The market is likely to start the coming week on a positive note, tracking strong closing in US markets on Friday after better-than-expected jobs data but for the rest of the week, a bit of weakness amid consolidation is expected to continue, experts said.
The market continued its correction in the passing week despite recovery in global peers, shedding more than 2 percent and taking total losses to over 8 percent from its record high touched on January 29, 2018. Benchmark indices closed at fresh 2018 closing lows.
Continued weakness in the banking space after the Rs 12,700-crore PNB fraud case, and worries over trade war arising from the US announcement of import duties on steel and aluminium hit market sentiment.
Generally, when the market sharply moves either way, it becomes difficult to predict the top or bottom. Hence, in this falling market, people are finding it difficult to take long positions and are waiting for the bottom to be formed.
The market trend also indicated that traders as well as investors are using two strategies - "sell on rally" and "add exposure to quality stocks".
The current gradual correction from all-time high indicated the overall weakness in the market is not yet over due to ongoing asset quality issues in banking, the major driver of the economy, experts feel.
The market is likely to start the coming week on a positive note, tracking strong closing in US markets on Friday after better-than-expected jobs data but for the rest of the week, a bit of weakness amid consolidation is expected to continue, experts said, adding a major sell-off is unlikely unless there are any further detrimental developments in the banking fraud case or globally.
"The market breadth has remained weak throughout the week. Despite a recovery of almost 100 points on Thursday, a negative breadth clearly suggested prevailing scepticism in the market. Thus, selling pressure may continue at higher levels in the coming sessions.
As fresh shorts are not evident in data, any change of bias in the Nifty may be seen only if fresh long additions were observed or Call writers start unwinding their positions. At the same time, sudden depreciation in rupee also weighed on equities as it moved above 65 once again.
In the coming week, the market will closely watch the macro data (January IIP and February CPI inflation). The flow in secondary market could be impacted due to active primary market as three IPOs nearly worth Rs 10,000 crore will open for subscription.
"The macro data will give a sense of the economic recovery and trend in inflation, respectively. In this, inflation would be something that would be critical as its further hardening could trigger fears of rate hikes.
On the global front, he said President Trump’s rhetoric on trade protectionism could weigh on markets. On the other hand, any move by the Trump towards reconciliation with North Korea could be taken positively.
The recent fall in mid-cap stocks provides a good opportunity for investors to pick stocks. So he advises investors to select stocks with strong management quality, robust earnings growth and reasonable valuations.
