By Anand James
As the initial dust settles after an intensely volatile and pensive week, the Indian market is poised towards a more objective assessment. Meanwhile, several green shoots are becoming visible. For one, the valuation premium that India has been fetching over the EMs has fallen, with Nifty having pulled back over 1500 points from the peak, and meanwhile EMs staying positive during the same period. This should encourage foreign inflows, and a near record low rupee should further increase the purchasing power.
Secondly the rate rhetoric from Fed, RBI as well as BoJ has been relatively dovish, taking the sting out of rate fears. Only one more rate hike (by 25bps) is expected of the Fed (March 2023), followed by pause, and then rate cuts in 2024. This gives a stable investment horizon for the year ahead. However, this construct will have the first test next week, with NFP data released last Friday, showing a strong labour market.
Nifty PCR (put call ratio) is near 0.78 after the week long carnage, and as discussed last week, the last time we had negative close and sub 1 PCR ahead of Budget, we saw a 4% gain in the 3 days post budget. Incidentally, we closed 1.35% on the first day after the Budget, paving way for more gains in the next week, as per this analysis. Signals towards this end, would be sought from Bank Nifty first next week, as it is best poised to benefit from any respite from the Adani saga, while the SBI’s results will also help in giving momentum to a directional move. We will look for a burst towards 42600, but any pull back below 41900 will have to be taken as a weakening signal.
Similarly, for Nifty, if volatility thereof is unable to be contained above 17,750, side ways to negative bias would dominate. However, we will wait for a close below 17,460 before collapse theories are entertained again.
(Anand James, Chief Market Strategist, Geojit Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)