In this article I am highlighting some glaring points for the possibility of the rally in Nifty.This might sound somewhat unrealistic when the majority of the analysts have turned bearish
after the outbreak of Coronavirus. Before I present some technical views let me explain the current sentiments of Indian market. Within 2-3 weeks, Indian market has witnessed many events. Let us start from the budget. As usual there were very high expectations from the budget. Stock market participants were expecting a booster dose from the finance minister by addressing issues of long term capital gains shortly known as LTCG. Now every analyst knows that FM has hugely disappointed the market by doing opposite to expectations. Instead of removing LTCG, the stock market is slapped with a new provision of dividend distribution tax shortly known as DDT. As per the new provision the burden of DDT is shifted to investors
from corporate. Now onwards investors will have to pay tax on the received dividend . As expected, the market could not digest the double whammy and crashed on budget day. In fact during the live budget I had tweeted that a market crash is coming and ultimately
that happened. Nifty crashed over 3% which was highest on budget day.
The good thing was that the stock market absorbed the budget shock and recovered sharply and focused on second events which was RBI policy. It is true that the market was not expecting any rate cut from the central bank but what keenly watched was stand on policy. Many had feared that RBI would change it's stand rate cut from accommodative to neutral .
RBI announced the policy on 6th February which was also weekly expiry day for Nifty and BankNifty. Market welcomed the policy as RBI assured to keep accommodative stand on rate cut until the required time. Market welcomed that stand and Nifty reclaimed level above 12100.
During the above two important events one more bad event is still going on. You might have guessed that I am talking about the Coronavirus outbreak.World market is reacting very strangely to this ongoing event. In the initial stage, world market reacted sharply to the outbreak.
Indian market too, followed the world market and major indexes including Nifty corrected. But soon after that, the world market bounced back, discounting the effect of Coronavirus . Post this, market experts have kept flip flop views on this and the market is reacting accordingly.The fact is that the impact of Coronavirus is huge on the economy and there are many news reports confirming this.
Many MNCs in China have halted their operations and this has affected the supply chain of goods and machineries. In India supply of Tata motors and others have also been impacted.Besides this there are many other news and developments which clearly shows one thing and that the impact of Coronavirus on the economy is real. In spite of this glaring fact many might be astonished with my bullish stand on Nifty. Here onwards I am putting my case.
The chart clearly shows that it has a digested impact on the budget .
Nifty respected 200 DMA on closing base and then after rallied. Now it is a well known fact of technical analysis that the market can't be termed as bearish until it starts trading below 200 DMA. Here Nifty left 200 DMA far behind. In fact we have seen a huge rally of 600 plus points post budget and positive RBI policy. There was enough chance to stretch the rally beyond 12300 if the recent judgement of Hon. SC had not dampened sentiments of the market .
Option data of Nifty and buying by FIIs in the cash segment is enough to support the claim.But as of now some worries of rising bank NPAs are surfaced as judgement of Hon. SC on telecom companies directly affects banks . In spite of this fact, I believe that the market will also digest this one like the budget and outbreak of Coronavirus and it will focus on the next event which is not big but huge. At present we are witnessing high pessimism in the market and that's why the majority of analysts are ignoring the importance of this event but very soon their focus will shift to this event may be after correction of a few days more. So which is the event and why am I giving so much importance to it ?Let us see.
On February 24 and 25 US president Mr. Donald Trump is visiting India which is going to be a huge event not only for politics and diplomacy, but also for the economy and stock market. I will not get surprised if in the coming days the market comes under euphoria of the event. This is not just a guess but there are many reasons behind it. At present I am not discussing all that but just reminding you of the last visit of USA president Obama. Just check what kind of hype was engineered across the various fields and sectors. Below chart explains movement of Nifty during that time.
The above chart clearly shows movement of Nifty before and after the visit of the USA president.During the same time Nifty had made new all time high . Once again the USA president is coming to India and once again a similar kind of movement can not be ruled out.As narrated earlier in this article, the majority of negative news is already factored in . The other big positive factor ignored is the crash in crude price . It is a well known fact that
crude prices directly affect indian economy .