Market reacts adversely post budget, poured water on all expectations
Over the weekend, we had some favourable developments with respect to US-China trade war and hence, the week started off on a cheerful note. Post this, our markets had to deal with our domestic factors as we were inching closer to the Union Budget 2019. All four sessions ahead of the event traded in a narrow range but the overall bias remained positive. On Friday, the Finance Minister presented the actual Budget post which we witnessed a massive sell off in the market to pare down all weekly gains.
Since last many months, the benchmark index has been showing tremendous outperformance but the broader market continues to remain in a slumber. Ahead of the Union budget, there were some hopes built in and people were expecting some triggers that could boost the traders’ confidence back into the mid and small cap pockets.The kind of reaction, however, that we saw on Friday, clearly suggested disappointment and hence had an adverse reaction once the budget commentary concluded.
With this, the water has been poured on all expectations and market participants again have to wait for some other ray of hope. As far as levels are concerned, we closed precisely at the key psychological level of 11,800 after which next support zone lies around 11,700-11,630.
At this juncture, it’s hard to give any possible direction for the forthcoming week. We need to see how market reacts in the first half. Till the time 11,630-11,591 are not violated, the broader structure will not get distorted. But in case it happens, then investors must get ready for some sharper cuts in the market.
On the higher side, 11,900-12,000 remains to be a sturdy wall. On Friday, July 5, the banking space showed resilience and didn’t participate at all in the correction, which is the only positive takeaway. If market has to regain strength, the banking space needs to take charge. Also the information technology (IT) and Midcaps witnessed complete sell off and hence, we need to see whether the correction is overdone or yet to extend further. At present, traders are advised to stay light and to adopt a confirmatory approach for a while.
View – Bullish
Last Close – Rs. 1178.20
On the budget day, we saw sheer outperformance in some of the FMCG counters and this marquee MNC name was clearly one of them. Technically speaking, this stock has formed a structural higher bottom at 1120 and has now closed near the previous swing high with a bullish candlestick pattern. The said pattern is witnessed with a good increase in volume and with the momentum oscillator i.e. RSI crossing above its previous swing we sense an early sign of bullish breakout. In addition, prices have closed above 20-SMA and 50-SMA, indicating that the short to medium term trend for the stock has turned positive. Looking at all the above scenario, we recommend buying for a target of Rs.1250 and the stop loss should be fixed at Rs.1137.
View – Bullish
Last Close – Rs. 1380.80
This midcap name has been consolidating of late after having a remarkable calendar year 2018. This consolidation itself is a sign of strength if we compare it with the broader market destruction in last one and half a year. In fact on Friday too, it was clearly bucking the trend. On the daily chart, last week, we witnessed a breakout from the recent small congestion zone and Friday’s up move indicates possibility of giving a decent price move in next few days. Thus, traders can look to initiate longs at current levels for a target of Rs.1450 and the stop loss should be fixed at Rs.1338.
Disclaimer: The analyst may have a position in the scrip mentioned above; the views given above are the personal views of the analyst.