And this paved the way for a sharp and abrupt buying interest in quality smallcaps and midcaps. A handful of quality smallcap and midcap stocks witnessed prolific exuberance, which was reflected in their weekly price gains. Going by the adage of ‘Mr Market is always right,’ investors are advised to take note of such quality smallcap midcap names and look to buy them on declines.
Peeping into global markets, the US market witnessed its biggest software IPO this year, Snowflake, which more than doubled on its first day of trading on NYSE. Such kind of frenzy reminds one of the hysteria witnessed two decades ago, which culminated in what we call today ‘The dot-com bubble’.
Such maniac listing for a company which is not yet profitable, even though sales are growing rapidly, is a sign of clear hysteria. Such indicators may perhaps hint towards a plausible bubble taking shape in the world of listed tech startups.
However, taking a 360-degree view, broader markets still seem to be lagging and offers value in many under-owned and under-researched sectors – not only in the US but also in India.
Event of the Week
Reiterating its stand, US Fed Chairman Jerome Powell, signalled that the US central bank will keep interest rates near zero for at least three years until the US economy heals from the effects of the Covid-19 pandemic and the labour market recovers. He said the Fed will keep interest rates near zero until US inflation rises above its 2 per cent target for an unspecified duration of time. At the grassroot level, it seems that ground level economies across the globe would at least take two-three years to recover from the jolt of the pandemic.
And, therefore, the current disconnect between forward looking Mr Market and backward looking Ms Economy may persist.
Nifty50 closed on a negative note and traded in a very narrow range during the entire week. The index saw strong participation from pharma and IT sectors while the banking and financial stocks which have the largest weights on the index underperformed and Bank Nifty closed the week in red with losses of almost 2 per cent. Nifty is trading in an overbought zone in sync with global indices and minor fractures in the form of corrections may continue. We maintain a cautious stance on the market and suggest traders to remain watchful of key levels. The immediate support and resistances are now placed at 11,200 and 11,630 levels, respectively.
Expectations for the Week
Indian stock market has started witnessing a slew of money raising exercise making it a festival of IPOs. Renowned names like Computer Age Management Services (CAMS), UTI Asset Management Company, Angel Broking to name a few are looking to access primary markets before Diwali. Anecdotally, when such IPOs start hitting D-Street a trading mentality arises in the minds of retail investors who subscribe and book profits on the day of listing itself rather than sticking with the IPOs for longer.
Such profits further increase risk taking appetite both in primary and secondary markets causing bullish sentiments and when too many companies line up for IPOs, the liquidity is squeezed out of the market causing major corrections. But until then, investors are advised to follow a stock-specific approach by skewing their trading bets towards strong momentum sectors like Pharma and IT and wait for a correction before investing.
Nifty50 closed the week at 11,505, up 0.4 per cent.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)