Mark of 9,700 Acts Crucial for Nifty!
Multiple narratives are catching markets’ attention these days. Topping the list is the developing concern arising out of the potential second wave of Coronavirus cases in United States as well as in the capital city of China, that is, Beijing.
The second narrative include the progress report of the health care sector in the way it is trying to combat COVID-19 pandemic. Thirdly, markets recently also reacted to the statement released by Federal Reserve, which stated that it is going to start buying individual corporate bonds to shore up liquidity and facilitate easier access to capital. Last but not the least, the rising geopolitical tensions between India and China flared up concerns in the already tensed atmosphere.
Amidst these narratives, the markets participants are stuck in a chicken and egg situation and as a result, the markets are mostly seen in ‘volatile modes’ these days and juggling between gains and losses. However, markets have provided ample of stock specific opportunities, which we had mentioned in our last Editorial. Further, if you remember a couple of editions back, we had also pointed out to a new theme-pesticides and agrochemicals, which looked in good momentum for the medium-term. Many of the stocks from this theme have performed well in the short-term and we hope that our readers would have reaped benefit from this move.
As it’s said ‘a crisis is an opportunity in disguise’. We had seen how pharmaceuticals stocks had seen a run-up after COVID-19 pandemic crisis and now, there is a new theme emerging for investors and traders after the recent border tensions with China. Defense and related stocks could be the new theme, which could add some power to your portfolio. As an investor and trader, it is always a good idea to be in the sector which has a potential to outperform the markets and this is how one generates alpha return. Hence, our motto is to take what market has to offer us but at the same time, it is important not to buy any stock blindly. It is prudent to understand the price pattern and look buying only financial sound companies.
Over the last five trading sessions, foreign institutional investors (FIIs) have continued to be negative on India and the border crisis with China has only worsened for the institutional flows into equity. FIIs have been net seller to the tune of Rs 7,042.1 crore over the last five trading sessions till June 17. On the other hand, domestic institutional investors (DIIs) have been the net buyer to the tune of Rs 3,476.74 crore for the same period.
Since many nations have opened the lockdown and restarted economies after months of battle with COVID- 19 and India too has lifted restrictions and restarted its economy, there is a potential chance for a second wave of COVID-19 that introduces downside risk for the markets and economy. However, given that we have had experienced from the past (since March), including experiences in other countries that have successfully managed to tackle the virus situation; we believe that we are better placed to tackle the situation in an efficient way. Another factor which has kept the market participants on the back foot is geopolitical tensions between India and China at Ladakh border. Clearly, both the sides do not want a full-fledged war. On this, Prime Minister Narendra Modi commented, “Indian wants peace but can give befitting reply if instigated.”
So overall, this news flow could act as a speed breaker in the near-term but the price which is regarded as the Almighty, is indicating that as long as Nifty is above 9,700 mark, the bulls have an edge.
