Second Viral Wave Triggers Negative Reaction
Almost a year ago the markets were gripped by fear of uncertainty as the outbreak of the pandemic resulted into one of the most dramatic stock market crashes in history. Though we have come a long way with benchmark indices having touched record high levels on the back of unprecedented liquidity flow and vaccines rollout, of late we have seen investors locking their profits from the markets. And one of the prime reasons for this is concern about a second wave as India is seeing a surge in virus cases, particularly in the states of Maharashtra and Kerala. Also, a crucial thing to note is that after the UK strain, the South African and Brazil variants have found their way into India.
The unlocking in a phased manner has certainly lifted the economy out of the miseries, but safety measures such as wearing of masks and following social distancing have been set aside. As a result, Mumbai Mayor Kishori Pednekar has warned that the city might be forced into another lockdown if citizens do not take proper precautions and continue to defy the rules. The markets have corrected almost 2.02 per cent from the all-time high in a quick span. However, stock-specific action continued on D-Street and one seg-ment which is seeing interest from market participants is Nifty PSU Bank index
The unlocking in a phased manner has certainly lifted the economy out of the miseries, but safety measures such as wearing of masks and following social distancing have been set aside. As a result, Mumbai Mayor Kishori Pednekar has warned that the city might be forced into another lockdown if citizens do not take proper precautions and continue to defy the rules. The markets have corrected almost 2.02 per cent from the all-time high in a quick span. However, stock-specific action continued on D-Street and one seg-ment which is seeing interest from market participants is Nifty PSU Bank index compared to only one in the latter part of January.
One more key development which took place recently is that the Union Cabinet has approved production-linked incentive (PLI) scheme with an outlay of Rs 12,195 crore over five years for telecom gear manufacturing in India. The PLI scheme for telecom gear will cover manufacturing of equipment such as core transmission products, 4G, 5G radio access networks and other wireless gear. The incentive structure ranges between 4-7 per cent for different catego-ries and years. For micro, small and medium enterprises (MSMEs) 1 per cent higher incentive is proposed in the first, second and third year.
The minimum investment threshold for MSMEs has been kept at Rs 10 crore and for others at Rs 100 crore. Two stocks which would be key beneficiaries of this move would be Tejas Network and Sterlite Technologies. Technically, the evidence of weakening of trend has already started to emerge in the index. The index has registered lower high and lower low for the second successive trading session and has closed below its prior day low. Furthermore, it has breached its important short-term moving average i.e. 5-EMA, which has begun to trend down.
We believe any extended breather from here on would get anchored around 14,950-14,977. The buying demand is expected to emerge around this support area as it is a confluence of 50 per cent retracement of the post Union Budget rally (14,469-15,431.75) at 14,950 while the last week’s low is placed at the 14,977 level. Be focused and not scared if the market extends its correction in the coming days as we anticipate that stock-specific action is likely to continue and the index would take support around the 14,950-14,977 region.
