A lot of supporting cues across global economies drive the market rally, though some headwinds keep blowing in
Welcome back, I hope you all had a good week in the markets and otherwise too. First the big news for the week that the 16,000-mark for the Nifty was finally taken down. It’s been a big struggle and a barrier that the bears had defended for months. However, on Tuesday, the bulls finally took it down.
Last week I mentioned that China’s pain could be India’s gain and sure enough FIIs came back to the markets on Tuesday with a bang. They bought for Rs 2,116 crore on Tuesday and an additional Rs 2,828 crore on Wednesday.
The DIIs, after weeks of relentless buying, finally turned sellers and sold for about Rs 710 crore in the same period. This is exactly how it’s been for almost the last 16 months – the day the FIIs buy, the DIIs sell. The FIIs also have their favourite stocks and these include the HDFC twins, HDFC bank and HDFC Ltd. The latter ran up almost 10 per cent in three trading sessions and that’s exceptional, FIIs do, however, hold 72 per cent of HDFC Ltd.
A big reason for the rise in the Nifty was the contribution of the banking stocks, almost 36 per cent of the Nifty is composed of bank stocks and almost all the banking shares really ran and that gave the push that finally toppled 16,000.
As soon as the Nifty broke 16,000, the next 250 points came fast, as there were a lot of option writers who were caught on the wrong foot. As they started closing their positions, the Nifty rose further and that explains the record highs notched up this week.
The question on everybody’s mind is what happens now? Well in my opinion, 16,150–16,200 are now crucial levels. If we hold these levels, then we may even make our way to 16,500 and, maybe even 16,600.
There are some headwinds though. The Delta variant is making news in the US and there is an increasing number of cases in parts of India as well, we need to watch out for that. On the flip side, Corporate India declared some very positive results and this was despite a lockdown quarter. GST collections are back up, exports, despite the logistics logjam, looks robust, oil prices have softened and the US dollar is weakening a little too. The market in my opinion truly hangs in balance and a move on either side is still very possible.
The swings in certain shares have been very high and intraday volatility of 4-6 per cent has been par for the course. This market is not for the faint-hearted, especially those with limited capital and especially if you’re playing the leverage game. In the past week, I have seen crazy gains and then seen those gains evaporate within a couple of hours. Stop losses need to be in play and the golden rule of containing your losses and booking your profits would be a good one to follow.
My personal plan for the week ahead is to continue deploying funds where I see opportunity. In the run-up to this week, I had 30 per cent in cash and Monday onwards some of that found its way back into the large-caps and especially the banks. I still think many of the finance stocks offer opportunity and could follow their banking peers up in the days ahead.
The pharma pack has been so beaten down and God forbid if there is a resurgence of the Covid, then these will really run and so pharma stocks remain my hedge.
The realty sector continues to look strong and related sectors like steel and cement probably won’t see much of a downside either. Real estate and related stocks still have my attention.
The small-caps and mid-caps have shown some weakness in the past two days and may not show any upward trend in the next week. I’ve significantly lightened exposure to this segment and lean towards the heavyweights for now. Bullish on the heavyweights and FII favourites and neutral on the rest of the market is the theme of the week for me.
You all have a great week ahead, stay safe, stay well and let’s hope we get to 17,000 on the Nifty before we get to 15,000.
The author is Managing Partner & Chief Visionary, Gaurav Bhagat Academy
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