In the Midst of this Storm, Remain Rooted!
Traders and investors were on their edge of the seat on Wednesday when D-Street witnessed mammoth moves in both directions. After a promising start to the day, the bulls were seen cruising along while the Nifty crossed the milestone level of 12,000. However, just when the bulls were puffed with pride and market participants were celebrating the moment with fist pumps and high-fives, within no time all were heartbroken as the Nifty lost almost 240 points from the top and at a later stage recovered 150 points from the lower levels. If you think you had seen it all with this rollercoaster ride on Wednesday, then mind you this was just a trailer as there is more in store that may be revealed over the next couple of weeks.
We are at a strange crux in the cycle of the markets. We are sitting on the precipice of what could either be a continued bullish run that we have seen over from the March lows or then things could very well turn ugly. Why do we say so? The reason is that there are too many factors flying around in the backdrop which are twisting and turning the markets and making the life of a trader quite difficult. Right now, we have got a lot going on! To begin with, there is the hide and seek of a US’ stimulus package. While on some days there is hope that the stimulus relief package will go through, there are days when there is news about such a move being unlikely.
Meanwhile, the fresh levy of restrictions in some parts of the European region due to a surge of corona virus cases has begun to dim the prospect of economic recovery. The ongoing earning season and the rapidly approaching US presidential election are also some of the crucial events that are likely to swing the markets. That’s why everything seems to be so chaotic right now. And we believe volatility would be the hallmark for the next couple of weeks. To manage this scenario of the markets, there are two options: either one sits on the sidelines and watches it as a mere spectator or, to quote investment advisor John Train, “For the investor who knows what he is doing, volatility creates opportunity.”
Thus, the second option is to look for opportunities during this phase. But one needs to have skills to sail through these phases of the markets. Amidst all this, Nifty Realty and Nifty Metal have seen some fireworks. Nifty Realty jumped nearly 14 per cent from last Thursday’s low while the latter surged nearly 9 per cent from last Thursday’s low. And moreover, all the constituents of this sector have managed to deliver positive returns from last Thursday right up to this Thursday’s close. So traders and investors can look at venturing into these sectors with a short to medium-term perspective, but we recommend staying with quality stocks.
Fortunately, there are early signs of green shoots in the real estate sector. India’s residential market showed a promising recovery in sales during the July-September quarter. According to real estate consulting firm Knight Frank India, housing sales more than trebled in the July-September quarter as compared to the April-June quarter. The recent decision by the Maharashtra state government to slash stamp duty and the fall in home loan interest rates encouraged customers to buy their dream house. Apart from this, DLF has inked one of the largest deals in commercial real estate in 2020 for an upcoming project, DLF Downtown, with Standard Chartered GBS.
Investors and traders should keep a close watch on India VIX, which has been moving in a band during the second week of August and what we have observed in the past is that when volatility breaks out of the range or moves out of the band, violent moves are witnessed. So, one has to closely monitor India VIX as well. With Nifty turning back for the third time from the 12,000-12,025 mark in the past eight days, this would create strong resistance in the near term and until and unless it moves above this zone decisively we may see consolidation in the band of 11,770-12,000. We are on the cusp of something definitely happening in the markets; we would urge our readers not to opt for an overleveraged position. Look before you leap should be the mantra!
