More Weak­ness Likely in Stock Mar­kets

The Economic Times - - Satur­day Fea­ture -

Among other lag­gards, Mahin­dra & Mahin­dra lost 3% to end at Rs 1,346.35 while Re­liance In­dus­tries fell 2.4% to Rs 1,546.55. Ris­ing ten­sions be­tween US and North Ko­rea have raised wor­ries of a war be­tween the two coun­tries. US pres­i­dent Don­ald Trump’s warn­ing came af­ter Py­ongyang an­nounced it will have a plan ready by mid-Au­gust to fire four rock­ets into wa­ters near the US ter­ri­tory of Guam. Trump said he may not have been tough enough in his ear­lier warn­ing to North Ko­rea that the coun­try will face “fire and fury like the world has never seen” if it did not give up its nu­clear am­bi­tions.

In lat­est de­vel­op­ments, Trump tweeted that “mil­i­tary so­lu­tions are now fully in place, locked and loaded, should North Ko­rea act un­wisely. Hope­fully Kim Jong-un will find an­other path!” Money man­agers said the rise in rhetoric means that the mar­kets are in for some more weak­ness. The Se­cu­ri­ties and Ex­change Board of In­dia’s di­rec­tive on sus­pected 331 com­pa­nies has also fu­elled volatil­ity in do­mes­tic mar­kets though the Se­cu­ri­ties Ap­pel­late Tri- bunal has given re­lief to some com­pa­nies since the di­rec­tive was re­leased late Mon­day. “We have been see­ing a one-way move for the last two-three years with hardly any ma­jor cor­rec­tion ex­cept dur­ing the post-de­mon­eti­sa­tion pe­riod. Given the global ten­sions, short-term volatil­ity can­not be ruled out,” said Vinit Sam­bre, fund man­ager, DSP Black­Rock.

“We will use this op­por­tu­nity to de­ploy cash where prices have cor­rected to rea­son­able lev­els,” said Sam­bre.

In­dian mar­kets have re­treated from record high lev­els but they are still up 18-19% for the year 2017. Yo­gesh Radke, head of al­ter­na­tive and quan­ti­ta­tive re­search at Edel­weiss Se­cu­ri­ties sees scope for an­other 100 points fall in the Nifty.

“The mar­ket (Nifty) may head to 9,600 and we ex­pect the in­dex to lan­guish around that level be­fore mov­ing up again. 9,800 will be the in­terim re­sis­tance,” said Radke. The out­look for mid-and-small-cap stocks ap­pears grim­mer as stocks in th­ese spa­ces are still over­val­ued.

“Mar­ket is likely to weaken fur­ther, par­tic­u­larly mid and small caps. A cor­rec­tion of 5-10% is likely in mid-caps,” said Jy­oti­vard­han Jaipuria, founder, Veda In­vest­ment Man­agers.

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