Mr Market was largely directionless and indecisive during the week gone by, as it whipsawed its way awaiting triggers from local and global markets.
Global macro-economic factors seem to have become stable now and they are offering a ray of hope post the gloomy October. Concerns over exorbitant oil prices have since died down, with crude tanking 30 per cent from its four-year high hit in October.
Additionally, sliding crude prices have bolstered the rupee, which has gained 2.79 per cent against the dollar this month. The Indian rupee has been among the top three emerging market currencies in November. Liquidity risks also seem to be receding after the easing of RBI–government tensions. Given the reported numbers, almost all commercial papers have been successfully redeemed and NBFCs are able to raise fresh funds.
Despite this, the stock market is still reeling under fear psychosis, which is offering a great opportunity to accumulate NBFC stocks, especially those of top housing finance companies, which have reported excellent numbers. DHFLNSE -0.89 % reported 52 per cent PAT growth for the quarter compared with that in the previous year despite a rise in provisions and liquidity crises. Revenues grew 33.8 per cent but NIMs contracted to 3.15 per cent against 3.44 per cent, which was due to the increased cost of funds mainly due to the liquidity crises.
However, DHFL successfully sailed through the tide and investors must see this as a good opportunity to get into leading housing finance companies.
Event of the week
RBI and the government are now aligned to lubricate the economy with liquidity. Setting up a committee to reconsider the PCA norms is a big positive for the sector, as this would enable a large part of the 11 banks to come to the market and lend, which will further ease the liquidity concerns. This meeting was historic, as it gave a clear direction and intent that no matter what, India’s financial system is robust enough to withstand any crisis. Now it is up to the stock market when and how it will react to such positive ground-level realities. It does seem that the worse is behind us on this front.
Nifty50 has turned lower after retracing about 40 per cent of the entire fall, which indicates that strength of the rally was weak as Nifty could not even retrace 50 per cent of the entire fall. The price action should oscillate between the upper resistance at 10,750 and lower supports at 10,350 and 10,000. The downward drift might continue for some more time till Nifty50 reaches its first support levels. Traders are advised to stay on the sidelines, or at best, trade in puts as the market is prone to oscillations, causing whipsaw losses to traders.
Expectations for the week
The market is expected to remain rangebound in the coming week, less with downward bias wherein open interest is low. This shows that market participants are unwilling to commit at this point in time. The next trigger is expected to come in the second week of December with the state election outcome, which might give some direction to the market. Till that time, volatility and whipsaws would persist. Traders ideally should stay away, and investors should remain on the sidelines and wait for market to correct.
Nifty ended the week 0.69 per cent lower at 10,526.