The week gone by was historic in terms of massive volatility; implied volatility and India VIX both registered record highs, but soon normalised reflecting the emotional sentiment of Indian investors in the stock market.

This was indeed very high compared with the two dozen other countries that had gone elections in last two years. In none of these places, the volatility was as high as was witnessed in India. No doubt Indian elections were the biggest across the globe.

All said and done, the market will at the end move according to earnings visibility, economic policies, global sentiments and how they are going to impact corporate earnings will be a real guiding factor in the long run.

Although Indian indices attained new highs, certain sectors were conspicuously weak. FMCG, IT, metals and auto stocks did not participate in this sentimental rally. That being the case, if these sectors cannot rally now when everything is up, when will they! Therefore, these four sectors are unlikely to run up in the foreseeable.

On the other hand, PSU banks were star performers during this quarter, which is giving an indication that their time has come under Modi 2.0.

Event of the Week

Time and again traders have made mistakes. Every time there is an emotional euphoria, be it elections, including this one, or any other event such as quarterly numbers, the market has behaved in an identical manner. When corporate earnings or election results have been as per market expectations, it is pointless to act on that very information which is already known to all. Everything has been discounted for already and, therefore, taking a contrarian bet could be far more profitable than going with the consensus.

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Technical Outlook

After scaling new highs on very high volumes, Nifty50 is once again trying to test the immediate high at 12,041, which will act as a strong resistance. The index is likely to remain rangebound with 12,041 level as the upper resistance and lower support at 11,600 or 11,400. The market has historically always filled these gaps, which makes a case that Nifty50 will soon retest the 11,400-11,600 levels. Traders should take positions only after the volatility comes down. Currently, the market can witness whipsaw losses on both sides of the trade, so it is better to avoid it for the time being.


Expectations for the Week

The market had a vigorous week and, therefore, sufficient rest will be needed before it can find new pace. Volatility will eventually come down and rationality will prevail. The benchmark indices might not show any direction next week, but it could face mild downward pressure and finally align with the global mood. As of now, a wait-and-watch approach should be followed at least till the monetary policy and Budget announcement by the newly-elected Government, which might be a gamechanger. Investors must ideally avoid largecaps, as they are in the overvalued zone, while select beaten down midcaps and smallcaps could be bought into.

For the week gone by, Nifty50 closed at 11,844, up 3.8 per cent.



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