Samvat 2075: Investors will be cagey about uncertainties in stock market

For Samvat 2074, Indian stock market journey was not lesser than a rollercoaster ride and volatile. Nifty started on a strong note with a strong bull run with indices touching new historical highs with strong domestic flows and favourable macroeconomic data. Another historic event unfolded with the introduction of long-term capital gain tax (LTCG) in the budget which directed the rally in reverse gear and ultimately eroded all the gains for the entire year. Samvat to Samvat Nifty is up by 4% as fear of global trade war tensions between two giant economies US and China, series of rate hikes by Fed, strengthening of the dollar, rising crude, debt market liquidity crisis, IL&FS issue and foreign FIIs selling in equity markets worth Rs 42,000 crore.

As we enter into Samvat 2075, many uncertainties about foreign institutional investors (FII) selling, trade war tension, state election events, bloating rupee, rising twin deficits and the Lok Sabha election in May 2019 etc. likely to paint a bearish picture for the markets. On the other hand factors such as stable GDP growth, stabilised GST collection, hike in MSPs, rising rural income and in turn rural consumption, rising revenue receipts would make a strong investment case in Indian equity markets. Investors can adopt staggered investment strategy in equities to lower the risk in such a volatile and uncertain market condition in Samvat 2075.

Last week, the broader Nifty made a marvellous come back gaining 5.21% week on week to close at 10553, the best weekly gains since last 30 months. The mid and small cap indices outperformed after a long time gaining 7.22% and 8.61% respectively.

All the sector indices ended in the green. Bank Nifty also gained by 5.24% as the bond yield fell to 7.77% and the Rupee recovered the ground and ended at 72.47 posts touching 74.38 in this week. The PSU Banks gained the most by whopping 13.62% led by the State Bank of India (SBI) which gained 15% and Bank of Baroda which gained 11%. Infra, Realty and Auto sector gained between 7-8% while Media, Pharma, Metals and IT gained between 4-5%. Crude also corrected 4% in this week and settled at $73 as the US oil inventory rose for the fifth straight week and statement of the US President to allow India and other countries to buy oil from Iran.

In the last week highlights, markets saw dip on Wednesday with news of rift between RBI and the government but later settled and saw strong rally when Trump agreed for peace talks with China over the ongoing trade war. India jumped to 77 ranks in World Bank’s ease of doing business ranking and GST collection for the October month crossed Rs 1 lakh crore.

Key important global events in this week, US mid-term election for House of Representatives and Senate elections on Tuesday, the US Fed meeting for interest decision on Thursday. Indian markets are closed on Thursday on occasion of New Year. The Indian market will have Muhurat trading on Diwali occasion and will remain closed on Thursday on occasion of New Samvat year.

For the week, all eyes will be on the US mid-term poll outcome which will set the tone for the global markets. Technically on weekly charts, Nifty support levels are 10440-10330-10230-10130 while resistance at 10580-10680-10770.

By, Yogesh Vinod Mehta

(The writer is VP- retail research, Motilal Oswal Financial Services)

Image source: DNA Money