Markets on Friday ended with marginal gains and the week ended on almost flat note. This is the third week that markets have not registered any substantial gain or fall, signaling indecisiveness in the market, this is primarily due to mixed news flows with some positives and few negatives. Poor exports despite weakening rupee are a bad signal but at the same time the imports have also fallen. Rising crude oil prices and increase in domestic petrol and diesel prices are worrisome. With important reform bills still pending in the Parliament is also a cause of concern in the near term. Optimism in the Global markets have given some solace to our market and restricted a complete sell-off.
Indian equity markets are very critically poised and have been trading in a tight range between 8000 and 8360 on the Nifty. Further news flows will determine the direction for the market, although, short and the medium term trend are down, hence, bad or negative news flows will bring down the markets sharply. In terms of technical level, a close below 8000 will prove very fatal for the market and it will witness a prolong correction and eventually Nifty could test 7400 – 7500, which is also justified from price to earning perspective. However, in event of positive news flows, if the market breaks out 8360, it will witness a swift throwback rally that would initially test 8500.
Investors are advised to exercise caution and as suggested earlier, exit from under performing stocks and remain at-least 20 to 25 percent in cash. Deep corrections should certainly be used for buying since the bull market is still intact, it is only the short and the intermediate trend which is down, and is instrumental in keeping the markets jittery and volatile.
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