Volatility Will Continue To Haunt D-Street In Coming Days
The Indian equity benchmarks pocketed gains of around a percent in the first month of new financial year. The price movement during the past week has been inconclusive as the indices have exhibited volatile movement. If we investigate further, the trading screens were mostly haunted by volatility and that was kind of obvious amidst 3Es- Election, Economy and Earnings, which have started to take the centrestage. The fourth phase of general elections 2019 recorded a voter turnout of 64 per cent, which was better than the turnout seen in 2014. A fresh round of phobia gripped banks and finance companies' stocks as Yes Bank posted a large loss in the March quarter and two of the Reliance ADAG finance companies’ credit rating were downgraded. Besides this, the monthly auto numbers that have come in continue to show YoY decline and have also confirmed that the sector is reeling under a prolonged weakness. But the markets appear to be impervious to any negative news and all the panic selling has been absorbed. The catalysts that helped the bulls to keep themselves afloat were both economic and political. On the economic front, India’s core sector number finally showed some improvement at 4.7 per cent for March 2019. This figure represented the best core sector growth in the last five months. Apart from this, the GST collections reached a record high collection in the month of April since the launch of the GST in July 2017. The GST will have to be maintained around this level each month to meet its full year target for FY2019-20. On the political front, the UN has finally declared Masood Azhar as a global terrorist after China withdrew its objections. This is a triumph for India’s diplomacy and speaks volumesabout India's growing clout among the world powers. In other news, the market regulator SEBI has prohibited leading stock exchange NSE from accessing the markets for six months on co-location case, which implies that the exchange cannot bring its IPO for six months or make other capital market investments.
On the global front, there was a lot of hustle and bustle on the Wall Street on the Federal Reserve's interest rate policy. Also, the US President Donald Trump called for a rate cut and implementation of more money-printing quantitative easing to help the US economy go up like a rocket. The most-awaited event finally unfolded as the FOMC announced that it would leave interest rates unchanged. The US stocks witnessed a pullback from the higher levels after the Federal Reserve Chairman Jerome Powell said that the US economy is on a healthy path, incoming economic data was broadly in line with expectations and that weak global growth, Brexit and trade risks have moderated. These observations may have dashed some trader’s hopes that the Fed might be willing to adopt a more accommodative stance. Meanwhile, iPhone maker Apple announced stellar numbers.
In the present context, the index has been swinging in a broader range of 11,550-11,850 over the past month or so. In the first month of FY2019-20, we saw Nifty bouncing back multiple times near about the level of 11,550, while on the higher side, the zone of 11,800- 11,850 continues to pose stiff resistance. Until this range is breached in either direction, we may see the index swaying within the range. In the coming days, there are not many economic announcements on the domestic front, however, the earnings outcome and the progress on the general elections will remain on the market radar. We would advise traders to avoid risky leveraged positions as volatility would be the buzzword on the D-Stree
