Indian markets excited about a second stimulus: Nirali Shah of Samco Securities
The immediate support and resistance are now placed at 11180 and 11540 respectively, she said, adding that traders should wait for a decline before building long positions
Indian markets witnessed across-the-board buying in its shorter than usual week, after registering a fall of 4% in the week gone by. Hopes of a fresh stimulus from US and UK governments are keeping the market sentiments upbeat and India isn’t far behind. Back home too, there are expectations from the government to announce a second round of stimulus measures to cater to the ailing sectors of the economy.
As the country slowly and steadily opens itself to normalize operations, investors on D-Street are expecting growth to replace the contraction being witnessed in the economy. This positivity is truly reflected in India VIX which since the past few weeks has been declining. A negative correlation between VIX and equities imply that the optimism will keep bourses afloat for some more time. Adding to the overall sentiments in India is the record high current account surplus in the April-June quarter. This is the second consecutive quarter India reported a surplus which also cheered the mood. But investors should not get excited and place aggressive bets as US elections is hanging like a Sword of Damocles over the market’s head and could emerge as the party spoiler.
Event of the Week
October has brought with it some encouraging auto sales numbers and stellar IPO listings. Maruti’s 30.8% YoY growth and Bajaj Auto’s 10% rise in sales have also added fuel to the bull’s party. A growth to this capacity is being observed in the auto space after a long time. But investors should not read too much into these numbers yet. Because on the face of it, these growth numbers might seem positive, however there are a couple of factors such as pent-up demand, attractive rebates offered by dealers to get rid of the piling inventory which have led to this demand. Investors are advised to remain wary while picking up stocks from the automobile space and wait for an update on the scrappage policy, relief in terms of GST, renewed lending by financial institutions and any new stimulus to address its woes.
Technical Outlook
Nifty 50 closed on a positive note after a big bearish candle last week as the index found support at 25% retracement of the entire rally since March. The bounce from these levels hint at further room for an upside in this rally. Market’s move this week can be attributed to aggressive longs in the metal, auto and banking sectors. Bank Nifty, which remained on the sidelines or underperformed till now, is now taking the lead and indicating a fresh upmove. After a sizable fall last week in the benchmark index, we maintain a bullish outlook on Nifty as long as it does not fall below the 25% retracement support. The immediate support and resistance are now placed at 11180 and 11540 respectively. Traders should wait for a decline before building long positions.
Expectation for the Week
Going ahead, markets could keep a keen eye on the Supreme Court’s waiver of interest on interest outcome and RBI’s MPC meet. As both these events were postponed from this week they could keep an overhang on the bourses in the coming week. A relief package by the government for the ailing hotels, airlines and entertainment sectors could also uplift the mood of market participants. All in all, domestic markets are expected to remain buoyant in October before the festive season begins. Investors can look for stock specific bets on decline as India Inc’s Q2 numbers will be reported this month. However, any aggressive buying should be kept for later once there is clarity on US elections. Nifty50 closed the week at 11417.0, up by 3.3%.
Nirali Shah is senior research analyst at Samco Securities
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