Week Ending 11th September 2020

Dear patrons, the week gone by was a lack luster affair for the markets. Moving in a narrow range of 300 points the Nifty managed to close in the green for the week, with minuscule gains. There was no trigger for the market to go up or down. The week was pretty slow on news flow as well as events.

The Nifty managed to touch low of 11185 during the week on the back of massive sell off in the US. Correcting from all time high the Nasdaq and the S&P both indices lost heavily in the sell off. The fall reverberated in the global markets, wherein all the markets lost considerable ground. Indian markets were no exception, though they recovered quite sharply. The Nifty managed to bounce back and closed the week a tad above 11450. We had mentioned in the previous blog that Nifty should find support in 11200-10800 band.

Rally in the markets was mostly ruled by Reliance Industries. Reliance rose sharply on announcement of offering a 20 bn USD stake to Amazon in its Retail arm. Reliance is already a debt free company. If the deal with Amazon goes through, it will have expertise as well as reach. Reliance now has bigger market cap than all IT companies on the Nifty combined. Banks also played a part, although a very small part, in the rally.

There are two scenarios that may unfold during the coming week. We will see them one by one.

Scenario 1. Nifty has achieved its upward target and likely to resume its downward trend. In this scenario as per wave theory Nifty may drift towards 11200-11100 range. The following pic. illustrates the point.

Scenario 2. Nifty is yet to complete its retracement and may move up towards 11550. Once Nifty reaches 11550-11600 range it may start the fall towards 11200-11100 levels. The following pic. illustrates the same

One should be prepared with a contingency for any eventuality. Chances of a fall are more than rise. Plus chances of higher movement on the downside than upside are more. One should pick stocks which are fundamentally strong.

New regulation from SEBI has made it mandatory for mutual funds to hold 25% of their portfolio in small cap stocks and same with large cap stocks. This may bring some unwinding in index stocks by mutual funds resulting in fall in Nifty. Markets are already in fragile state due to new margining system, geopolitical tensions with China, the new regulation may prove to be a dampener.

All in all chose fundamentally good stocks. Invest in SIP mode.

Stay Invested!!!

Happy Investing!!!