Driving Through Volatility

Indian equities started on Monday with a gap up on the news of a sharp fall in COVID-19 cases, which was sooner than expected. However, the markets snapped their two-week winning streak by the end of the week after receiving global inflation data, bringing the bears back, sending Nifty and Sensex Down, 1.8% (14677.8) and 1.7% (48732.55) respectively from weeks high.

  •   Metal stocks took a beating after being up almost 6% the last week. Nifty Metal is down about 4.58% at 5093 from the previous week’s close.
  • India VIX, which is the volatility index based on Nifty, showed an increase in volatility by going up as high as 21 from the lows of 19.80 through the week.
  • The FMCG sector saw a strong growth momentum on Friday. Nifty FMCG was up 2% (34781), with ITC going up almost 4.5% with solid volumes.
  • Nifty Realty had a tough week as the index was down about 2.2% from the previous weeks, close at 300.
  •   PSU (Public Sector Undertakings) banks were up a staggering 3.7%, and the PSE sector for the week outperforming every industry in the market.

Earnings Report

Several stocks reported some stellar numbers and rallied up throughout the week.

L&T: PAT rises 3% YoY to Rs.3,293 Cr. CMP- 1414.5

Dr. Reddy’s: PAT declines by 28% YoY to Rs.554 Cr, Rs.25 dividend announced. CMP- 5203

Asian Paints: PAT rises by 84.5% YoY to Rs.852 Cr. CMP- 2772

Cipla: PAT rises 68% YoY to Rs.413 Cr, Rs.5 dividend announced. CMP-904

UPL: PAT rises 74% YoY to Rs.1361 Cr. CMP- 742.9

This week Public Sector Enterprises (PSE) and PSU banks were on a roll after having low momentum for quite some time while private banks were seen in red. There is no specific reason for it, but a logical answer would be that markets stir themselves from exhausting rallies from other sectors. Markets also realized the value of these idle stocks, and money started chasing other sectors. Markets are looking bullish for next week and this rally is expected to continue.

Outlook For Next Week

Upcoming week’s status looks moderately positive, as the CPI stood at 4.29% (YoY) and Industrial production was at 20.4% (YoY). 

We expect these numbers to positively impact nifty for the coming week as the global markets are also seen recovering from inflation fright. However, WPI (Wholesale Price Index) is expected to be released on  Monday will be higher, keeping track of the same is advisable.

With the government taking all possible measures to reduce the spread of Covid-19, the recovery rate is increasing with the vaccination drive.

In the coming week, some big names are expected to deliver good numbers, which might help the bulls make a comeback.

Good to know

What is support and resistance?

Support and resistance are price levels on charts that create a buy or a sell zone on different price levels of a chart. Support is created when there are a lot of buyers in the market at a particular price level. Similarly, resistance is created when there are a lot of sellers in the market at a particular price level looking to exit their positions.

Image Credits: Excellence Assured

 

Support and resistance show a range of price at which an instrument will be trading at. Once at this range you expect the price to break the support or resistance. Breaking of support results in a movement towards the downside and breaking of resistance results in a move towards the upside and with that comes a possibility of a new trend.

Source: Forex Trading Course at FreeForexCoach.com

Old support levels can also become resistance and old resistance levels can also become support. The reason for this is very simple: people want to buy and sell at key price levels to have another opportunity at them.

Chaitanya Chaman
Chaitanya is currently a research intern with Econfinity. He is a finance and investment enthusiast with two years of experience in investment management.