Calm Before the Storm

Welcome back, I hope you all had a good week in the markets, and otherwise too. An eventful week it was. The big Reliance annual a general meeting happened, and I’d mentioned this was one event that could take us above 16,000. However, even though there were a lot of positives in that meeting, the market responded in funny ways, and in 3 days. Reliance gave up almost 7 per cent in its stock price. Now, when the company with a 10 per cent weightage in the Nifty index gives up that much, then naturally there will be some stress on the index. So even though IT, power, and banking came in support, we hit 15,915 and then started to turn back, and yesterday closed at 15,721.

The week ahead has a mix of some local and global cues that will move the markets. Today being the 1st of the month, SIAM will release monthly auto sale numbers for India, which should be positive, as lockdown restrictions have eased and buying has resumed. Also, on the global side, big day in the United States today with monthly jobs data being released. In May, the number was 8,86,000 and if June does come in lower, then market watchers may breathe a sigh of relief that the so-called raising of interest rates may be further pushed back. Watch out for that one later this evening.

The reason why I titled today’s article “The calm before the storm” is because I felt something is going to happen as we start July; it may not happen this week but we surely have to be watchful in the month ahead. The fact that the market has faced so much resistance in touching 16,000 just tells me that some really good things have to happen to get us over the line. Right now, some of the factors that worry me are rising crude prices, which show no signs of letting up and also the slightly slower progress of the monsoons around North India.

Our domestic institutions have been aggressive buyers in the market, thanks to the amazing collections they have had from retail investors in mutual funds, Foreign institutional investors though have been sitting on the sidelines and even been lightening positions.

What I’ve been doing in the last few weeks is a bit of spring cleaning.

(Although it’s peak summer in Delhi). So I’ve taken a long hard look at my portfolio and just done some liquidating of stocks that don’t make sense to me. Some have been penny stocks that were gifted over the years or just accumulated based on a feeling (mostly wrong) and made me realise that if the market does start to correct and find its way lower, these gains would be the first to evaporate. So, while I hold on to the best in the sectors and have no intention of letting go of those, I just think 40 different companies are too many to hold in a portfolio and have been bringing the number down to 25. A lot of stock market experts would say the ideal number is 10 but I find it hard to actually limit it to a number that low.

In conclusion, outlook for the week ahead, flat to mild movements. The main factors to watch out for are the US jobs data, auto numbers, crude prices and the dollar. We have very strong support for the Nifty at 15,400 and resistance at 15,900. In that range, we shall remain, unless something drastic happens in the US markets. Sectors that interest me are IT and automotive. I am also watching the monsoon progress, as companies linked with agriculture have a lot riding on how that progresses in North India.

You all have a great week ahead, stay safe, stay well and keep an eye on market action.

The author is the Founder, Gaurav Bhagat Academy

DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.