Mumbai, September 7, 2020: Looking at the market movement in last few days since August 25, it gives an indication that the focus is shifting from aggression to defensive. The movement in domestic market is mirroring the activities that are taking place in the US markets. The seemingly enhanced level of geo-political tension and the concerns over the markets running ahead of the economic realities are factors that may be of consequence to the course of the markets during the month of September.
After witnessing heightened volatility, Indian markets close in green with minor gains. The benchmark indices S&P Sensex and Nifty gained 0.16 per cent and 0.19 per cent to end the day at 38,417.23 and 11,355.55 points respectively. The broader market participation, we have witnessed in last couple of weeks, is once again shifting to the large caps, indicating widespread selling ahead in the form of profit booking during the September.
The global rally seen recently was supported by a $22.50 billion stimulus package by the developed nations. Foreign Portfolio Investors (FPIs) have so far pumped in Rs 41,762 crore in domestic equities in August, which is the highest monthly inflow for this calendar year (CY) 2020. Meanwhile, the Indian government is cash-strapped, due to shortage in tax revenues, and is looking for non-tax revenues, such as divestment from PSU's, and dividend from the Reserve Bank of India (RBI).
The Central Government received a dividend payout of Rs 57100 crore ($7.6 billion) from the RBI this financial year, in August. The RBI has stated that the coronavirus pandemic could cause a structural downshift in the potential output of the Indian economy.
Bhavesh D Damania, Founder and Chief Care Taker, Wealthcare Investments, said, “Key economic indicators suggest that our economy is yet to reach at 80 per cent of pre-COVID-19 levels but the markets have recovered almost at 100 per cent of pre-COVID levels.!!! This development remains unexplained. I foresee severe lockdown impact and winding up of many businesses and rise in bankruptcy incidences going ahead. There will be huge demand collapse leading to higher Job loss in economy, over next 3-6 months. No financial package can address this fully. Liquidity and retail inflow is keeping markets in good mood but the reality is far from it”.
The Supreme Court’s (SC) decision on loan moratorium is eagerly awaited. The apex court asking banks not to classify standard loans as on August end as non-performing till further orders has impacted the sector stocks. Nifty Bank has witnessed deep damages. The festival celebration season which started has seen tepid response and going ahead we will the same response will continue for the forthcoming festivity.
‘Markets are maintaining a safe social distancing from the reality’. All hopes of revival lie on Diwali. September should see good correction, if moratorium is not extended along with some profit booking across the board, Damania added.
In this backdrop, Abhishek Bansal, Founder Chairman, Abans Group said, “We may see the uptrend continuing in September, on optimism over a COVID-19 vaccine and further unlocking of the economy. Going ahead in the month of September, Nifty 50 index may find critical support level around the 20-days EMA at 11,253, and the 50-days EMA at 10,855, while key resistance could be witnessed around 11,641, and 11,948”.
Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking said, “Technically speaking, there is a ‘Bearish Wolfe Wave’ on hourly chart and precisely from the Potential Reversal Zone of this pattern, we witnessed some profit booking in the market. Till now, we were only making our assumptions but now we can see a defined level on chart, which can trigger some weakness in Nifty. This level is at 11,420. Going ahead, a sustainable move below this point should be considered as an exit opportunity for existing longs and aggressive traders can opt to short as well”.