By Anand James
Given NFP data as well as Fed testimony last week, risk appetite was low anyway, especially with several rate decisions also scheduled shortly. But it was the unraveling of SVB that exacerbated the negative vibes, that led Nifty to fall back below key levels, including the 200DMA on Friday. Inflation readings from both India as well as the US will assume high importance next week. However, given the fact that it was the SVB fallout that gave bears the fuel, any bailout packages or measures that could signal that this event is not systemic will be taken in positively. And, while VIX rose 5.4% on Friday, it is still benign at 13.4, hardly a level that projects a collapse.
If the rejection trades that rushed in on approach to 17,800 diffused the upside momentum, the fall back below 17,500 has given the rein back to the bears, which the bulls had so painstakingly wrested after a week long duel. Sectors apart from capital goods, industrials, infra and FMCG have gone below key moving averages, suggesting that the rot is spreading.
Moreover five stocks from the Nifty 50 index which together weigh a little over 20% in the index, have gone below their respective lows of the day when Nifty hit its recent low. So, will the rest 80% pull their weight help Nifty out of the doldrums? A soft indication towards this end, is Nifty had closed above its VWAP on Friday, despite all the selling. So did 71% of the stocks in the F&O segment.
Nevertheless, we will open the week with a high likelihood of seeing 17,255 the recent low or 17,050, but will be glad to initiate cautious longs if above 17,500 or if slippages extend to 16,500-200. Bank Nifty meanwhile is better off, being almost 2.5% above the 200 DMA, and also closing above last week’s breakout level, even though the falls were much bigger than that of Nifty on Friday.
(Anand James, Chief Market Strategist, Geojit Financial Services