RBI and Mr Market Both Surprised Everyone
RBI and Mr Market Both Surprised Everyone
Market began the week with positive undertone on hopes of an interest rate cut from RBI, but fell mid-week when policy rates remained unchanged and then later bounced back with vengeance by the close of the week baffling even the smartest bear on the street. This also means that Mr Market is enveloped in a strong bull market. When symptoms such as utter negative news are disregarded and market moves up defying all logic, a clear signal is sent that structurally markets are in secular bull market when such important macroeconomic indicators like interest rates rhetoric’s are ignored. FPI’s selling have reduced drastically this month, with low market wide open interests indicates that all the weak hands are out from the market and deliveries of past two months of heavy FPI selling have been consumed by domestic investors making the market ripe for bulls to again take control. Market is just awaiting the right kind of trigger.
Events of the Week: Cairn India commits to raise output to 300000 bpd by investing 30K Crs while Russia pledges to cut crude oil output by 300000 bpd to support prices, a perfect analogy to befit the business axiom ‘one man’s loss is other man’s gain’ the same is true in stock market and in real businesses too. RBI truly displayed the independence, ignoring the political and popular demand, refrained to cut interest rates in order to protect Rupee rout due to impending US interest hikes, a smart move belittling all the experts and economists.
Technical Outlook: Market seems to be in a broad trading range oscillating between Nifty 8400 on the upper side and 7900 on the lower side. In these sideways, corrective times, over bought/over sold indicators are best suited to analyse the market. RSI is approaching from deep oversold zones to neutral levels indicating some more potential to go up. However the velocity of ascent is slow indicating profit booking should be expected at higher levels. As the market rises higher, resistance is expected at 8400 levels. Buy on dips should be the strategy for the traders. Nifty50 is expected to trade with positive bias with intermittent profit booking at higher levels.
Expectations for the week:
Market has firmly made a base awaiting positive triggers to kick start the rally. However December being the year end month historically closes with no fresh commitments from large institutional investors. Next week the whole world will watch the events unfolding in Washington DC, when USFED meeting is expected to raise interest rates and more importantly the ensuing commentary would give a major direction for further course of action. However it is given that the interest rate will be raised by 0.25% and therefore that will just have sentimental effects on the market. The main trigger for Indian markets would be the future road map post demonetization and the major policy pronouncement through budget, till that time the market is expected to remain range bound with bullish bias. Investors should take this opportunity to invest and build long term portfolios. Nifty50 closed the week up by 2.16% at 8261.75.
