Weekly Market Recap
The two bellwether IT stocks TCS and INFY have declared their earnings this week with bleak growth outlook going forward yet the market or indices held up well, though INFY announced its result post market hours whose impact will appear on Monday, which is expected to be quite negative as the INFY ADR is down 12% in last two sessions while our market remains closed. However, so far, the NIFTY has been quite resilient amid so much negativity.
Current Outlook
It is indispensable to note that despite everything that has been thrown in like; high inflation, increase in rate, recession fear, and earning fear; and yet here the indices are, bulls manage to escalate the prices vertically and kept there. There could be a few reasons for this. Foremost, the market is expecting relief from inflation pressure so as in the rate of interest. This view is reflected in the quite low VIX which is at 11.9. Yes, it’s been at the lower end in the past, but if the above-mentioned expectations are right, it could even move lower or remain low for quite a long period of time, which again bolster the bull case.
On the contrary, the low VIX indicates the topping condition on NIFTY, which suggest caution at this point despite the seasonal strength that usually plays out in the month of April. On the positive side, the banking stocks have the highest weightage in NIFTY and so far, they are solid and resilient. In fact, given the prevailing negativity, if anything, we could see more positive surprises to the upside, which could further lift the market higher depending on banking stocks.
Hence, much depends on banking stocks any negative surprise from their earnings could severely affect the overall market.
Conclusion
Finally, analyzing the market from the oust-side has helped us to identify the strong and weak candidates in the market. For the reason laid out above, as well as the ability of the bulls to keep the indices higher; suggest we should consider buying the strong candidates on dips, but with strict selling discipline.
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Be Patient; Be a Savvy Investor..!!
Pankaj