WEEKLY TRENDSETTER (APRIL 17th ,2021)
| 2021 | APRIL 9 | APRIL 16 | Ch % |
| NIFTY | 14835 | 14618 | -1.46 |
| BANK NIFTY | 32448 | 31977 | -1.45 |
| USD/INR | 74.73 | 74.43 | -0.40 |
MARKET REVIEW –The week started on a sell -off mode with the Nifty sliding to 14248 before the recovery which erased some of the losses. The Bank Nifty likewise was also down but the index clearly is under pressure.
RESULT SEASON -EARLY TRENDS
The result season kicked off with the IT majors posting decent results with Wipro being the one which had a better quarter .However ,the results were not enough to boost the market and both TCS and INFY saw profit booking .This was despite a buyback announcement by INFY at 1750 .The weekend saw result announcement from HDFC BANK which was below expectations .However the more worrying part was the surge in provisions as well as the management commentary which hinted at slowdown in business ,possible impact of the Covid resurgence and increase in customer defaults .So much so the bank even skipped dividend for FY21.
NEWS FLOW
US markets are surging but emerging markets are sulking
There is a clear divergence between the US markets and the emerging markets. For the 1st quarter ending March ,2021 the MSCI Emerging index gained 2.29% vis-à-vis the surge in DOW by 7.75%. This comes on the back on the bond yields hardening in US and this is causing reversal of interest rates in the emerging markets like Brazil and Russia, where rate hikes are the way forward.
POINT OF VIEW
US MARKETS -Will the surge continue?
The US markets are clearly having a party of their own. The ramp up in vaccines and the new stimulus package clearly is providing the right steroids for the markets to shrug off the bond yield rise which looked like halting the rally. The P/E ratio of the S&P 500 stands at nearly 42.6 which leaves little scope for the rally to extend much .The same was at 23.1 in Dec 20 just before Covid started .In March the same was at 22.2 .While clearly the surge has been on the back of stimulus measures and the markets getting a massive inflow of funds ,a near term correction is looming large .Another popular indicator which has raised alarm bells since last couple of quarters is the Buffett market indicator which is simply the ratio of the US stock market ‘s total market cap to U.S.GDP .This is at an all time high at 1.85 .Even during the tech boom in early 2000 it peaked at 1.45 and just before the financial crisis in 2008 it peaked at 1.1 .Thus the current ratio indicator has been the point of discussion for the last few months notwithstanding the continued market surge .
MARKET OUTLOOK
1.The last week IT results set the tone of equity markets and the weekend saw results from HDFC Bank. As already discussed, the management commentary as well as skipping of dividend for FY21 could be negative for sentiments for the entire sector which is already an underperformer.
2.Results for next week are ACC, ICICI Pru, Nestle, Tata Elxsi, Indus Tower, HCL Tech and M&M Fin. ICICI Bank is slated to announce results on April 24 which will now be keenly awaited post the HDFC Bank numbers.
2.Technically, the market is witnessing a huge struggle with Nifty failing to sustain above 14800 .While the bounce from 14250 levels have been seen several times odds are high that the pre-budget level of 14000 will be tested in which case 13600-700 could be seen in the next few weeks .Sector -wise also banking is on the backfoot and barring metals ,pharma and IT ,the rest of the market also looks like running out of steam .Most of the counters are still fetching good returns since the sharp surge in the last one year .Thus the temptation to book profits will increase if the current sluggishness continues .
Some technical cues are as follows going by market trends
L&T (1360) -Has been breaching critical levels. Trading close to pre-budget levels. Likely to slide to levels of 1275-1300
HDFC BANK (1428) -Underperforming the market since last 2 months. Likely to slide to its 200 DMA levels of 1305.
Some caution is advised on market front. The first leg of correction till 14250 has been completed. However, levels of 14700-800 should again see resumption of selling pressure. Profits are good for financial health. The market still provides decent gains to be captured. Book profits and remain on sidelines!
Krish Subramanyam