The domestic equity market had a roller-coaster ride this week with the dollar and crude oil hitting higher levels and taking the market lower. However, when crude oil relented, the market bounced back immediately. The change from bearish to bullish sentiment overnight was a little surprising to all.
SBI, the countrys biggest lender reported its second straight quarterly loss of Rs 7,718 crore on account of surging provisions for bad loans and erosion in profitability from its core lending and securities trade business. The bellwether of the Indian economy did not meet the Street expectations; but the stock bounced back post results.
This shows there was huge pessimism among investors and traders and SBI bounce post earning suggests the worst may be over at least for the interim period.
There is very little room left for the stock to go down further in the short term. Also, the management commentary that the worst is over for the bank instills confidence that the coming financial year would be one of hope, as there are chances of recovery of Rs 78,000 crore from the cases in the first two lists of companies referred to NCLT.
However, on further analysis it looks like smaller PSU banks such as Allahabad Bank, PNB and a few others would recover a much higher amount in terms of percentage of their market cap from IBC resolutions compared with that of SBI.
Events of the Week
Sugar prices prone to highest cyclicality are facing an existential crisis. Sugar prices have plunged 30-40 per cent, creating a dent in operating margins of companies, which are unable to pay farmers. But is this, the turning point for the mills is that the government is willing to help the battered industry by revisiting the fair and remunerative prices offered. If the government indeed passes protective measures for sugar mills, stock prices are going to bounce, given that internationally sugar prices have moved up 10 per cent, giving higher realisations to exporters.
The market has bounced back from the oversold levels, and more such bounces are likely to happen after which Nifty is again expected to start its downward journey to touch lower support levels. Midcaps and smallcaps are expected to bounce more vigorously, as they had corrected more sharply in percentage terms. Traders should buy-on-dips at current weekly low with stop losses. Overall, the market is expected to remain volatile, so stop losses have to be little wider.
Expectations for the week
The domestic equity market can expect some volatility on account of expiry and earnings from a couple of companies such as NTPC, Oil India and Aurobindo Pharma, among others. Key sectors to watch out for would be oil and gas, IT and cement. With rising uncertainty on the global front, the market is not in a hurry to begin a northbound journey. Investors can hold on to their investments and look to pick quality stocks to build long-term portfolios. Buy on dips should be the strategy.
The Nifty50 closed the week by a marginal 0.08 per cent higher at 10,605.