Market Update

Saturday, 15 April 2017

Equity Market Tips; Market shifts from greed to fear zone: Nifty won’t move north in a hurry now

Market shifts from greed to fear zone: Nifty won’t move north in a hurry now 

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. 
Equity MArket Tips
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 reality,
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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