India's GDP numbers were announced at the start of the week. For Q1FY20-21 Indian GDP declined by a whopping 23.9%. Almost all sectors saw double digit decline barring the Agriculture sector. Construction and manufacturing bore the worst brunt of the decline falling by around 50% and 40% respectively. The fall in GDP growth was more or less anticipated on the back of the lock down imposed in the country for the entire quarter. The markets were not impressed with the fall and lost more than 2% on the first trading day of the week. However, the Chief Economic Advisor's statement that the economy is witnessing a V shaped recovery, gave some hope to the markets and the Nifty rose mildly in the following sessions.
The fall in GDP growth is a worldwide phenomenon. All the global economies lost sheen due to the Chinese Virus pandemic that holds the world by the scruff of neck, stopping all economic activity across the globe. The pandemic is far from over and we may witness further economic distress in various sectors like Aviation, Hospitality, Tourism etc., which in turn will culminate in big distress in the banking system. The road to recovery is not as bad as in 2008 though. Like during the subprime crisis, this time there is no dearth of finances at various governments' disposal. Governments around the world are pumping in huge liquidity in the system, thereby keeping the markets buoyant. In all likelihood we should see a vaccine for the Chinese Virus around November, which gives solace to the entire mankind.
Apart from Chinese Virus, Indian markets are also unnerved by the geopolitical tensions with China on it's Eastern border. There have been little skirmishes resulting in deaths of soldiers, the situation however remains volatile and may result in a limited war like situation. China's expansionist behavior needs to be restrained and India can take lead in that endeavor.
Let us turn our attention back to the markets. Nifty lost almost 3.5% in the week gone by, marked by big falls and small recoveries. The week started off with a multi month high opening but it lost its way midway through the day losing heavily on high volume. Mid week saw mild gains for Nifty amid average volume. The week ended on a somber note following global cues and losing close to 2%.
We can see in the above image, Nifty was forming a rising wedge, which has been broken from the downside at the start of the week. The gates are open for further fall for now with impending targets in the range of 11200-10800. For the time being Nifty looks fragile. One needs to be nimble footed in trade adhering to strict stop losses.
Focus should remain on fundamentally good stocks with an accumulation mode.
Stay Invested!!!
Happy Investing!!!
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