A Survival Kit For Market Volatility

Dire predictions notwithstanding, there’s hope for the markets if one looks at long-term prospects – plus there’s a silver lining in the form of earnings growth, finds Suyash Desai.

- Suyash Desai

Markets have corrected over 10 per cent from their high over the past few weeks, and experts feel equities may remain volatile for some more time. While no big crash is imminent yet, international events such as a rise in oil prices, concern over emerging trade wars, and an expected hike from the US Federal Reserve System have got investors worried – especially when coupled with developments closer home, such as uncertainty over domestic elections, deteriorating macroeconomic data, and the scams plaguing the banking sector.

A Word of Caution

Says Rajesh Palviya, Head Technical & Derivatives Analyst at Axis Securities, “The Nifty will not go much higher and be around 10,500-10,600 points. If we take the retracement theory, 50 per cent retracement of the recent fall is coming around 10,560, which is likely to act as stiff hurdle.”

Retracement is based on the idea that the markets will retrace a predictable portion of a move, after which they will continue to go in the original direction. Palviya adds that the derivative data is not looking encouraging and lot of call writing is happening at 10,500 strike price, indicating that upside is capped. “On the lower side, Nifty forms a bottom around 10,000, which is a psychological level. The recent bounce in April does not look strong enough to take it past the above mentioned levels,” he says.