Market seem to be on steroids, but tread cautiously | Economic Times

Equity markets worldwide turned choppy this past week, as jittery investors navigated uncertain currents. After a short bout of divergence, the Indian bourses returned to echoing global markets and displayed whipsaw movements in tandem with the overseas peers. Amid fears of a possible global contagion triggered by a probable default by debt-ridden Chinese behemoth Evergrande and the overhang of the US Fed announcement on tapering and interest rate timelines, investor sentiment swayed between pessimism and optimism. However, towards the latter half of the session, the pressure on the bourses eased as each thread of the story began to unravel. Concerns over China’s 'Lehman moment' and its global linkages were laid to rest as US junk bonds were visibly unbothered by the debacle, while yields on their Chinese counterparts soared. The liquidity infusion into the banking system worth $18.6 billion by China’s central bank also cooled off some anxiety. Even the Fed’s hawkish stance signalling tapering towards the end of this year was in line with estimates already factored in by the markets. In fact, S&P500 snapped its four-day losing streak post the FOMC announcement. All these factors helped the continuous rise of Indian equities with both the benchmark indices again making record highs this week. Moreover, the return of the FIIs after a hiatus of five months and buying support at every dip hinted at the continuation of optimism in the Indian indices. Thus, every dip now presents a good opportunity to deploy funds.Event of the weekIn the past week, realty stocks have defied gravity with the Nifty Realty Index surging 21.22% this week alone. This optimism is not unfounded, considering a sharp drop in home loan rates, which have dwindled to as low as 6.5% ahead of the festive season. The existing demand for housing is expected to be boosted further by increased affordability and rise in income with various new launches by developers adding to the already dwindling inventory.As a matter of fact, despite stamp duty cuts being reversed in one of the country’s most expensive real estate markets, MMR, registrations in August jumped by 16% over August, 2019 levels. Moreover, to tackle any further potential Covid waves, some developers have adopted virtual tools to boost sales. Considering the existing tailwinds, it seems like realty stocks have rightfully made a comeback. However, the stocks have become overheated in the short term and investors should wait for prices to cool down before starting any long positions.86501635Technical outlookNifty50 closed the week again in the green after making a new high of 17,947. While Nifty50 is trading at new highs, Bank Nifty ended on a flat note and continued to struggle around its previous all-time high. To maintain the bullish momentum, Bank Nifty will need to play catchup. The midcap basket is giving signals of underperformance compared with the benchmark. A failure to decisively surpass the previous highs will be a sign of weakness for the broader market. The immediate support on the downside for Nifty is now placed at 17,600. Traders are advised not to create aggressive longs at current levels, but maintain a bullish bias and initiate longs on dips or around immediate supports.Expectations for the weekVolatility seen in the market this week may now seep into the forthcoming week as well, given the monthly expiry that falls towards the latter half. Considering the increased concerns over chip shortage and the resultant dampened sales prospects, monthly sales numbers of the auto firms are sure to grab eyeballs to determine a future trends in auto stocks.With no major domestic economic data expected in the following week, markets may be dominated by global news flow such as another possible default in interest payment on Evergrande’s bond due next Wednesday. Thus, in the current volatile market, investors must carefully invest only in fundamentally sound stocks as the market remains fickle and unpredictable. Nifty closed the week at 17,853, up 1.52%.