Hold Your Horses Till Lok Sabha Poll Results Are Out
We had one of the busiest weeks of the year so far on Dalal Street, with key earnings, global developments and a bunch of crucial economic releases making waves throughout the week. In the thick of all this, the scene on Dalal Street was like sinking of the Titanic. The volatility skyrocketed this week on D-Street as major Indian indices logged one of the longest losing streaks in over half-a-dozen years. One of the stormy clouds which hit the markets during the week was the worsening trade war between the US and China after the US hiked tariffs on $200 billion worth of imports from China on Friday. Also, during the initial part of the week, a daily Chinese tabloid reported that the Chinese officials were planning retaliatory tariffs against the US, hitting $60 billion in annual exports to China with new or expanded duties that could reach 25 per cent. Some domestic announcements added fuel to fire as a distinct slowdown was visible in manufacturing growth in fiscal 2018-19 as it fell to a 3-year low and IIP declined by 0.1 in March hitting a 21-month low. The food inflation appeared to be back as retail inflation (CPI) inched up 2.92 per cent for the month of April, while the WPI inflation for April came in lower at 3.07. The latest report from privately owned forecaster, Skymet, indicated that the monsoon was likely to arrive in Kerala on June 4, rather than on June 1, the normal onset date for monsoon in Kerala. All four regions are going to witness less than normal rainfall this season. The delay in monsoon impacts sowing, agricultural output and rural demand. India’s trade deficit widened to a five-month high in April due rise in crude oil imports, coupled with tepid growth in exports amid rising concerns over US-China trade war. The FII selling also continued throughout the week and that put additional pressure on the Indian markets. On the global front, the panic caused by escalation in the trade war was clearly visible on the Wall Street as major indices started off the week with sell-offs. However, a rebound was seen after the initial jitters when President Donald Trump commented on expectations of a fruitful meeting with Chinese President Xi at the June G-20 summit. Meanwhile, on the economic front, both US and China reported softer industrial production and retails sales for the month of April.
Going ahead, on the domestic front, there are no major economic announcements lined up, but market participants will take cues from the last phase of the 2019 Lok Sabha elections on May 19 and from the exit polls of media houses which will be telecast on the same day in the evening. In the coming week, our markets will continue to reel under the global cues and the outcome of the Lok Sabha elections. The bulls will be praying with body, mind and soul for a favourable outcome in the Lok Sabha elections 2019 (BJP led NDA majority) on the May 23 as this will bring about a ray of sunshine in the stormy clouds.
In technical terms, if Nifty holds above the psychological mark of 11,000, there is still hope that Nifty can rebound back to the top of its trading range. The crucial long term moving average, i.e. 200-DMA and also options writers are active at 11,000 strike price as maximum put open interest resides at this strike price. If the week gone by was a roller-coaster ride, traders might be yo-yoing in the coming week and, hence, we advice traders to hedge their positions and wait for clarity on the Lok Sabha election results before making any bold move.
