Saturday, 23 January 2016

Market Brief – 25th Jan 2016.

The markets continued its downward journey and it got abetted on Thursday and Friday on the back of some stability in crude prices and Global markets, and it ended the week on flat note. The fundamentals look weak and jittery with World Bank downgrading the global GDP growth to 3.4% in 2016 and 3.6% in 2017, but there is some silver lining for Indian economy where the estimates were raised for 2016 at 7.3%, and 7.6% in 2017, well, it needs to be seen how it unfolds and the fundamentals play out. Geo-political fears, weak aggregate demand and awaited policy reforms by Indian Government will all keep the Indian markets under check. At best, one can expect a range bound trade until we see further deterioration or improvement in the underlying fundamentals. The Union Budget next month, too, will play a crucial role in giving the directions to the markets.

Technically, as mentioned in the last newsletter, 7200 on the Nifty is a very critical support and the Nifty for the moment has held this level, and gave a small bounce back on Friday. The supply of equities on higher levels, will keep the markets under check, 7500 to 7650 is the first important resistance area. One needs to see if market manages to close above 7650. If it does close above 7650, we may see some more upside to the market. However, failing to surpass these resistance levels and the undertone being bearish, hence, a close below 7200 would certainly witness a sharp sell-off and perhaps 6800 would be tested. The near term range for the market would be 7200 to 7650, and only a close above or below either sides would determine the trend going forward.

This is a very fragile market and usually occurs every 3-4 years, and according to our studies, this is a sharp correction within the Grand Bull Run. Though painful, but gives tremendous opportunities to long term investors. One need to be cautiously and stock specifically optimistic on the markets, and remain invested or invest in quality companies having good governance and growth. We once again reiterate that this is a good portfolio restructuring time.

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