Market Outlook

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Market last week

Nifty witnessed strong resistance above 12,000 levels and ended this week on a flat note. Profit booking was seen at higher levels, given downgrade in India’s rating and weak macros. Investors were concerned over the premium valuation of large caps stocks while mid & small cap may catch up in the medium-term as economy improves.

Weak economic data and concerns over slowdown in earnings growth was hurting investor sentiments. Despite series of rate cut by RBI, core sector growth remained muted and CPI inflation was inching higher. WPI inflation numbers indicated a weak demand in the manufacturing segment. In-terms of earnings growth, we noticed that the strength of Q2 result slowed by the end of the season, which is having an impact on broader market. Post recent rally, the gap between valuation and earnings growth has enlarged. The large caps valuation seems at peak level which kept investors on sidelines. Government plans to set minimum price for mobile calls and data boosted telecom stocks. PSU Banks gained on expectation of reduction in NPAs post the favourable verdict from Supreme Court on Essel Steel NCLT issue.

Week ahead

On global front, signs of progress in US-China trade deal has improved overall sentiment across global markets. However, domestic macros are not providing confidence to investors. But in recent times we are seeing some concrete steps from government and RBI to push growth which will soothe investors nerves. Going ahead, RBI is likely to give more focus on growth rather than rising inflation in the near term which may influence them for few more rate cuts and induce greater transmission. Given this scenario, we may see limited downside for Nifty despite premium valuation. The likely trading range for market will be 11600-12000.

Posted: November 18, 2019

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