Stock-Specific Action Theme Works Well
What a week it has been for the Indian markets! Even though the benchmark indices have registered a modest gain of about 0.04 per cent, the stock-specific action theme worked pretty well as real action was seen in the broader markets wherein Nifty Mid- Cap has surged nearly 1.50 per cent and Nifty Small-Cap has jumped 2.85 per cent. And this is what we had indicated in our last editorial – that the broader markets would outperform the benchmark indices – and once again our analysis hit the bulls-eye. We continue to reiterate that there is still some steam left in the broader markets rally as the Nifty Small-Cap index is still trading 11.74 per cent away from its all-time high, whereas the Nifty and Bank Nifty had already registered fresh all-time high in mid-February. As such, the Nifty Small-Cap has still a lot to catch up on.
Talking about Nifty 50, it has remained trendless, making it difficult for short-term traders to take a definite directional bet. Given the trendless landscape of the markets on the daily chart, each short-term view has led to whipsaws. However, post the RBI’s monetary policy announcement, a directional trend has started to develop on the bullish side. But the most important thing if this trend has to continue is that the major sector i.e. Bank Nifty needs to contribute. Bank Nifty has to play a major role from here on as this sector has been underperforming lately and as a result we are witnessing a tepid performance from the markets.
Post the RBI policy, the Bank Nifty has reclaimed its 100- DMA, which is a cherry disposition. However, at present, apart from this there are not many shining signs, which makes us suspicious about any decisive trend to emerge in Bank Nifty and hence we feel the markets may continue to consolidate in the broad range with the level of 15,050 acting as an immediate hurdle for the bulls. The major event of the week was the monetary policy announced by the RBI. All members of the RBI MPC decided to keep key rates unchanged and stance as accommodative and pledged to be able to continue to sustain growth on a durable basis.
That said, some concern has been expressed on input cost pressures which can feed into inflation, particularly commodity prices and logistic risk. However, overall the RBI stated that the Consumer Price Index (CPI) inflation trajectory is likely to get subjected to both upside and downside pressures. The projection for CPI inflation has been revised to 5 per cent in Q4 of 2021 and 5.2 per cent in Q1 2021-22. The projection of real GDP growth for 2021- 22 has been retained at 10.5 per cent. With the RBI policy behind us, the market participants’ focus would shift back to fundamentals and the trend of corona virus cases. The cases are rising at a brisk pace and recently India witnessed a record single-day surge of 1,26,789 new corona virus cases infection.
Moreover, the pace of vaccination is not able to keep one step ahead of the pace of the pandemic as some states have reported shortages of vaccination. So, in the coming week, the market participants would keep one eye on the escalating number of pandemic cases and the other one on earnings’ announcement from the corporates as there is a lot of expectation built up going into the earning season. Hence, it’s important to see how things pan out in the coming days, as any disappointment from corporate earnings could trigger a retreat. On the other hand, any pleasant surprise would help the Nifty to climb the wall of resistance which is placed at the 15,050 level and if Bank Nifty starts to participate, then we can see the overall sentiment lifting in the markets. Until then it would be prudent to focus more on the selection of stocks and avoid aggressive bets overnight or prefer hedged positions.
