Nifty Go Into Wait & Watch Mode!
Two most important aspects of successful investing or trading journey are entering and exiting at the right moment. If you recall our last week editorial, it clearly said that it is time to take profits off the table and as you can see, the current price of the index is a testimony of our clear and precise research. Nifty index is trading almost 700 points down from last Thursday’s high. This reminds us of one of the quotes by the best-selling authorAlan Farley, in which he says, “It’s easy to get into the market but what about getting out? Most traders don’t have an exit plan, whether their positions are turning a profit or going down in flames. The truth is that a good exit will save your neck on a bad entry and keep you in the game longer than good stock-picking.”
The biggest thorn in the flesh, which saw the markets crack impulsively were US President Donald Trump’s intensified threats of new tariffs on China as part of retaliatory measures. US President’s administration believes that it’s Beijing’s failure to contain the spread of Coronavirus beyond its origins in the city of Wuhan that the virus has spread to almost all the nook and corner of the world and isn’t showing any signs of recovery. Further, in April, after reporting weak PMI Manufacturing at just 27.4, India reported a record low of 5.40 for PMI Services.
I’m sure many would have a question in their mind as to why did the bull turn their tides? Well time and again, we have said that sharp pullbacks are common in any bear market. These sharp pullback rallies are short-lived. If we analyse the previous bear market of the years 2000 and 2008, the pullback rallies where quite sharper in the year 2000, where Nifty pulled back almost 30 per cent from the first bottom. And, in the year 2008, Nifty again pulled back in the range of 21 to 25 per cent. In the current leg of pullback rally, Nifty has rallied almost 31 per cent from March’s low. Hence, this proves that history repeats itself. Like in general, we don’t remember every day of our life but we do remember beautiful moments, when we had enjoyed success or struggling times, when we endured hardship. Similarly, markets have a memory and they remember what happened in the previous bear & bull markets and it tends to repeat its pattern quite often.
On the earnings front, index heavyweights such as Reliance Industries and Hindustan Unilever had reported their earnings last week. The country’s biggest-listed company by market-cap witnessed a decline in its net profit, which was impacted by inventory holding losses in the energy business due to a dramatic drop in the oil prices, accompanied with unprecedented demand destruction due to Coronavirus. Hindustan Unilever was also impacted by the spread of Coronavirus, which resulted into a nationwide lockdown as the company reported a decline in its underlying volume growth at seven per cent in Q4FY20.
So, pondering over as to what would be the outlook for the coming week? With a sharp decline from its recent swing highs and the current leg of correction halting near to 38.2 per cent retracement of the rise from March’s low, we expect a range-bound oscillation and some stockspecific action that keeps unfolding in the markets. In the coming week, we may see the level of 9,000 acting as a crucial support level and on the upside, witness 9,450 acting as a resistance level.
Further in the coming week, the market participants will be looking at a large number of data like retail inflation, industrial production and WPI inflation. Also, the fluctuation of rupee and crude oil will be eyed for cues.
