homemarket Newsstocks NewsNifty can test 9400 9600 before resuming massive selling pressure: Goldilocks Premium Research
Nifty can test 9400-9600 before resuming massive selling pressure: Goldilocks Premium Research
The pullback being witnessed in the Indian market at present is quite surprising as there is no indication of when the lockdown would be lifted and when economic activity would bounce back. Yet, investors seem buoyant on a quick recovery.
In an interview with CNBC-TV18, Ashwini Agarwal of Ashmore Investment Management and Gautam Shah of Goldilocks Premium Research discussed the fundamentals of the market.
Talking about the pullback in the domestic market, Agarwal said, “This pullback has confounded everyone because there is no clarity on when the lockdown would be lifted nor there is clarity on what would be the course of the virus from here on. The economic situation that will arise from the lockdown would be quite dire and how much fiscal room does the government have to support the industry, remains to be seen. Yet we have seen a significant rally, which could be attributed to US-led sentiments and mutual fund flows that have been reasonably robust. ETF selling has come down from what we can see through data and through anecdotal reports from large institutional brokers that trade on their behalf. These factors seem to be driving this rally.”
On the pharmaceutical sector, Agarwal said, “I have been positive on pharmaceuticals for almost a year now and I am glad that it is finally starting to play out. The logic in my mind has been that pharmaceutical has been a huge underperformer pretty much since its peak in 2015-16.
"Fundamentally many of the companies were trading at inexpensive valuations and that was very encouraging to start looking at these stocks as investment areas almost a year ago. I continue to believe that pharmaceutical stocks are reasonably valued and so the rally that we have seen in some of the names still has legs in my view.”
Next, Shah said, “I think there is a big difference in the recovery or pullback that is happening right now in comparison to the two previous recoveries. On previous occasions, you did not have any market breadth, just a handful of stocks which were very weak and were oversold were taking the market higher. But this move has great breadth, has good volumes and has reduced volatility. You are in an environment where in India VIX was trading at levels of 80-85 and gradually came off in the last seven days despite the news flow only getting worse. So, the market is clearly ahead of the news, it is almost as if it knows that things would get slightly better going forward.”
“Today’s close above 9,000 is quite encouraging. Given the kind of chart setup that we have on the short term, I think this move could take the Nifty into that 9,400-9,600 area where there could be massive selling pressure once again. So, another 3-4 percent possible, but anything beyond that, looks a little difficult,” he added.
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