During this short but action-packed week, D-Street couldn’t pick up the festive mood. The week started with a spark, but quickly fizzled out towards the end. Still, markets have managed to hit milestone after milestone since the last Diwali, despite some concern as our economy continues to battle the pandemic!
In hindsight, the pandemic has resulted in several permanent structural changes, the most notable of which is the rapid expansion of the IT industry. Companies around the world have never been more eager to drive their digital transformation. The adoption of technology that used to be limited to specific industries has now become mainstream.
Technology used to be a support department, but today technology is at the heart of every business. This transition to the online market led to fundamental changes in sectors such as travel, hotels, restaurants, entertainment and education, to name a few, with the boom in e-commerce. With the expanded internet, smartphone penetration and 5G modernization in India, there is an enormous acceleration in the user base of Indian technology-driven fintech, edtech, healthtech and e-commerce start-ups.
This trend is also supported by India’s rising list of unicorns, which has resulted in the country having the third largest startup ecosystem in the world. It is therefore not surprising that 2021 was an opportune time for several such startups to launch their public market launches, with Zomato being the trendsetter. This positive response to
IPOs could also be an indicator of a structural change in the perception of start-ups by investors; Growth potential and not your operating metrics. Whether this change is permanent or not, however, depends only on the ability of these startups to deliver on their ambitious promises and ultimately grow their investors’ wealth in the medium to long term!
Event of the week
The festival of lights is here and with it the hope of better business for the automobile manufacturers. Auto numbers disappointed year over year, with PV being the hardest hit given the ongoing chip crisis, followed by two-wheelers with a double-digit decline. But at the end of the tunnel there was light, because CVs and tricycles saw good traction. In addition, all segments achieved higher MoM growth in a sequential comparison as OEMs took matters into their own hands and growth rebounded. The EV segment in particular impressed after reaching a new high as the expansion of EV infrastructure continued to act as a catalyst for sales. As green shoots emerge, investors could tactically opt to get exposure to auto stocks if they keep in mind the dynamic supply-side disruptions currently taking place.
Technical outlook
After two weeks of sharp decline, the Nifty50 index closed slightly positive and is up 0.89% compared to the previous week. However, the index continues to trade under pressure and is likely to do so as long as it stays below 18,000, which is in line with the immediate resistance level. A break below 17,600 could re-test the critical support level at 17,350. We will maintain a bearish bias in the markets, at least for a short time, until the immediate resistance level is not broken.
Expectations of the week
With a flood of key economic data and the current earnings season, this week’s volatility is expected to continue into the following week. Inflation numbers for the US and China will affect global markets. With inflation remaining an overhang, even D-Street investors will be closely monitoring the domestic inflation rate, which was previously in the RBI’s comfort zone. However, an inflation rate that is consistently above its tolerance level, combined with a rate hike calendar adopted by the FED at its meeting this week, could induce the RBI to adopt a restrictive stance and start tightening monetary policy earlier than expected. Nifty50 ended the week at 17,829.20, up 0.89%.
I wish everyone a happy and prosperous Diwali!
