Will This Slow And Steady Race Result Into A Rewarding Situation For The Bulls?
Does it make sense for the stock price to plunge one day and climb the next with little in the way of new information to explain either of the moves? Maybe not! However, this has turned out to be true for the D-Street. The Nifty has been trading in a range of 11,800-12,040 over the last 14 trading sessions. During this time, it was at least 4 to 5 times that the index attempted to overcome the 12,000 mark on a closing basis. It did manage to do so on November 7th but was discouraged by a bearish formation on the charts. Moreover, there have been multiple formations of indecisive candles around the 12,000 mark and the market breadth has not been so encouraging while attempting a breakout. Even though the benchmark index has managed to close on a positive note on 3 out of 5 occasions when the breadth has been negative on the whole. Nonetheless, despite the overall negative market breadth and some tremors of negative news flow, the index was able to hold the crucial support level of 11,800.
In a nutshell, this has been nothing but a directionless market. Although this type of contraction phase is frequent in a market, no one, unfortunately, can predict its end. Meanwhile, this contraction phase has not only left retail investors on D-street in confusion, but even institutions have split opinions on the Indian market at present. On one hand, FPIs are on a buying spree - they have bought stock worth Rs. 2,797 crores to date - while on the other, DIIs have become net sellers and sold stock worth of Rs 4,327 crores till now.
With the majority of the week turning out to be slow on the news front, Wednesday turned to be a wonderful day as a host of measures were announced from the government, which helped to address a lot of issues, ranging from disinvestment to woes of telecom operators. To begin with, the cabinet cleared the strategic sale in 5 PSUs, including BPCL, Shipping Corp., and CONCOR. The government has set a target of mobilizing Rs 1.05 lakh crores from disinvestment proceeds and achieving this has become more critical after it doled out Rs. 1.45 lakh crores stimulus by way of a cut in corporate tax. Further, with its back to the wall, the telecom sector was provided with a great relief with the news of the Cabinet's approval of two years' moratorium on spectrum payment dues. The news turned to be an icing on the cake after the operators announced a hike in tariffs. One should pay close attention to this sector as it has seen a lot of disruption in the past two-three years because of a new entrant. Now, post the tariff rate hike news, we see the stability returning. However, the quantum of price hike is yet not cleared and initial signs are a positive sentiment around the sector and we might see a re-rating for quality telecom companies.
As for global happenings, a lot went right on Wall Street in recent weeks when major indices were setting record highs. The optimism over the probability of Beijing and Washington reaching a ‘phase one’ trade deal, solid corporate earnings, lower interest rates, and the feeling that the economy would pick up in 2020, collectively, fuel a surge in stocks. However, stocks are retreating from their respective highs and the biggest thorns in the flesh, which are restraining the markets, are concerns regarding the trade deal between the US and China not concluding this year. Meanwhile, pushing the deal into the coming year is not going down too well for the global economy.
Technically, nothing much has changed and the Nifty is still stuck in the same old loop of 11,800-12,040. However, if we dig deeper, we can see that the gap between the Nifty and its rising 21-DMA and 50-DMA has shrunk due to the consolidation over the last 2-3 weeks. Also, there are no odds of a quick pick-up in benchmark indices at the moment as there is no immediate trigger. Even a sharp correction is not seen at the horizon. Considering the current scenario, it would be beneficial to keep calm and stay sector/stock specific. Keep playing along the range of 11,800-12,040 until a firm and definite direction bias is established.
