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Sharp rebound from lower circuit levels improved market sentiment.

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Gaurav Bora , Market Expert

Sharp rebound on Friday from lower circuit levels improved market sentiments; Nifty (-9%), Sensex (-9%). Mid Cap & Small Cap index fell by -8.7% and -11% respectively in past week. FIIs sold Rs 30,334 crore in March so far against Rs 27,689 crore of buying by DIIs, which both are the highest in a single month as per the data since April 2007. It was seen not only in India but across emerging markets as FIIs seem to be preferred to cash in and stay on the sidelines given the seriousness of the pandemic that is expected to hit the global growth in the short term. The recovery seen on Friday March 13 was largely driven by value buying, rally in global markets on more stimulus hopes, short covering and DIIs buying. Immediate rally could be possible but overall the sentiment may remain weak as volatility is likely to be on the higher side until the market sees consistent fall in the number of Corona cases worldwide. In such times of global volatility retail investors should not panic and start accumulating quality stocks on a gradual basis. In such oversold market so any positive news will give reason to investor for buying and market may witness V shape recovery.

Government notified Reconstruction Scheme for country’s 4th largest private bank Yes Bank with effect from March 13, the moratorium imposed by RBI will be lifted on March 18 and all transaction to start from March 19. SBI and other financial institution came forward to help by investing 10,950 crore in bank but investors wait till the complete clarity over its liquidity and day-to-day operations. On March 14 Yes Bank reported a loss of 600 crore for Q3 due to sharp rise in bad loans and decline in deposit base. Country’s second largest credit card issuer SBI Cards and Payment Services will get listed on stock exchange on Monday, March 16. Grey market premium of SBI Cards dropped considerably to Rs 50-60/share from Rs 350-380/share due to sharp fall in market, due to nervousness in market we may see listing of SBI Cards nearly 825-850/share.

FOMC will begin its two-day policy meeting on March 17 and we may expect the Fed to cut interest rate by 100 bps to zero rate and US central bank could also come out with more measures to maintain enough liquidity. Jan IIP at 2% vs pervious months -0.3% which highest in last 6 months and Retail inflation in Feb came down to 6.58% from 7.59% in the previous month. Due to sharp sell-off in equities USDINR touched lifetime low of 74.52 on March 13 but later strengthened by 30 paisa to close at 73.91 after RBI announcement that steps will be taken to maintain sufficient liquidity in the panic-stricken currency market. USDINR lost 13 paisa for the week due to consistent outflow of FII money and rout in equities but we may expect 25 bps rate cut by RBI to stabilize impact of corona virus. Oil prices remained under pressure due to lower demand caused by outbreak of corona virus in many countries. Saudi Arabia promised to increase production capacity after OPEC and allies failed to agree on production cuts which will cap further upside in Crude oil.

Monday market may open on flat to positive note as SGX Nifty at 10,015 (+36). After the extreme overreaction of corona virus fears and global equity sell off now market seems to have tested it’s near term bottom, followed by sharp recovery in later part of March 13 which is expected to continue in coming days. RSI has shown signs of reversal from its deeply oversold territory, which hints of some pullback towards 10,500. On lower side 9,500 will act as crucial support. India VIX surged by 100% last week to end at 10 years high to 51.47, which is a major concern for the bulls and it has to cool down below 30 levels to give comfort to the bulls. On the options front, maximum Call open interest (OI) is at 11,000 followed by 10,500 strike while maximum Put OI is at 9,000 followed by 9,500 strike. Current option data shows a narrow trading range between 9,500 to 10,500 levels on Nifty. On lower side Nifty’s immediate support at 9,500 levels, on the higher side immediate hurdle is at 10,500. F&O data indicates that a decisive break above 10,500 could take Nifty towards 11,000.

In the previous major declines in equity markets pullbacks were generally seen after 30% of decline, the same is turn out currently and hence the current pullback may extend towards 10,500 in coming week.

Top Gainers of the Week:
Bharti Infratel (+5.85%)

Top Losers of the Week:
Indiabulls Housing (-42.69%)
Yes Bank (-30.57%)
ONGC (-28.83%)
Tata Motors (-28.63%)
Vedanta (-28.22%)

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