recovery pace as new restrictions got implemented in the wake of increasing COVID-19 cases, which once again, threatened business activities.
Monday’s stock market crash hurt all the global indices, including the domestic ones. Except for indices such as Sensex, NASDAQ & KOSPI, all other indices are yet to attain the opening levels of Monday. Overall, the energy stocks as well as the banking stocks are showing good momentum in the US markets. Investors and traders can focus on high beta financials and energy stocks that are showing some great value.
Investors can adopt a buy-on-dip approach as the overall market bullish structure is intact. We advise our readers to stay invested in the markets as there may be some hiccups. However, it is wise to remain invested than staying on the sidelines. Further, readers can keep a close eye on India VIX as the zone of 24-26 is a resistance range and a move above this zone in India VIX could hint that the wind is changing its direction.
