Market in holiday mood, aggressively accumulate quality stocks for long term: SAMCO Securities

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New Delhi | Published: December 23, 2016 5:46:53 PM

The market began the week with lacklustre mood in the absence of any triggers and the momentum downward just got accentuated by the close of the week.

The market began the week with lacklustre mood in the absence of any triggers and the momentum downward just got accentuated by the close of the week. (Reuters image)The market began the week with lacklustre mood in the absence of any triggers and the momentum downward just got accentuated by the close of the week. (Reuters image)

The market began the week with lacklustre mood in the absence of any triggers and the momentum downward just got accentuated by the close of the week. The projection of gloomy picture in the media due to demonetization shattered the confidence of the market participants and the volume and open interest were at yearly lows. FPIs and DIIs almost balanced the outflows and inflows for the month of December. Volatility cooled down and combined with the negative sentiment offers a convincing proposition to investors to invest, who believe in the adage “buy when others are fearful”.

Events of the week

The Central Electricity Authority predicts a gloomy picture for thermal power generation in the country. It is estimated that by 2022 plant utilization will reduce by 50%, which will not only threaten the viability of many coal based plants, but at the same time slowly destruct the coal and ancillary demand permanently. The demand gap will be replenished by renewable sector which will act as disruptor for the decade. The government brings under price control stents that are used for human body, thus sending out a clear message to pharma companies that profiteering will not be tolerated.

Technical Outlook

The market is likely to test the strength of key support area at 7900. The formation of Doji on Friday gives an indication that the bottom may be near, although Doji in itself is not sufficient for trend reversal. “The confirmation comes only when next day strong bullish candle follows the Doji pattern formation, which confirms the trend reversal. However, if the follow up next day buying does not turn up, then the market can test the support area of 7700. The market has entered into a period of low volatility, low volumes and low open interest which is a symptom of ongoing correction nearing an end. For traders these correcting periods are a nightmare and the best approach would be to avoid trading and go for Christmas holidays,” said a report by SAMCO Securities.

Expectations for the week

The market has entered a state of inertia which is just drifting lower in line with the continuing momentum. This week being the last week to deposit demonetized notes, there will be a lot of drama for the viewers. But once and for all this will end the 50 days of ordeal for the people of India. Markets will at last come out of this spell and move ahead with New Year setting in with new opportunities to be looked ahead. GST is also moving as per schedule and hopefully should be implemented by mid of next year.

The market will now look at the Budget for important policy directions for the economy. Last week “we had mentioned that ‘the market may again have to re-visit the old support levels to check whether there are still weak players left and only then the new rally can begin.’ Mr Market did exactly the same thing by testing 7940, which is a multiple support area for Nifty. The real action should begin after the first week of January wherein the quarterly results season will begin,” said Jimeet Modi, CEO, SAMCO Securities.

According to him, investors should take this opportunity to aggressively accumulate quality stocks for the long term as valuations have turned attractive. It is also a time for year-end review of the portfolio before the New Year begins.

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