NIFTY - OUTLOOK FOR JULY 2020

Nifty extended its gains on the third consecutive session on Monday, but witnessed profit booking in the last hour of trade. 

WODS states that there will be a minor reversal from this point as the second wave of Covid – 19 is haunting D-Street. Also, by the end of this week, Covid-19 cases may surpass the half million mark and Nifty is likely to witness a minor reversal

Nifty has an immediate support near the 10,250 - 10,160 zone and key resistance at 10,400 and 10,500 levels.

The recent border standoff with China and investors are advised to keep a short-term outlook for the time being. Nifty has formed a Doji, in the daily chart which is suggesting a sense of indecision between the bears and bulls. This implies that we are going to see a seesaw trade pattern in the Nifty 50 today and we at WODS is expecting a reversal pattern in the index.

MOODY's CUTS GDP FORECAST for india

Moody's Investor Service further downgraded its growth forecast for India to 🔻-3.1% this calendar year compared to 0.2% in April.

The June 2020 update of its Global Macro Outlook, released on Monday, expected a marginally stronger rebound at 6.9% in 2021, as opposed to 6.2% in the April update.

The global rating agency lowered it's estimates for almost all major economies. For the G20 advanced economies, the report projected a contraction of 🔻 6.4% in 2020 followed by a 🔺 4.8% recovery in the coming year.

For G20 emerging economies, the report projected a contraction of 1.6% for the calendar year. Removing China, this figure would have been worse at -4.7%

China is one of the very few countries that have not seen a downgrade from the April report, with Moody's sticking to its 1% forecast for the country this year as economic activities are returning to normalcy

On the other hand, most of the major western economies saw their projections declining further. The effect of lockdowns on activity in the second quarter of the year would be larger than previously thought

Risk reward ratio – In whose favor???

One thing that is very clear to us is that government will not allow a drastic fall of the stock market as it happened in March. If such a fall happens then they will actively step up providing a second tranche of stimulus. Therefore, a severe downside of the market is highly protected as per our analysis.

The recent market rise in the past two weeks is not owing to any improvement in the economy but primarily due to the huge amount of liquidity put inside the system by the RBI. While USA and other countries have supported their markets by pouring in a huge amount of fiscal stimulus, but we can say that our government lacks suck kind of muscle power.

However, there are two areas that our FM must consider. The objective is to boost liquidity in the hands of the consumers and spend a considerable amount of money on upgrading the downgraded infrastructure of the economy.

These two points must be considered by the Finance Ministry in order to improve the market outlook:

v  Reducing the tax rate on companies wanting to buy back their shares as no understands the business better than the promoters of the company. So, if the company and its promoters buy back shares from the open market then it will act as a motivation for the retail investors who are stepping out from the market at this point.

v  Removing the long term capital gain tax (LTCG), which was expected by everyone in this year Union Budget. We need more money to be invested in the stock markets in the form of equity rather than debt. With this tax gone investors would move away funds from low yielding bonds and debt market securities to equity and stock market ETF’s. This in turn will fuel expansion of the equity markets.

Thank You

Team WODS

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Disclaimer: The information contained herein is obtained from publicly available data or other sources believed to be reliable and WODS has not independently verified the accuracy and completeness of the said data and hence it should not be relied upon as such. While we would endeavor to update the information herein on reasonable basis, WODS, its subsidiaries and associated companies, their directors and employees (“WODS and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance, or other reasons that may prevent WODS and affiliates from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.