Nirali Shah, Head - Equity Research, Samco Securities during the start of the week, Indian markets encountered increased volatility with VIX rising 16.22% while US continued to hit fresh life-time highs.

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Actually, domestic benchmark indices registered its second-biggest single day fall in 2021 with massive volumes. Unlike in the past, FPIs have diverted from their usual buying behaviour and have turned net sellers so far this month, as India struggles to cope with the increased pace of infections. However, this correction can be construed as a healthy one ignited by fears of a second wave of COVID-19. Just when investors expected a resilient recovery in our economy, markets began to falter and showed hiccups due to vaccine issues and rising cases. Nevertheless, it is expected that once the vaccination drive starts in full-swing, things should come back in control. Investors are advised to look at corrections as an opportunity to rejig their portfolio and invest in quality companies

Samco Securities said that an additional macro data which was negatively affected in the past week was the rupee that observed depreciation till levels of INR 75.5/USD, which was last seen in June’2020. This depreciation caused the rupee to deteriorate its position from one of the best performing currencies in Asia last quarter to the worst one now. The weakness was also intensified by unwinding of short dollar positions against the rupee.

Event of the Week:

Samco Securities highlights that IT mammoths delivered moderate earnings with softer deals and modest growth in revenue and margins sequentially. Though the pandemic is known to accentuate a new tech up-cycle, some management commentaries mentioned that there is no room for additional margin expansion as travel costs and wage hikes make their way back into the sector. Most positives are already priced in the stock price which led to market participants turning cautious on their growth leading to pressure on the stock. But from a wider perspective, there is a long runway of growth in IT companies and investors can continue to invest on every dip without any hesitation. 

Technical Outlook on Nifty:

Samco Securities said that Nifty closed negative for the week however, it formed a hammer candlestick pattern just around channel support and at previous support. The level of 14250 has now become a make or breaks level for the index. Any break below the current support will trigger a bearish sentiment across the broader markets while other global and emerging market indices are trading at all-time highs. They suggest traders maintain a cautiously bullish bias on the index and initiate long positions around the support by maintaining a strict stop loss just below the support. Resistance on the higher side is now placed at 14900.

Expectations of the Week:

Samco Securities highlight that with major Indian cities undergoing partial lockdowns, markets may continue to remain unstable at least till the uncertainty on the rising cases front subsides. Market participants must not read much into India Inc.’s numbers and should give utmost importance to the management commentary in order to gauge future growth prospects amidst the second wave. Further, any correction may turn out to be a blessing in disguise for the ones who felt left out in the past rally. Samco Securities advises market participants to keep their shopping cart ready to go in for resilient stocks from the pharma, IT, FMCG sectors in a phased manner. Nifty50 closed the week at 14618, down by 1.5%.