Highly Susceptible Market Spooked by Fears

Highly Susceptible Market Spooked by Fears - Week ending September 23rd

Markets during the week had a very volatile period shaking even the strongest bulls on the street. The panic selling based on some news or eventsare, historically speaking, good buying opportunities. No fundamentals had changed either for Yes Bank or for housing finance companies such as DHFL for such 50% moves which occurred just on the basis of street expectations which are often irrational in the short-term because they are based on herd mentality.
But such irrationality offers good buying opportunity of quality companies as the so-called fear is hypothetical and hence won't last for long.
And once the fear subsides the stocks will rebound. As Warren Buffett had quoted “The best thing that happens to us is when a great company gets into temporary trouble. We want to buy them when they're on the operating table."
Another such incident occurred this week! The regulator's mandate to cut AMC fees marginally by 0.25% on an average, although on the face of it may look negative for the AMCs but in a way has brought in a lot of clarity that atleast for the next few years the margin visibility looks intact.
However, the decision to convert the upfront payment commission compulsorily to trail model should compensate for this negative impact. Hence, AMCs should not be sold-off just on the basis of this news.

Events of the Week:

The highlight of this week was by the Government who fired Bramhastra to clean up the public sector banks byway of merger.Three banks; Bank of Baroda, Vijaya Bank and Dena Bank will be merged by the end of this financial year which in the long run will give synergies, cost reduction and resource optimization. This will help them to reduce costs and compete with the private sector peers and regain market share. Although this is a long-term process but eventually the action will reap fruits.

Technical Outlook:

Nifty50 became hyper volatile this week penetrating the lower channel and later bouncing back by the close near the channel indicating that indeed it has taken support at the lower channel suggesting buying is emerging at such lower levels. It is time for bounce back for Nifty50 after such panic moves. Buy on dips should be followed by traders as currently it is no time to short.

Expectations for the Week:

All eyes would intently be on Jackson Hole the coming week where the US Fed is all set to hike interest rates by 0.25%. Although this fact is already discounted for in the market and may have a short-term impact but in the future, inflationary outlook seems to be deteriorating which could further accelerate the interest tightening process. Tariff wars will be the reason US Fed would be constrained to increase interest rates because the cost of goods sold in US to the consumers would be higher due to tariffs.Also, short term volatility will increase in the markets. Investors should now start accumulating quality stocks in their portfolio. Yes Bank, Housing finance companies, Oil marketing companies offer value at the current levels and should be accumulated from the long-term perspective. Nifty closed the week at 11143.10, down by 3.23%.