In a holiday-shortened and monthly derivative expiry week, the markets registered sharp gains of 7.7%. This was led by rising hopes of stimulus package from the government and resumption of operations for certain companies. However, the biggest factor that led to the gains was the global cues which despite weak economic data from the US and no action by the Fed, the equity markets continued to their upmove until Thursday. However, Donald Trump new threat to impose additional tariff on China led to sell-off in equity markets worldwide on Friday (our markets were closed).
In the week gone by, the broader markets also witnessed strong buying interest from investors. On the sector front, investors had their risk mode on as cyclical sectors like Metal and Banking were the top gainers followed by IT index. On the other hand, Defensive sectors like Pharma and Healthcare ended on flat to negative note during the week. Fund flow wise, both FII and DII were net buyers.
There are a number of developments that have happened post market hours on Thursday wherein Donald Trump has threatened to impose tariff on China. On the domestic front, the government has announced extension of nationwide lockdown by 2 more weeks. However, there are guidelines issued for relaxations for respective zones (Red, Orange and Green), but it would depend on the State government which means they can ease up to the limit set by the centre; however, they can impose harsher restrictions in certain districts if required.
Coming to markets, the last week run-up was definitely unprecedented, nonetheless, we maintain our bearish view on the markets in the near term as Coronavirus cases continue to surge in the world as well as India even though the pace has slowed. Further, global sentiments are also likely to be impacted post-Trump’s statement on the imposition of tariffs on China. On the domestic front, earnings announcement from Nifty majors and outlook given by the management would be one key thing to watch out for along with key economic data release this week including PMI Services, loan growth and deposit growth.
The hopes are also high of yet another economic stimulus package from the government, however, in our view, the package would strictly be limited to the vulnerable section of the society. One can read more on this here.