Market View – Jan 2020 (Union Budget 2020, make or break…)
“February, is one of the peculiarly dangerous months to speculate in Indian stocks market (Union Budget). The others are July, January, September, April, November, May, March, June, December, August and October.”
2019-year end, Nifty 50 was able to close near all-time high, but there was a sign of weakness in Nifty Bank Index (I forecasted the same on 1st Jan 2020, to read, go at the bottom and click on Post 1). Correction came immediately in equity markets on news of US – Iran clashes, which pushed Crude and Gold prices higher. Although impact of US-Iran clashes remains in global equity market and Crude for just 3 days but Gold prices even after correction from high of $1609/ounce are sustaining above 1550 levels.
Nifty 50 was able to recover and made a new high but Nifty Bank struggled to break its previous high and the weakness was confirmed by weak quarterly banking results which pulled Nifty 50 down along with it from the life high of 12400 odd levels (I forecasted the same on 17th Jan 2020, to read, go at the bottom and click on Post 2)
Nifty 50 last week recovered from the support of 12100 but is likely to face resistance at 12300, if it stays above 12300-12350 it might head towards new high of 12500 odd levels. At same time in very short term 12000-12050 can remain a minor support but there is reason to be cautious, 11800-11900 is a strong support to be watched for this uptrend.
Nifty Bank is looking weak, although this bounce back can take it to 32000 levels.
Nifty IT is at a make or break level of 16500, I believe from here we might see a massive move in either direction. (keep a close watch)
Nifty Midcap 50 as forecasted in the last month article, once its crosses level of 4750, will rally. In this month it has already outperformed frontline Indices, now I believe it might face resistance at 5100 before budget.
Nifty Next 50 has broken out of long consolidation and trading above a major resistance of 29000.
Nifty Auto is struggling at a major resistance of 8500, Even if it is able to cross this level it will find an immediate resistance at 9000-9500 levels.
Nifty Realty, a star performing Index has witnessed monster rally, almost 37.50% movement in last 4 months. Although in short-term I believe it would be difficult for it to stay above 330 levels, a sharp correction is likely to happen.
Nifty Metals, was unable to hold above the resistance of 2850 on global back drop (I forecasted the same on 17th Jan 2020, to read, go at the bottom and click on Post 3) Even if it resumes its uptrend, likely to face multiple resistance till 3200 level, at the same time 2550-2650 will act as a strong support.
Nifty FMCG, as forecasted in last month view, has bounced back sharply from the recent lows after a healthy consolidation. Budget will decide the future movement of FMCG sector.
Nifty Pharma, is slowly and swiftly consolidating, break above 8500 levels can immediately take it to a level of 9500.
BSE Oil & Gas, seems to have completed its correction and consolidating at current levels. If it manages to trade above 15000 levels, might move towards life high, at the same time 14250-14500 should act as a near term support.
“In stock market you have to behave as if you take a bath in cold waters, jump in, and get out again quickly. – Carl Meyer Rothschild”.
In current scenario when equity markets are moving up supported more by liquidity than fundamentals, it is better to enter when momentum is high and keep booking partial profits. This time correction in Global Equity market is due to Coronavirus, which is detected first in China then in US and now in other parts of world as well. Earlier in 2003, SARS virus caused a sharp slowdown in China, shaving off 2% of GDP with spillover effects in many countries.
Dow Jones Industrial Average has moved a lot in short run, a small correction of at least 3-5% can`t be ruled out.
Dollar Index in short-term is showing strength but likely to face strong resistance around 98.50. Federal Reserve policy outcome on Jan 29 will give further direction, although there is consensus for status quo.
Silver after recent correction from the high of $18.72/ounce seems to have completed its correction and ready to resume its uptrend. I believe, it can move towards 19.50 if it stays above 17.50.
Brent Crude saw a sharp upward movement with US-Iran clashes but returned sharply with same pace from strong resistance of $72.5/barrel and now trading around 60 level. As now Saudi Aramco IPO is gone and Global economies are struggling with growth revival, I don’t see any strength in Crude prices for near term.
Indian rupee (INR) in short term is looking weak against all 4 major currencies. Amongst 4 currencies, Japanese Yen (JPY) is looking strong as it has completed its correction and uptrend is intact till it stays above 64.30 level.
“Trade Hungry, not greedy”.
There was a time when we use to complain that Indian equity market is majorly driven by FII`s flows but since last Union budget things have changed. DII`s are not only holding this market by absorbing the supply from FII`s but in fact post corporate tax rate cut, this market has made new life high backed by inflows majorly pumped by DII`s.
At one point we are complaining that there is no fundamental supporting our economy, this market is rising on just liquidity and on other hand we are the ones who are investing 8000cr every month via SIP with Mutual Funds (DII`s).
Money is with Corporates/Institutions even with public, as investors are pumping funds via SIP, just the thing is corruption/weak system which has shattered the confidence of Investors, who are resisting themselves to put these ideal funds in business/projects/consumptions.
“Things work out best for those who make the best of how things work out.” – John Wooden
On Global front Dow Jones Industrial Average is highly overbought, NIKKEI 225 is facing resistance at level of 24500 as economy is contracting signal by BOJ governor, Crude and Base Metals showing weakness, Gold/Silver showing strength even after US-China trade deal and US-Iran clashes subsiding.
On Domestic front I believe now liquidity alone can’t take Nifty 50 or Nifty Midcap higher from these levels, now we need some number/evidence showing actual change in fundamental front as well. Let`s see, will this Union Budget 2020 make or break…. as RBI is likely to hold its Monetary policy on Feb 6 due to higher Inflation level and Governor had already indicated that “Monetary policy has its limit and the Indian government will have to use fiscal measures and structural reforms to revive demand and support the sagging economy”. Although I don’t see government having any room to give positive surprises but at the same time there should not be any negative surprises.
“Be selective in your battles, sometimes peace is better than being right”.
Post 3 - https://www.dhirubhai.net/posts/puneet-rathi-b2b99913_nifty-nifty-activity-6623424272423546880-kPpT
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