DSIJ Mindshare

A Flat Trading Day In The Making

It’s been almost two months since the market has been focusing only on one single factor – the expected outcome of the General Elections to seek future direction. Valuations, corporate performances, fiscal worries, inflation, interest rates, think of as many factors as you can that were driving the markets until two months before, you certainly will not find any of them as heavily weighing on investor’s minds today as the General Elections are.

With the results season underway, stock specific movements were expected to be guiding the overall markets at least for now. But still a lot of emphasis is being laid only on the outcome of the elections. The broader worry for the market is a stable government with a clear cut policy mindset that can lead the country into the next growth orbit. The vacuum felt by an insipid leadership is being sought to be filled in meaningfully.

With a good part of the process now being completed, the final outcome isn’t too far away. Considering that its been almost two months since it began, another month looks to be comfortably short to wait out. With all the noise about NaMo (Narendra Modi) assuming the Prime Ministership of the country and leading the NDA for the next five years, one would assume that the outcome is a given. But politics is a weird game to place your bets on.

The outcome of an election is not final until the last ballot is counted. Elections and fought and won on the ground and not the social media. And the ground reality could be far different from what sometimes seems to be. This may sound a little pessimistic, but certainly needs to be kept in mind especially in the Indian context, where votes swing faster than you can move your neck end to end. It also assumes significance in the light o the fact that the markets have been scaling new highs almost on a daily basis.

The slow grinding march to the top is reason enough to be cautious. Jumping in at such a time could be perilous. A sudden catch up with the fundamentals could throw up a difficult situation given the way corporate results are panning out, inflation is inching up and the RBI is waiting for the dust on the elections to settle down before it makes the next move with interest rates.

We are almost at the end of April. As we get closer to D-day, it would be better to take some profits off the table and wait for the next phase of the market rise. This phase will (probably) come after the results in mid May. As for today, the F&O expiry scheduled for tomorrow will keep the markets in a volatile state as they were yesterday. Corporate results are slowly flowing in, but have not been such a big issue for the markets at least for now. Looks like the markets are at least pretending that the results have been priced in.

In overnight developments, US stocks did well yesterday, tracking financial results and some strong economic data points such as declining existing home sales propped up the markets yesterday. The Dow closed up 0.40% while the S&P 500 was up 0.41% at close. The Nasdaq rose much sharply closing up by almost a percent yesterday. European markets too did well with benchmark indices closing in the green.

Asia markets are trading mixed this morning. China, Hong Kong and Singapore are tracking some important data points which have not come in as per expectations and hence trading on the lower side. The Shanghai Composite is down a quarter percent, the Hang Seng is down 0.30% while the Straits Times is down almost half a percent in early trades. Japan leads the positives. The Nikkei is currently up 0.80%, followed by benchmarks in Indonesia, Malaysia, Korea and Taiwan.

All in all, it looks like the markets are in for a flat opening today and more volatile trades in the face of the F&O expiry. There isn’t much on the global front to drive the markets today. The SGX Nifty is currently trading three points down and this indicates towards the insipid trades that could characterize today’s markets.  

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