Market Trends Up

The equity markets commenced the week with a significant move towards the upside and ended in green on Friday May 4th, with Nifty hitting a new lifetime high. The positive economic data and some of the big names on the street registering substantial quarterly gains helped the markets lighten up the mood and pushed Nifty and Sensex up to 15670(+1.51%) and 52095(+1.21%) respectively by the end of the week.

·   Nifty Realty had a fantastic week as it was up 6.69% on Friday, outperforming every sector in the market. Stocks such Oberoi Realty and Hemisphere Properties were up (11.4%) and (11%) respectively at the end of the week.

·   India VIX, the volatility index based on Nifty, showed a significant decrease in volatility throughout the week as it went down about (8.4%) from 17.4 to 14.95.

·   PSE (Public Sector Enterprises) was included among the week’s best performers as the index was up (4.02%) at 3624.7.

·   Nifty Energy also had a good week; the index was up by (4.09%) at the end of the week and was one of the top performers.

Spotlight

This week we saw that the realty sector was the best performer in the entire market and some of the stocks like Phoenix Mills went up about 14% by the end of the trading week on Friday. If anyone is wondering why this happened the answer is simple: Repo Rate (rate at which the banks borrow money from the Reserve Bank of India) was kept unchanged at 4% by MPC (Monetary Policy Committee) which is a body that is responsible for setting up the benchmark interest rates in India. The unchanged Repo rate means that home loans will not get expensive for home buyers and thus will result in an increase in demand for realty projects. The RBI said that this is a very logical move towards the growth of the GDP. However the GDP will most likely be hit in the coming months due to the second wave of Covid-19 as we saw RBI revise the economic growth forecast to 9.5% from 10.5% later in the week.

Economic Report

In the coming several big names on the street will be coming out with their quarterly results and announcing dividends.  

Outlook for the coming week

The markets have seen a massive upside in the past few weeks and several indices in Indian and around the world hit a new lifetime high. The markets saw some positive economic numbers last week. As a result, they gained a good momentum towards the upside and this is likely to continue as there are several names in the market and with the Covid-19 cases plateauing, the overall outlook looks positive for the coming week. However, it wouldn’t hurt to stay a bit cautious as the market is overbought and might see some profit bookings and possibly a correction in the short term.

Good to Know

What is going Long and going Shorting?

Going Long

The strategy behind going long is simple, you speculate that a stock will go up in the future. Therefore you buy it and wait for the stock’s price to increase once it hits your target, then you sell it at a profit.

For example: – You buy company X at ₹100 and sell it at ₹120. Here you pocket ₹20 is your profit.

Going Short

The strategy behind going short is a bit different, and here you speculate that a stock will go down in price. Therefore you first borrow a stock as you don’t own it, then sell it in the market and wait for the price to go down. Once the price goes down, you buy back the shares at a profit.

For example, you borrow ten shares of company X from your broker at ₹100 and sell them in the market. After selling the shares, you now have 100*10= ₹1000 in your hand. Once the price goes down to your target, let’s say ₹90, you buy back the ten shares, but to buy back these ten shares, you must spend 90*10= ₹900 out of the ₹1000, which is in your hand. Therefore, when you return the borrowed ten shares, you will have a profit of ₹100.

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.