Right off the bat, the Nifty move has been textbook so far. With 10800 holding and a bounce ensuing, the guessing game is to try and rationalize the upward move as a sustainable one. September quarter numbers should start rolling in from the 2nd week of October but the auto numbers for Sept will come in to provide direction.
Ahead of the festive season, the management commentary should sound positive and if all that buzz about the second stimulus package was anything more than headline management, there could be a justification for putting a floor under the Nifty at the 200DMA. So, for now, let's wait and watch and try and see if the expectations of the market are exceeded or they are priced in. Nifty range to keep in mind is 10800-11250 and my stop loss for the negative call remains a distant 11460 for now.
I'm trying to remain focused on the direction of the DXY and the reasons for it to rally further. That could determine how the FPI flows will materialize, especially from the ETF pack. If the US economy is expected to get a boost from the Pelosi stimulus, dollar assets could pull money back onshore giving it a boost, but the cacophony surrounding the elections is the counterbalancing force. Yet, a classic risk-on cannot emerge with this election fever. Here, despite a sharp bounce on Friday, FPI numbers were a significant negative.
Bank Nifty remains my biggest worry with the potential for a further delay in settling the moratorium issue. The bigger issue is the sustainability of the retail book and the capability of servicing that debt given the employment debacle. But that is some time in the making.
For the moment, I'd retain a negative bias and wait to see if 11250 breaks on the Nifty and then begin to worry about my stop loss at 11460.
