By Anand James
As the dust settles on the global bank crisis, Fed and BOE rate decisions will obviously hog the limelight, with Fed still expected to raise rates by 25bps this week. There is a 62% chance for the same, down from 81.9% a month ago, but up from 59.8% a week back. Looking beyond the week, April is expected to come with positivity, and earnings will give enough distractions for the market to look away from broad based worries, and instead focus on stock specific cues for a change. Look for value buying in the latter period of March.
Though the mid and small cap stocks suffered deep cuts during the week, recovery was sighted towards the end of the week, with more stocks pushing above the key 200 DMA. We now have 50% of the mid cap index stocks above the key benchmark as opposed to 46% above the same at the start of the week. Moreover, 32% of the mid cap stocks also rose above Monday’s high, suggesting that risk appetite is returning. Certainly this is not an outright signal towards a broad based buying, but does invite selective buying rather than staying away fearing an apocalypse.
With these in background, the morning star finish on Friday encourages us to stick with the 17,470 trajectory that we had embarked on, late last week, anticipating a relief rally. Alternatively, stalling in the 17,100-185 band could signal that the recovery attempt is short lived, but we would wait for a break of 16,800, to play a 16,200-15,500 plunge. This is not our favoured view for now though, but we do need a break beyond 17,224 to be more confident.
(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)