The domestic equity market crawled up slowly amid war-like threats between the US, its allies and Russia during the week gone by. Certain stocks remained muted with virtually no strength to inch higher and remained rangebound throughout the week in spite of bullish global cues.
When global cues were positive, Indian markets were lethargic, which indicated that the market has reached plateau and is in a wait-and-watch mode.
Even when the market has begun to discount the fears, early Saturdays air strikes on Syria by US, British and French forces have completely changed the equation. This will now be a key trigger determining market direction in the forthcoming weeks. The Dow closed 100 points down in Fridays trade just before the air strikes. By Saturday morning, Dow futures traded over 100 points down, signalling bearish sentiment across markets.
Besides the Missile mania, March quarter earnings will sway the market through the week. The Indian market had a streak of positive news this week, like favourable IIP and CPI numbers for March and companies like Goa Carbon reporting double profits this year.
However, there wasnt any drastic move in the stock price. There is a chance that the commodity cycle has peaked and this can threaten the bull market in some of the cyclical stocks in the long run.
Analysts estimate that the earnings growth may lose steam in their Q4 results and expect Nifty50 firms combined net profit to grow at 10.9 per cent YoY.
Events for the Week
A sharp $5 a barrel increase in crude prices over the past few days with Brent crudes rise to a three-year high of $72 a barrel have caused fears among consumers. The trigger for this significant rise in oil prices was worsening of tensions in West Asia with Saudi Arabia having intercepted missiles over Riyadh.
In the midst of this uncertainty, the government asked the OMCs to absorb the Re 1 per litre price hike. Although the OMCs denied this, but the market seems to have got a whiff of early elections and, therefore, started to punish public sector undertakings on fears that their profits will be impacted in the election year.
The market has lost the momentum on the upside. Indicators like MACD are indicating a possibility of a correction. Open interests and volumes are low, which is positive in the medium term. Low volume and low open interest mean that the down side is capped and the upside is open till 11,100 on the Nifty50 in the medium term and 10,600 in the near term. Buy on dips should be the strategy for the traders.
Expectations for the Week
The market will be reacting to US-France-UK joint strike on Syria and also quarterly earnings, which could play a significant role in providing a jumpstart to the indices. Key events to watch out for during the week are the earnings numbers from private banks, which are expected to be healthier.
Also, the latest twist on the Fortis deal with Munjals and Burmans joining the race along with IHH and Manipal Hospital should benefit minority shareholders. This will be like an IPL match for the stock market audience. Be cautious on cyclicals but positive on private sector banks, housing finance companies, NBFCs and fertiliser and consumer durables firms.
Investors should continue to look for quality stocks and should adopt a buy-on-dips strategy.
The Nifty50 ended the week 1.44 per cent higher at 10,480.