Patience is the Key
In the 1970s there was a song by the English rock band Zeppelin titled “The Song Remains the Same’. The lyrics were a bit tottering on that one (like many rock music songs are) but basically it spoke of things being pretty much the same whether you are in California’s sunny climes or the Kolkata rain or the Honolulu beach. The current market circumstances are to some degree akin to that – days are passing by but the trend remains pretty much the same! In India, the index has been seen oscillating in the range of 15,650-15950 and more importantly, there has been no change in commentary of US Fed Chairman Jerome Powell as he sounded hawkish.
Today is the final trading session of the first half (H1) of calendar year 2022 (CY22). The first half of CY22 has been a dismal one for the equity markets. The S & P 500 is on track for the worst H1 since 1970 and the Nasdaq has fallen 20 per cent in the last three months i.e. Q2 of CY22 has been the worst stretch since 2008 and the domestic frontline indices, namely, the S & P BSE Sensex and the Nifty 50 have shed nearly 9 per cent apiece in H1CY22 on account of a protracted geopolitical stand-off between Russia and Ukraine and the consequent rise in key commodity prices.
Additionally, the central banks’ action to tame galloping inflation by raising key rates has also punctured the equity market rally. So, let’s not forget that the sentiments are dire and that we have a big drawdown that have we put behind us. That said, the main question still remains whether or not there’s more to come, which only time will tell. Going forward, the auto sales numbers would start to trickle in for the month of June and it is a good barometer of which way things are headed in the economy. Interestingly, Nifty Auto index is the only index which has delivered a positive return in the month of June.
Hence, it would be important to keep an eye on the numbers as a healthy set of numbers would augur well for the auto sector stocks and as a result the auto index might touch new highs. On the other hand, the RBI will be releasing its financial stability report. Time and again, RBI has indicated that it is ahead in sort of taming inflation or at least in its fight against inflation. So, let us watch out for the commentary that comes in from this financial stability report. We had mentioned earlier that the Nifty is oscillating in a range; hence, the level of 15,650 is a line in sand for the bulls. Meanwhile, on the upside, the level of 15,950-16000 is well-documented resistance as there is confluence of resistance placed in this region.
First, the 20 DMA and secondly, on the lower timeframe there is flag formation and the upper end of the flag is placed around the 15,910 level. One interesting observation in the last three trading session has been that the market has seen a gap in all the three trading sessions but there has been no follow through move as on Monday we had a gap-up which was then followed by two back-to-back gap downs. However, during the gap down opening the dips were being bought and considering it is the quarter as well as the half year end there is some element of index management as well as element of NAV management.
Once this range is breached on either side, there would be at least a minimum of 300-400 points for taking for the traders and it will be the winner takes it all situation. Therefore, if you are an aggressive trader, wait until the market resolves out of this trading range. In short, the market is about survival and if traders and investors survive this volatile part of the market, the coming couple of years will give you ample opportunities to earn money and create wealth. As such, stay cautious and watchful and follow the levels.
