In our previous post, https://www.plindia.com/blog/the-optimists-guide-to-nifty/, we had indicated that the Nifty has a crucial support on its monthly charts at around 8450 levels.
Its been one month since the blog so we revisit certain things that point to a potentially positive trend ahead! Of course, things are fluid and the situation a never before seen one, so all predictions come with a (large) pinch of salt! Enough negatives being anyways talked about so we present below some positives, as we see them!
The Positives
- The Nifty ended the month of March just above the critical month end levels , after dropping all the way intramonth to 7500 , of 8500 odd. This long term trendline, as long as it remains protected, means that we remain in a secular bull market and only that the extremes have been touched.
2. India VIX has staged a reversal from alltime high levels to the early 50s, meaning that activity in deep OTM options may be reducing – as its an important gauge of fear, this is good news.
3. The deal between Opec and Russia this past week promises to provide support to oil prices which in turn ensures that the key indices in the west, which have a high weight in energy stocks, find support if crude reverses its losses post the long holiday weekend.
4. The return of the UK PM from an ICU Unit, followed by comments by the White House health advisor Dr. Anthony Fauci who expressed “cautious optimism” that the deadly coronavirus outbreak is slowing down in the U.S., and said that parts of the country may start to reopen as soon as May.
5. Chinese on ground manufacturing activity is back to pre-February 2020 levels as per various reports including one from Morgan Stanley.
6. Finally, one critical ratio that this blogger always tracks very closely is the ratio of Nifty to Bank Nifty. This has , like the Nifty, reached a long term trend line on its monthly charts and it is likely therefore that financials will now begin to outperform against the broader indices.
All of the above may be an exercise in futility (Fingers crossed its not!) if the trends in the spread of the virus intensify – for India especially the next 10 days remain critical as the number of cases rise even as in the West the speed slows down – However, if one believes that patterns recur in markets and that these coincide with certain newsbreaks, right now is a good time to see these.
Meanwhile, lets all live by the “Jaan Bhi, Jahaan Bhi” call and hope that normalcy returns soon!