Hope you all are having a great weekend. Here's a quick market update for the coming week.
So what have we learned this week? U.S. markets have been hitting all-time highs while Asian markets are struggling and seem mixed. Banknifty has been following structure as per the last few weeks' updates. The 38.20% level remains sacrosanct as long as Friday's high holds in place. On a local basis, covid cases have been on the rise and state governments have insisted on a curfew with strict state regulations.
Last week RBI Governor came out with the Indian style of QE. Nobody expected this kind of liquidity measure. As a result Bank Nifty shot up more than 1000 points from an intraday low. On that particular day, FII and DII both turned out to be net buyers in the cash segment. The RBI Policy acted as a trigger for short covering but that started to come off as well. Our Indian markets have been underperforming.
SPX has reached the 1.618 fib extension. Will it go even further? From what we have learned so far in 2021 and I say it again. Simple: The relentless liquidity machine remains in full control. In addition to renewed and larger fiscal stimulus central bankers, including the Fed, have made it abundantly clear they will keep printing no matter what the data shows, no matter how much inflation there is (“let it run hot”).
Coming back to Indian markets. The real action is in mid-caps and small-caps. I came across some content where equity mutual funds saw their first month of net inflows in March after eight months of net outflows. All categories of open-ended equity funds, barring multi-cap funds and value/contra funds, saw net inflows. Have people started getting back to normal investment habits post covid? I wonder.
Sliding over to where there has been some real action and optimism. Nifty IT has closed the week at the top 25% of its candle range. All IT stocks have been trading near an all-time high. I certainly feel it can travel further towards a pivot resistance level as highlighted above. The breakout was around the advantage of "work from home" due to state laws tightening up concerning covid and expectation of good results.
These stocks may come under severe selling pressure if the results are even slightly disappointing. In fact, that is what happened during last quarter results.
Coming to another interesting sector to watch out on which has been the pharma index.
We are back to 2015 high and seem ready to break through the highlighted resistance. Although the conviction in buying banknifty seems way low compared to nifty. Heavy call writing for upcoming contract expiry on Nifty and Banknifty. PSU index closed higher for the week.
I feel using these corrections to add stronger decisions to one's portfolio would be quite a systematic investment. But let us not make any bets here. Markets have definitely been all over the place. As per sources shares of PNB, Vodafone Idea, Tata Motors, IDFC First Bank, and SAIL were among the most traded shares on the NSE on Friday.
I can’t tell you how the year 2021 will turn out nor will I pretend to throw out price targets, rather I want to suggest humility in face of the reality that having an alternative view might help and just assume that central bank printing and liquidity remains the overarching driver of everything. That's all for this quick market update.
Have a great weekend.