IIFL - MARKET OUTLOOK
IIFL : Market Outlook
The highs hit on March 2015 appears to be a distant memory as the benchmark indices have been on a declining curve since then. Moreover, Indian indices have got to the worst possible start in 2016 as well with Sensex plunging below 25,000 for the first time since September 8, 2015 hitting its 52-week low in intra-day trades on Thursday.
Rising concerns over a global slowdown, particularly due to a possible hard landing in China, heightened geo-political tensions and lack of visible recovery in India Inc earnings are the reasons for the ongoing fall in the stock market. China’s Yuan devaluation and Hydrogen bomb testing by North Korea dragged global markets into a whirlwind.
The slow economic recovery and poor show reported by Corporate India, QoQ, will continue to be a concern. The coming week has a number of larger caps announcing their results. These include Infy, TCS, Indusind Bank and HUL. In line with its latest commentary, Infy would deliver a tepid growth of 1.4% qoq in CC terms during Q3 FY16 due to seasonality and lower spending by top clients. While it may be difficult to predict the timing of broad earnings pick up, but a recovery has started in many companies outside the Nifty. It would be prudent for investors to identify these stocks and sectors rather than wait for a full-fledged recovery.
Technical View
Inability to conquer previous peak of 7979 led to a sharp reversal as index continues to move in a downward sloping channel. Nifty is on the verge of violating previous support of 7540. A market which keeps on visiting support zone on several occasions, does not exhibit confidence. With uncertainty and chaos in global markets, a fall below 7540 would result in a breakdown from a descending triangle pattern on the long term charts. For index to reverse current predicament, pullback from lows has to sustain above 7750 for consecutive days.
F&O View
The first week of 2016 was a complete rout with Nifty and Bank Nifty losing 4.7% and 5.5% respectively over China concerns being raised again. Banking (-6.5%) and capital goods (-5.6%) sectors led the fall and Oil & Gas (1.5%) sector was the only one to hold ground. Markets are expected to take cues from the quarterly results that are going to start from Infosys result on 14 January. OI built-up on Nifty options still suggest a broad range with the maximum OI at 7500 puts and 8000 calls.
The highs hit on March 2015 appears to be a distant memory as the benchmark indices have been on a declining curve since then. Moreover, Indian indices have got to the worst possible start in 2016 as well with Sensex plunging below 25,000 for the first time since September 8, 2015 hitting its 52-week low in intra-day trades on Thursday.
Rising concerns over a global slowdown, particularly due to a possible hard landing in China, heightened geo-political tensions and lack of visible recovery in India Inc earnings are the reasons for the ongoing fall in the stock market. China’s Yuan devaluation and Hydrogen bomb testing by North Korea dragged global markets into a whirlwind.
The slow economic recovery and poor show reported by Corporate India, QoQ, will continue to be a concern. The coming week has a number of larger caps announcing their results. These include Infy, TCS, Indusind Bank and HUL. In line with its latest commentary, Infy would deliver a tepid growth of 1.4% qoq in CC terms during Q3 FY16 due to seasonality and lower spending by top clients. While it may be difficult to predict the timing of broad earnings pick up, but a recovery has started in many companies outside the Nifty. It would be prudent for investors to identify these stocks and sectors rather than wait for a full-fledged recovery.
Technical View
Inability to conquer previous peak of 7979 led to a sharp reversal as index continues to move in a downward sloping channel. Nifty is on the verge of violating previous support of 7540. A market which keeps on visiting support zone on several occasions, does not exhibit confidence. With uncertainty and chaos in global markets, a fall below 7540 would result in a breakdown from a descending triangle pattern on the long term charts. For index to reverse current predicament, pullback from lows has to sustain above 7750 for consecutive days.
F&O View
The first week of 2016 was a complete rout with Nifty and Bank Nifty losing 4.7% and 5.5% respectively over China concerns being raised again. Banking (-6.5%) and capital goods (-5.6%) sectors led the fall and Oil & Gas (1.5%) sector was the only one to hold ground. Markets are expected to take cues from the quarterly results that are going to start from Infosys result on 14 January. OI built-up on Nifty options still suggest a broad range with the maximum OI at 7500 puts and 8000 calls.
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