Bull on the Back Foot
The last one week has been a roller-coaster ride for the Indian benchmark indices. The Nifty witnessed a pullback after about 7 per cent cut from its all-time high; however, the pullback didn’t last too long as after a blissful first half of the trading session on Wednesday, the latter part of the trading session turned out to be a disastrous one since selling pressure was seen across the broad in that period. And mind you, the sell-offs from the highs are not uncommon around these days as barring a few trading sessions the Nifty has closed near its day’s low. What is important to understand is that it is unlikely to be a one-way ride-up.
In fact, it will be a lot of two-way price action with both bulls and bears in action. As far as the overall direction goes, we believe the choppiness many continue and during this wave of volatility the key level to watch remains 17,200 on the downside while on the upside the level of 17,613 is the key resistance level. The level of 17,613 was the swing low earlier and going ahead, it is one of the important levels the bulls need to take out if they have to regain their supremacy. On Wednesday we almost got there and then sold off from that point onward. So going ahead, the level of 17,613 should be closely monitored.
Meanwhile, cues from the global markets are mixed and double faced. On the one hand, the US market witnessed good buying on Wednesday as the market participants indulge in buying the dip ahead of the Thanksgiving Day amidst robust economic data. In the US, the jobless claims fell to 1,99,000 – the lowest level for initial claims since November 15, 1969 according to the Department of Labor, and far better than the expected 2,60,000. Personal spending also rose 1.3 per cent month-over-month in October, higher than the expected 1 per cent rise.
The uptick came from economic data forcing the market to reflect higher expectations about the Federal Reserve set to reduce support from both the market and the economy. However, the overall volumes have been thin in the last few days in the US markets as market participants are in a holiday mood on account of the holiday on Thursday. Talking about the cues from the European region, they are somewhat concerning as the number of corona virus cases is rising across Europe that’s become the epicentre.
The World Health Organization’s office for Europe said virus-led deaths could rise by 7,00,000 over the coming months. So, to cut the long story short, as far as news is concerned, it’s sort of a tough fight between the bulls and the bears, which is leading to the said roller-coaster ride in the markets worldwide. Coming back to the Indian markets, the FIIs are on a selling spree. The FII figures on Wednesday were quite disturbing on account of very high selling – in fact, the highest witnessed in recent times – but what is more concerning is the fact that they have sold consistently for six days and the total outflow from the cash market is a whopping Rs 18,000 crore.
On the flip side, the DIIs have turned net buyer to the tune of Rs 9,158 crore in the last four trading sessions. Despite this selling pressure the broader market indices are showing resilience by sustaining above their 50 EMA that coincided with last month’s low i.e. those of October. Both Nifty Mid-Cap and Small-Cap indices have witnessed fall of nearly 10-11 per cent from their all-time high and we believe that after forming a base around this level, they are likely to resume a bullish trend. Hence, the ongoing fall should be used to accumulate strong stocks from the broader market.
