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Below is the views on Mr. Market is Boring – Correction Underway by Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote
Mr. Market is Boring – Correction Underway
Markets are witnessing a whipsaw phase where neither the bulls nor the bears could make headway during the week. This is typically a corrective phase which the marketsare undergoing after witnessing a strong rally from 10600 right upto 11800, which is nowbeing corrected. Statistically, similar such corrections in the past have taken around a month’s time to correct. Therefore, the current corrective phase has just begun and it should last till the middle of May, however the undertone of the market will not be weak. The amount of price correction would be difficult to estimate but time-wise markets will take their own sweet time till May to correct. The result season will bring in some amount of volatility but that too would be restricted to either intraday or at best till the next day before the impact settles down. Nonetheless, the undercurrent will be of the corrective phase and Indian bourses will continue to remain boring. Therefore, traders should ideally avoid analyzing the markets in the current phase, but instead analyze elections.
Event of the Week
The US Department of Justice has finally booked 5 of India’s top pharma companies out of 18 global players in price cartelization for selling pharma generics in the years 2012-17. It should be recollected that companies like Sun Pharma and Aurobindo Pharma had theirbest run-up in the prices as profits and revenues grew. For example, 1 of the Companies had reported CAGR growth of 25% in its topline in the same period, whereas currently the growth is anemic. Potentially, the penalties can go uptoa few $100 million which currently the markets are not pricing in but soon companies will have to shell out the abnormal profits that they had earned back to the US Government. Currently, there is no point betting on pharma companies till the cases are concluded.
Nifty50 is consolidating around 11600- 11700 levels and showing strength on every decline. However, since the prices have broken the upward moving regression trend channels, the bullish impulse is over and prices will correct hereon although the price deterioration may not be significant but time correction will be longer. Buy on decline should be strategy for traders with proper stops in place. Stocks trading near the lower price supports should be bought rather than buying breakouts because many false breakouts may be experienced in such corrective times.
Expectations for the Week
Markets will continue to be lackluster although some of the corporate numbers will inject steroids to the otherwise dull market.The IT index has made a triple top which suggests that prices are not going to rise in a hurry. Howsoever, the results of IT giants although are slightly better than expected but they will not move into new price territory given the high valuations and built in high expectations. Also, metal prices such as aluminum and copperare likely to witness further pressure and therefore metal stocks should be avoided by investors,but traders can initiate short bets.Nifty 50 closed this week at 11643, down by 0.19%.
Above views are of the author and not of the website kindly read disclaimer