Right Time To Invest In The Markets, Regardless Of Direction
Indian stock markets took a respite for the second consecutive week, post a sharp fall of 3.5% in a single weekly tick. The reasons for the fall being not so convincing corporate earnings data and unfavourable macroeconomic data which, going forward, may refrain RBI from cutting rates any soon during the year. In the existing circumstances, it was presumed that marketmen would resort to profit-booking after nearly 28% consistent upsurge post-demonetisation.
The cross-border tensions with China owing to Doklam issue have been worsening and a war could lead to damaging trade relations, unless the issue is resolved peacefully to the satisfaction of both parties. Notwithstanding the stand-off, many investors feel that even if war-like situation occurs, it would not affect the markets greatly.
Considering domestic macro-economy, even as markets tumbled from their peaks, the agro-based and rural stocks surged ahead of favourable monsoon. However, the recently released data of 5% below normal monsoon would remain a matter of concern for the same stocks, unless monsoon revives. As for banking and finance, it’s the time after the RBI rate cut that commercial banks too cut interest rates followed by AGMs and dividend announcements, which would keep the banking stocks under the limelight in the coming sessions. On the GST front, the filing of income tax and returns have been extended to August 25. With this, the IT dues and GST are to be paid before September 15 and 20 respectively, which may bring in liquidity crunch going forward in the markets, despite festive season. India expects GDP growth rate at 6.6% in Q1FY18 as against 6.1% in Q4FY17, despite GST roll-out which has refrained momentum pick-up in major industries. Moreover, estimated recovery to the level of 7.4% is maintained on the back of retrieval in corporate earnings in H2FY18 and profits kick-off from the next financial year.
All said and done, it should not matter whether markets would bounce back or continue with the correction phase for some more time. Most important is the sectoral performances and picking up the right stocks with sound managements. SEBI has duly taken care of investors' interests by mandating BSE to delist first 200 shell companies and ordering promoters to implement buyback for recovering investors’ money soon.
Indian markets may remain in consolidation with lack of major domestic triggers in the coming days. The global markets would be driven by the release of manufacturing PMI data and growing concerns over the US domestic political uncertainty over Trump’s administrative capabilities may bring about some pessimism in the US markets. The delay in putting forward the tax reforms by the US government would bring in some anxiety in the US financial markets, thereby affecting other bourses as well.
India’s major benchmark index Nifty has a strong support near 9685, followed by 9450 in the medium term. On the upside, the level of 9950 followed by 10100 would bring Nifty back on track for further rally. Nevertheless, stability has replaced volatility in the markets. Hence, it is the best time to trade as well as invest in the markets regardless of the direction.