Short term predictions of the markets are always fraught with danger as they can end up making you look rather silly. It is much more hazardous to try and do this for the immediate term like a week. However, investors who are into stocks seriously will recognize the value of understanding short term market movements and I thought I would take a shot at it for this week.
Since the upheavals of last Monday, the market seems to have some semblance of stability, both globally and in India. The factors in the global markets that will be most watched for in September are the Fed rates in the US on September 17th and the ongoing China story that is unfolding. If the interest rates are hiked and Chinese market continues to slide then it is quite likely that there can be short term panic. As our markets are largely dependent on FII investments, any large scale sell-off from their end can easily get our markets to crash. On the other hand, if the two events do not take place then there will be a lot of relief among global investors and, while this still will not be enough for a strong rally, global and Indian markets will be able to be in a range with a possible positive bias.
The domestic factors faced by our markets are more challenging at present. The following are worth considering:-
- Earning for the last quarter was with mixed messaging and will not play a role in driving markets up. Even this quarter seems muted and all real hopes are pinned on the last 2 quarters of the FY.
- Irrespective of the political spin that the Government wants to put on it, the backtracking on the land bill amendments is a huge negative, both as a signal and in real terms. The pace of infrastructure build-up is going to get adversely impacted by this, leading to much longer recovery in the stock prices of companies linked to such activities.
- For all interest rate sensitive sectors, the wait for the rate cuts continue. However, the RBI Governor has not held out much promise on this front and my estimate is we will have a maximum of another 25 basis point cut this year and maybe 50 basis point cut in the FY. This will cause cheer for many stocks but it is still some time away.
- Political situation is uncertain and chances of GST being passed and implemented by April 2016 is doubtful. Though this is more of a sentiment issue, the lack of progress is negative for the markets.
My assessment from a fundamental perspective is that there are possibilities for the markets to either move up slightly or have a more considerable down-move in this week. For the Nifty, the downside will probably be capped at 7700 or so, where it is likely to find support. On the upside 8200 will be difficult to cross. We will most likely see both days of strong gains and serious losses in the coming 5 days. I expect Nifty to end between 7900 and 8100 on Friday.
The mid-cap and the small-cap indices will have more pronounced movements and in all likelihood the bias there will be negative. Individual stocks may fluctuate rapidly based on news flows but most will trade in a range.
If you are into stocks then what should you be doing? For your existing portfolio, where you already have price triggers for buying, look at these carefully but continue with your plan. For new investors trying to start a portfolio, stay on the sidelines for now. There will be better times to buy, the volatility this week and possibly the next month is not a good starting point.
I plan to do a post at the start of every week, covering this topic and hope it will be useful for the readers.
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