I hope all of you remember the saying “Markets can be irrational longer than you can remain liquid”
Was just overhearing in the news, that Bajaj Finance is still apparently over valued at Rs.2000, I find that a little strange as the exact same guys where saying that 3500 was the level to get into the stock from a value buy perspective, Lol. Unfortunately we seem to be bombarded with so much stuff in this field that it’s really hard to tell what to listen to and what not to.
If you notice the texture of our market, you will notice that there is a sense of decoupling that it is witnessing from its global pears recently. Lets analyze the data shall we, the S&P 500 rallied from 2180 which is its march lows all the way to almost 3000, which is approximately 40% up from its lows. The Nifty however rallied from 7600 to about 9900 which constitute approximately a 30% retracement from its lows indicating our markets are more bearish as compared to the US.
This decoupling has started only recently as the US markets rallied because they had a strong stimulus package that got announced and approved. We on the other hand have had no such thing, and have rallied simply because the mother market has done so.
Does this mean we are going to continue to rally after our stimulus (if at all) comes out? At first cut, I would reckon that to be very short lived, but we should wait for the data to unfold as well as the days go on.
Now, let’s come to the finer points of the data. If you noticed the FII data on Friday which is the 8th of May 2020, you would have seen that FII have sold puts around the 9000 mark and sold calls around the 9500 mark (weekly expiry). But the interesting point here is that the quantity they have sold respectively on each side are almost the same. This implies that they too have been split in the middle and have no consensus to any one particular direction.
Secondly, If you notice the Nifty chart the week gone by starting 30th April, either on the daily or the hourly time frames, you will notice that Nifty kept making lower lows and then one fine day gapped above the last low which again indicates indecision, since now for the second day in the running it has made a higher low. Furthermore, if you notice the India VIX which was cooling off from the highs it made at 85 in March, It kept cooling off till it hit an area of demand/support at 34 to 29, which is exactly where we expected it to go up from as well.
Now it is fixed in between a supply level and a demand level which basically also indicates the above hypothesis of indecision still continues to prevail. Thus to conclude, all these factors put together imply that we would see a sharp but wide ranged sideways movement in the days to come for our markets.
Coming to being Stock specific, from an investment point of view, I have my eye on ITC in the range of 130 to 145, this is the range I would buy my first tranche for the medium to long term on this stock. The second name that is coming to a good level from a long term perspective is SBIN, again first tranche from 142 to 157. I also continue to be bullish on Gold from the longer term perspective and would continue to do an SIP in it, Gold I believe would emerge as the next strongest asset in the decade to come not only from a diversification asset point of view, but also from a currency point of view.
