India’s cases are already on a rise with no sign of peaking. But, since businesses are gradually opening up, the expectation is that earnings should normalise in two quarters at least for a few sectors.
A) The rally past few weeks was a fear of missing out (FOMO) rally with bulls catching the bellwethers of each sector without the ground reality showing any improvement.
Despite the gradual opening of the lockdown, businesses haven’t started as normal or at full capacity.
Q) What is the way ahead for markets? Do you think we could retest 7500? If not which are the crucial supports which one can watch out for on the downside and on the upside which are the levels that could put bulls back in charge of D-Street?
A) The market is expected to remain bearish going ahead at least till the index decisively closes above 10,150 only then it will reclaim momentum.
And, on the downside, a decisive break below 8800 levels can take markets lower.
Q) Do you think we are starting at another nationwide lockdown in June as cases with respect to COVID-19 goes up? If yes, what could be the impact on markets?
A) As of now, it would be better not to speculate the worst. Cases are continuously increasing but a complete lockdown will have a huge impact on the economy.
Dalal Street will also react accordingly because when the crux of the economy is bleeding, markets should not soar to new highs.
Q) OECD sees 7 percent contraction in India’s growth – if second waves hit India. Do you think there could be another stimulus announcement from the government?
A) India’s cases are already on a rise with no sign of peaking. But, since businesses are gradually opening up, the expectation is that earnings should normalise in two quarters at least for a few sectors.
However, a second wave or an extended lockdown will be disastrous for a developing country like India.
In that case, the government will have to extend help in the form of stimulus. But, when and how much will be offered only time will tell.
Q) Small and midcaps outperform slightly in the week gone by - some stability there as major selling was seen in the top overbought stocks?
A) Stocks that rise faster without the backing of earnings or valuations are the ones to fall the first. Since, large caps had witnessed a bubble in the past few weeks in the name of safety they were the first to take the hit at the first sign of cracks.
Hence, mid and small caps outperformed slightly in the week gone by while large caps saw more pain.
Q) What is your call on financials? How should investors trade NiftyBank in the coming week?
A) The financial sector is the weakest link in a recessionary phase of the economy, which makes it a safe haven for short-sellers during bear markets.
However, current valuations do reflect deteriorating conditions of the economy but still panic selling may come in during Q1 & Q2 FY21 results.
In the near term, they are overbought and are therefore susceptible to deeper cuts in the prices especially the NBFCs and few private sector banks. In general, sell on rally should be maintained in BankNifty.
Q) The most abused phrase is ‘It’s different this time’. But, this time it is actually different, and history might just rhyme and not repeat. This time the only thing which is certain is uncertainty. What is your view?
A) If we see, uncertainty is a friend of bears and certainty is a friend of bulls almost always. The reasons causing uncertainty and certainty may be different all the time in history but the effect is the same.
Certainty brings hope and therefore bulls take charge, on the contrary uncertainty breeds fear and this turns the same bulls into bears making them sell on the fear that uncertainty will lead to further losses.
Every time, this cycle plays out with a different set of factors in varying time lengths but the end result is the same bull and bear phases of the market.
The trick is to identify where the majority is standing and take a contra stand but the secret to riches is to know the extremes and then go against the crowd. If you follow this it becomes irrelevant as to ‘What This Time Factors Are’!
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