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  • Jimeet Modi

    CEO, Samco Securities & StockNote
    The founder & CEO of SAMCO Securities, StockNote and the Indian Trading League Company, Modi believes that price is the most important factor in investing. He is credited with developing the AIRM (TM), an approach to screening stocks and businesses in a scientific manner. His role model is Warren Buffett.

Are poll pundits guiding D-St or is it the other way around?

Investors must continue to keep a watchlist of quality companies for their portfolios.

ET CONTRIBUTORS|
Updated: May 11, 2019, 01.06 PM IST
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Volatility will remain at its peak as the battle intensifies.
Mr Market had a rough week with the indices witnessing a steep fall. Indian bourses also became vulnerable to the US-China trade spat, which made global markets fearful and led Nifty to a massive fall from high of 11,856. Any depreciation in the yuan will put further pressure on the rupee, as the dollar keeps gaining strength amid the trade tussle. Globally, there is extreme weakness in macros and on the home front too, the political scenario is heating up in the last lap of the general election, making market participants wary of taking any major positions.

The crack in the market had its effect on the political analysts too, who started betting on lower NDA numbers taking hints from the market’s rocky behaviour.

However, just a few weeks ago, the very same analysts had predicted a comfortable NDA win since the markets were rising upwards in full throttle. This proves the wavery mind of the political analysts, who dance with stock market volatility before the actual outcome.

Hence, investors must form an independent view of their own and not blindly follow third party opinions.

India’s bellwethers such as Reliance Industries led this massive fall this week. However, the main reason for the largecaps cracking is none other than the euphoria which had buoyed the rally in the first place. The fact that massive selling is happening in frontline counters means smart money is exiting for reasons best known to these companies.

When the entire Street turns bullish on the biggies, that is time an investor should take a contrarian stance. As Warren Buffett rightly says, “Be fearful when others are greedy and be greedy when others are fearful.”

Event of the Week
The earnings season is on in full swing and the numbers are pouring in from all sectors. However, if you look at the results reported till now, in entirety, the pickup in corporate profits has been quite subdued this quarter. Nonetheless, certain stocks are trading at premium valuations. On the other hand, there are companies like Vedanta which reported a 5% degrowth in bottom line, ICICI Bank and BSE also reported a double-digit de-growth in PAT, but they are fairly valued compared with their peers in spite of poor earnings.

Technical Outlook
Nifty50 slipped swiftly after making a failed attempt to make new highs. Consolidation near the double top formation eventually brought it to lower levels, thereby indicating that 11,000 can be a reasonable target to expect before this month end. Nifty’s current level is at around 50 per cent retracements, where the market is expected to spend some time before slipping lower to 11,000 level. Sell-on-rally should be the stance to adopt for traders. Volatility is expected to increase, which also increases the possibility of stop losses getting hit faster, and therefore stop losses must be farther from usual levels.

jineet graph

Expectations for the Week
The important question next week would be – Among the trio: US-China tiff, political outcome and quarterly results, which one will dominate the market and swing the bourses in its favour. It’s a tough match between the trade war and the elections while the earnings numbers have taken a back seat.

Volatility will remain at its peak as the battle intensifies. Some important results to look out for the next week would be those of ITC, HDF, Honeywell and Hindalco. Investors must continue to keep a watchlist of quality companies for their portfolios, especially in the midcap space to buy if there is sudden panic in the market. FMCG is one sector that is showing value currently and a systematic investment approach must be adopted on a basket of stocks.

Nifty closed the week at 11,278, down 3.70 per cent.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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