Market Update

Saturday, 3 December 2016

Best Advisory Company: Watchout 7900 Nifty Level

Market awaiting monetary injections by RBI; watch out for 7,900 Nifty level

Best Advisory Company | Equity Market Tips

The domestic stock market remained positive throughout the week, defying a cash crunch in the system, and closed with some amount of profit booking.
Domestic institutional investors (DIIs) have purchased record Rs 18,200 crore worth of shares on the back of record domestic liquidity, while foreign institutional investors (FIIs) have sold stocks worth Rs 17,800 crore on fears of dollar appreciation and demonetisation.

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The fight of might will now be matched for the first time in the history of the capital market. Retail investors and Indian institutions will now become a solid counter-force to foreign capital, which is a positive fallout of demonetisation.

Headlines have again started to surface: “Dollar shortage world over...” “Dollar to reach 70 by...” “Importers rush for cover...” All these indicate that there is too much optimism for the dollar, and therefore, it is time to be cautious and stay away from the crowded consensus.

Events of the week:
Reliance Jio’s acquisition of 52 million customers and extension of free offer till March 2017 have caused a lot of tremors in the telecom space, impacting stock prices of the incumbents. But the biggest hurdle for Jio would be to make consumers pay when the freebies expire, which will eventually decide who will win the crown in the telecom sector.

Jio is just 10 per cent of the combined force of the three top private telecom players.Therefore, the fall in their stock prices on the stock exchanges looks overdone. It’s too early to tell the fallout in the short term.

Technical outlook:
The market seems to be heading for some volatile sessions next week due to a major event. However, prices are expected to oscillate between 7,900 level on the lower side and 8,300 level on the higher side in the short term, with expected weakness on the higher side.

Short-term traders may stay on the sidelines till RBI’s policy pronouncement. If interest rates are reduced more than market expectations, a brief rally can be expected. Otherwise, the Nifty50 is expected to remain under pressure.

A breach of the 7,900 levels in Nifty50 could trigger panic selling up to the 7,600 mark.

Expectations for coming week:

The market has turned into profit-taking mode, awaiting triggers for a meaningful direction. The bounceback and the subsequent fall by the close of the week should take the market into a broad spell of sideways trading till major policy announcements come in via Union budget.

The Opec cartel has become active after eight years and Russia’s pledge to cut crude oil production is not a good sign for an economy, which imports 70 per cent of the requirements such as the case in India.

As for India, last year’s low crude oil prices and the resultant benefits will be erased impacting consumption growth in the economy. Auto sales numbers for November suggest the impact of demonetisation has not yet been captured fully, at least in the passenger car segment, but in the two-wheeler space, HeroMoto reported 13 per cent YoY fall in monthly numbers.

Yet, December may offer some negative surprises to the market, which may create a panic bottom.  If that happens, investors should take that opportunity to aggressively invest and build long-term portfolios. The Nifty50 closed the week gone by 0.34 per cent down at 8,086.

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