The week gone by was dramatic and saw huge swings intra-day and intra-week. On Monday the market fell on expectations of election results. On Tuesday it was down as election results trickled in. Mid-way through Tuesday, the recovery began, as the market discounted the election results and closed with gains for the day. What is significant is the lows made on Tuesday, which were at 34,426.29 points on the Sensex and 10,333.85 points on the Nifty.
The Sensex gained 289.68 points, or 0.81 per cent, to close at 35,962.93 points. The Nifty gained 111.75 points, or 1.05 per cent, to close at 10,805.45 points. From the lows made on Tuesday, the Sensex was up 1,540 points, while the Nifty was up 470 points. The Dow Jones was under pressure and lost 288.44 points, or 1.18 per cent, to close at 24,100.51 points. It is important to mention here that it was positive for the week till trading began on Friday, but losses of about 500 points on Friday saw the Dow Jones end in negative territory.
In economic data, inflation has reduced, and this would weigh on RBI’s mind when they meet the next time to discuss policy rates. They have also forecast softer inflation going forward. Our market also saw large amount of short covering post-Tuesday when the market began its recovery. This was after market pundits had taken the election results in their stride and discounted the outcome and the link to what could happen in the general elections due in April-May 2019.
FIIs are back with their buying ways and are looking at India as they realise that the US may not deliver expected returns. Further the correction in prices and the expected likely improvement in corporate earnings and economic data, make India an attractive destination for overseas investors. The added icing on the cake is the negative mindset of most people and their current short positions. These are enough ingredients to point to a short-term rally in the market place.
The week ahead would closely follow events in the US and Canada where the daughter and CFO of Hua Wei was detained and subsequently released on bail. In retaliation, China has so far arrested two Canadian nationals and the issue remains unresolved. Far from easing tensions between the US and China in the ongoing trade wars, this has put the US on the backfoot and Donald Trump must fight a new war as well. The world is looking at what the US would do next and the markets are as worried as anybody else.
With the calendar year coming to an end, and new investment allocations yet to be made, things could be quieter in the week ahead. I believe the market would consolidate before moving up further in the latter half of the week. Ride the gains and wait for dips to add to your position. With the bulls back in control, it appears this would be yet another series in their favour when it ends on December 27. Currently the December futures at 10,805 are down 53 points or 0.49 per cent for the month so far.
(The author is founder, Kejriwal Research and Investment Services)