Markets gloom to be short-lived as fiscal measures expected
Mumbai: The gloom in the Indian equity markets might be short-lived as a number of global and domestic stimulus inducing factors are expected to give a boost to investors' sentiments.
Supporting such a move is a technical fact that FIIs have net shorted 156,261 futures contracts on the Nifty.
A similar movement was seen in September 2019 when a slump was followed by a spurt, however, with a lag of some 20-30 days.
If the overall pattern repeats itself, then an up move is imminent.
"We witnessed short rollovers from the February series and further shorting was seen on the first trading session of the March series. FIIs aggressively shorted index futures in the last couple of weeks and as a result, their 'Long Short Ratio' in index futures reached to below 13 per cent, which is lowest since April 2018," said Jay Purohit, technical and derivatives analyst at Motilal Oswal Financial Services.
"Technically, strong support for Nifty is placed in the zone of 11,000-11,100 points. The overall data clearly indicates that the market is hovering in oversold territory and a bounce towards 11,450-11,500 levels cannot be ruled out in coming weeks. However, sustenance at higher level would be a challenge for the Bulls," Purohit added.
According to Edelweiss Professional Investor Research's Chief Market Strategist Sahil Kapoor, reversal signs such as the US Fed's signals of an upcoming rate cut along with the EU's expected fiscal supporting measures might give the much needed boost to the global and Indian markets.
On last Friday, fears of widespread disruption to economic activities due to coronavirus caused a massive stock market crash. Dalal Street mirrored global stocks and headed for its worst week since the 2008 financial crisis.
The benchmark Sensex lost 1,448 points in a broad based sell-off which saw none except FMCG major ITC withstanding the carnage.
The 'Fear Index' or volatility index jumped by 30 per cent to settle at 22.87 as fresh cases of coronavirus infection surged outside China.
Domestic investors were also cautious ahead of the 3Q FY2019-20 GDP data release on that day. The growth rate remained subdued.
Nifty Metal index plummeted 7 per cent, the most among the 11 Nifty sectoral indices. It was followed by IT, media and PSU Bank index. The pivotal banking and financial service sectors index closed over 3 per cent lower.
The Wall Street's benchmark index Dow Jones Industrial Average closed (down 4 per cent) with record losses on Thursday. China's Shanghai SE Composite Index was trading 3.71 per cent lower while Japan's Topix tumbled 3.6 per cent. Hong Kong's Hang Seng plummeted over 3 per cent.
Besides, the futures markets pointed at no near-term relief for investors. FTSE 100 Index Futures pointed at a rough start. The index was down 3.44 per cent, NASDAQ 100 Future also traded lower by 1.29 per cent.
The coronavirus outbreak is likely to be declared a pandemic and focus is now shifting from China to South Korea, Iran, Italy and Japan where cases are escalating fast. Even Germany, Brazil and several other nations have joined the list, Moody's said on Friday.
The World Health Organization (WHO) has said that the coronavirus outbreak has reached a "decisive point" and has "pandemic potential".