The domestic equity market remained
flat through the week, as it prepared to enter the earnings season. The March
quarter numbers of IT bellwether Infosys BSE -3.86 % were a mixed bag for
investors, as the company reported a disappointing 2.86 per cent drop in net
profit while announcing distribution of higher payouts through dividends and Rs
13,000 crore by way of share buyback program.
US President Donald Trump’s remarks on the US dollar “becoming too strong” led
to a sharp fall in the greenback. It seems the decade-old policy on US dollar
will undergo a dramatic shift from a stronger dollar to weaker dollar,
potentially threatening many business models across the world. Commodities like
gold also saw a rise, as it hit multi-month high. The Supreme Court ruling
quashing compensatory tariffs to Tata Power BSE -1.29 % and Adani Power BSE
-2.95 % added uncertainty to the power sector, which has already been reeling
under a huge debt burden.
The Gujarat High Court
recommendations, de-notifying the Union Territory of Daman and merging it with
Gujarat to make the liquor ban effective in the state does not bode well for
liquor companies. Many more states are promising to make their states liquor
free. Only time will tell if it’s a political rhetoric or it will become a
Events of the week
The Infosys board’s announcement to give Rs 13,000 crore back to shareholders
in the form of share buybacks and dividends showed many IT companies are
finding it difficult to get better opportunities to deploy cash effectively.
Siam reported that Rs 5,000 crore worth of unsold BS3 auto inventory still lies
with manufacturers despite heavy discounting. The merger between Cairn India BSE
-4.51 % and Vedanta has also become effective, creating a natural resources
behemoth in India.
Technical outlook for the week ahead
The Nifty50 looks set to continue on
the path of correction for some time. The market has seen no meaningful
correction since last few months. The upward velocity of the indices weakened a
week ago, as was evident from smaller trading volumes on the way up. The zigzag
movement of the Nifty50 indicated that these are times for market corrections
and not a big reversal of the underlying uptrend. Traders should book profit
and stay on the sidelines and let the market corrects for a few more days.
Outlook for the week ahead
US President Donald Trump’s intervention in Syria last week and his recent
pronouncement on North Korea is a complete reversal of his election stance.
North Korea issued a ‘warning’ to target mainland United States with nuclear
bombs. Such threats of nuclear warfare can stall the bulls worldwide. The
domestic market was intoxicated with greed since last four months and any
geopolitical disturbance can easily create fear across the board, causing the
market to correct. There is a lot of uncertainty in the market. Plus, with the
earnings season on the horizon, the market would not move north in a hurry now.
Investors can wait and watch, but hold on to their investments. The Nifty50
closed the week at 9,150, down 0.51 per cent.
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