Monday, 18 January 2016

Market Brief – 18th January 2016

It was a pathetic week for the markets wherein the market internals became extremely weak and there was carnage in mid-cap and small cap companies. Although, the major indices, Nifty and Sensex, closed two percent lower for the week, the mid cap and the small cap closed almost ten percent lower. There was total despondency witnessed in the market, and total lack of confidence and fear, all this happened in the backdrop of global market meltdown, China in particular, falling crude oil prices (signifying the Global recession) and no positive news on Indian economic growth scenario. In fact there was a poor showing where IIP is concerned. The only solace market got was good corporate earnings reported by Infosys, BPCL and Reliance in anticipation of improved earnings, showed courage and leadership.

Going forward, unless there is a remarkable improvement in the macros and the micros, the markets will certainly be vulnerable to more sell-off. Where technical of the market goes, it looks extremely weak and down side seems very evitable. Initially it appears that Nifty would test an important level of 7220, that’s about 50 percent retrenchment from the lows of 2014 to the highs of 2015. If markets fail to hold this crucial level, then another leg of selling would take to sub 7000 levels. In the short term, the upside remains capped at 7700. Extreme volatile moves will be the rule of the game, in the near term.

One has to keep an eye on the earning season, companies showing improved sequential growth in terms of top line & bottom line will show a remarkable improvement in the stock prices and at the same time poor results will crush the stock prices further down. The year 2016, very apparently appears to be a volatile year and it would be a stock picker’s market. One needs to exercise caution and take courage to exit from under performing stocks and switch to better performing companies. This is a good portfolio restructuring time. 

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