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Market outlook: Why it’s better to stay in cash

Equity market witnessed immense volatility on Thursday durin..

Equity market witnessed immense volatility on Thursday during the Budget session, as the NSE benchmark Nifty50 swung 175-points on either side during the day.

Despite such volatility, the index ended virtually flat losing 10.80 points or 0.10 per cent. Market saw a sharp 170-point recovery from the lows of the day in the second half of the session.

The Budget, in all likelihood, will be perceived in a mature way by the market. Though there will still be some follow-up reactions to the Budget for a couple of days.

The level of 10,880, which remains in the vicinity of the short-term 20-DMA shall, acts as a strong base for the market.

The levels of 11,075 and 11,110 will play out as immediate resistance area for the market. Supports came in form of a strong base around 10,880-mark.

The Relative Strength Index (RSI) on the daily chart is 69.2956 and it has just crossed below 30 from a topping formation. The daily MACD remains in buy mode, while trading above its signal line, but is seen moving towards negative crossover.

On the candles, a long-lower-shadow occurred. This usually halts the downtrend if it happens during a correction or a consolidation and hints towards a potential pullback. However, this needs confirmation on the next trading day.

The pattern analysis shows that the Nifty has done nothing but consolidated on a closing basis despite 175-point swing on either side.

The volatility has ensured that a likely base may be formed near the 10,880-mark, which also happens to lie within a close proximity of the short term 20-DMA and hence is expected to act as strong support.

All in all, from proposals' point of view, the Budget has not been taken too badly by the market despite some short-term volatility that may still remain.

The major takeaways from the Budget are rural focus, infrastructure boost, benefits to marginal farmers, extending corporate tax rate cut to MSMEs, and encouraging rural spending.

It was believed that the Budget will grossly remain a populist one. Not only this turned out to be a more fiscally prudent, the FM also introduced return of LTCG at 10 per cent, which may induce short term volatility.

Despite looming 2019 elections, the FM choosing to remain fiscally prudent will taken in good spirits by the market in the long run, once the immediate reactions are over.

We recommend preserving liquidity and saying away from creating any speculative bets as all volatility will present fresh selective buying opportunities.

STOCKS TO WATCH: Fresh longs were seen added in CG Power, Vedanta, Federal Bank, Dish TV, HCC, M&M, NCC, JSW Steel, ITC and Apollo Tyres.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])

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