By Gaurav Bora (Market Expert)
Benchmark indices rallied nearly 8% last week and April month’s gains to more than 14%, which is biggest in this decade. SGX Nifty on Friday was down nearly 500 points mainly due to global markets and disappointing Q4 results announced by Hindustan Unileaver and Reliance. But after big gap down we may see some recovery so traders should avoid shorts and above 9400 levels we may see sharp recovery. We remain positive on markets and any correction near to 9,400 levels would be a good entry point for investor who missed buying in this rally.
HUL has already witnessed a sharp correction in the past two weeks and the results were largely in-line with expectations as it has gained market share in the overall business and low volume growth is mainly due to low stocking. Reliance results are in-line except for the exceptional loss which dragged the overall profits. But consumer business and Jio subsidiary reported stronger growth for the quarter. Reliance Industries announced biggest right issue of 53,125 crore at 1275 and after Facebook deal Jio to sell another 10% so we are bullish on Reliance we may see 1550-1600 levels in near time. Profit booking could be seen in short term after sharp rally seen in Reliance but in long term we are bullish on Reliance.
5 Key factors for the week:
• Markets are also expected to keep an eye on long awaited stimulus package. PM’s series of meetings with key Cabinet ministers, officials of economic ministries is likely to culminate into a second stimulus package. The Prime Minister also stressed on the need to strengthen major structural reforms undertaken in the past and new structural reforms in the areas of corporate governance, credit markets and infrastructure sectors.
• There could be US China trade war again. US President Donald Trump has threatened China with imposition of new tariffs on import of Chinese products, over China’s handling of the COVID-19 pandemic.
• Possibility of a USFDA approval to Gilead’s drug COVID-19 vaccine after emergency. The progress of Gilead Science’s Remdesivir an antiviral drug in treatment for COVID-19 patients lifted the global sentiment last week. If the drug proves to be successful in the coming days in treating COVID-19 patients then it could be breakthrough for market.
• Govt has eased restriction in non-hotspot areas where as extended the nationwide lockdown by two more weeks to May 17 in 130 red zones. Red zones include major economic cities like Mumbai, Delhi, Pune, Chennai, Hyderabad, Bengaluru and Kolkata.
• Around 24 companies will announce their quarterly results including front line stocks ICICI Bank, HCL Technologies, Marico and SBI Life.
Nifty showed big bounce from 39% retracement level of 9393 which was resistance in previous week. Now 50% retracement level 9970 will act as stiff resistance in coming time, for any big upside nifty has to sustain and close above that level. On downside Nifty has to hold 9400 mark, 9400 will act as strong support for market. Nifty has to hold 9,400 and move closer to 10,000 mark then only bullish momentum can be sustained but if it breaks 9,400 then there could be selling pressure. India VIX fell 13% to close at 34 levels during the last week, cool-off in volatility boosted positive sentiments in market. The April series data indicated that rollover in Nifty was higher than its 3-month average while there was short covering and formation of some fresh longs.