Dear Trader…
Equity benchmarks extended corrective phase over fourth consecutive session and also continuing to reel under pressure due to monthly derivative expiry on sustained profit-booking activities by market-participants by both funds and retail investors amidst negative global set-up.
After a weak start, the benchmark gradually drifted lower as the day progressed and settled around the day’s low. Several factors like negative foreign flows combined with no so encouraging earnings announcements dented the sentiment.
The sentiments were under pressure with Reserve Bank’s data showing that overseas investment by domestic firms fell by over 42 per cent to $1.45 billion in December 2020. In the year-ago period, companies in India had invested $2.51 billion in their foreign firms (joint ventures / wholly-owned units).
Traders failed to get any solace with International Monetary Fund’s (IMF) projecting that India will reclaim the status of world’s fastest-growing economy and projected its growth at 11.5 per cent in 2021 and India is rebounding to achieve the target of a $5 trillion economy.
We expect broader market to endure its relative outperformance post Union budget. Currently, the Asian market worries were the outcome of Federal Reserve’s policy meeting. While the Fed kept settings unchanged as expected, policymakers flagged a concerning slowdown in the pace of the economic recovery.
All Asian markets were under pressure following a sharp Wall Street decline amid deepening concerns about stretched valuations in equities markets. Investors will be concerned as India recorded 11,752 fresh cases of the corona virus disease (Covid-19). The caseload tally stands at 10,702,031. Globally, more than 101.4 million people have been infected by the virus. The country continues to be second-most-affected globally, and ranks 14th among worst-hit nations by active cases. The five most affected states by total cases are Maharashtra (2,013,353), Karnataka (936,955), Kerala (899,932), Andhra Pradesh (887,238), and Tamil Nadu (835,803).
Friends, we believe that it’s a healthy correction before of the key major event of Union Budget and the markets may continue to remain volatile amid quarterly earnings and after a sharp run up would make market healthier ahead, Therefore, investors should not construct the current profit booking as negative; rather utilize the same as an incremental buying opportunity to accumulate quality fundamentally sound stocks on dips.
Traders, on the other hand, should maintain extra caution due to the expected rise in volatility ahead and will be taking encouragement with a private report that India’s economy showed signs a recovery is taking root as waning virus cases and a vaccine roll-out supported sentiment and as focus turns to further stimulus possible in the upcoming federal budget.
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