Market Set for High Tide, Courtesy Zomato!
The frontline indices BSE Sensex and Nifty 50 hit fresh closing high on July 7; however, the indices are finding it difficult to sustain their all-time high as each time Nifty approaches towards the zone of 15,900-15,915, it is met with strong supply. On Thursday, it was for the sixth time that Nifty tested the zone of 15,880-15,915 in the last one-month. Historically, the repeated testing of supports and resistances beyond six times is very rare in any timeframe. If such a situation occurs then the only way by which this resistance or support is crossed is through a gap!
Though the frontline indices remained virtually unchanged from last Thursday to this Thursday, the broader markets have relatively outperformed the frontline indices. Moreover, nearly 56 and 61 per cent of the stocks from Nifty Mid-Cap 100 and Nifty Small-Cap 100 have closed in green as compared to 48 per cent of Nifty 50 during the period of last Thursday to this Thursday. Nifty Realty, Nifty Media and Nifty Financial Services saw their 100, 90 and 80 per cent constituents delivering positive returns. On a week-to-date (WTD) basis, Nifty Realty is up by nearly 4 per cent and interestingly, the realty index has reached towards a crucial point on its daily chart, as a sustained move above the level of 365-370 would result into a breakout and it could see a quick move of 5-8 per cent in the near term.
Hence, this sector which has recently started to outperform after a prolonged period of underperformance would be a good theme to play. One of the biggest news of the week was that Prime Minister Narendra Modi carried out one of the largest cabinet shuffles on Wednesday with 12 of the incumbent ministers asked to resign from their respective posts. Up to 43 new ministers were sworn in. The other important news was that Fitch Ratings has cut down India’s real GDP growth for FY22 from 12.8 per cent to 10 per cent due to slow recovery post the second wave of the pandemic. It said that rapid vaccination could support a sustainable revival in business and consumer confidence. In the coming weeks, a lot of action is expected to be seen in the primary market. One of the biggest IPO which will hit Dalal Street is Zomato. The mega Rs 9,375 crore IPO of Zomato will be launched on July 14. This would be the second-biggest IPO since SBI Cards and Payments Services. As the primary markets get active there is always a fear of liquidity drying up in the secondary market. There are certain theories that make rounds such as when the IPO markets get hotter and more and more companies hit markets, this could be a signal that the markets are peaking. However, we believe this theory might hold true in some instance but not at all the times.
A vibrant IPO market would only help bring more investors to the market and provide them with more wealth-creating opportunities. Overall, IPOs which had hit market in the first half of calendar year 2021 have been very good for IPO investors as the stocks post listing have given handsome returns. In the near term, market direction would depend on various factors. Quarterly earnings, sentiments and monsoon will be the three pivots which will determine market direction in the near term. So, investors and traders should closely monitor these factors. Finally, we would conclude with a quote from American author Dan Millman who said, “Stay in the present. You can do nothing to change the past, and the future will never come exactly as you plan or hope for.” Hence, traders are advised to follow proper risk management from here on.
