Market consolidation to continue amid election uncertainty in a truncated week

Pedestrians watch as a digital broadcast presents share price information on the facade of the Bombay Stock Exchange (BSE) building in Mumbai. In a week shortened to three days and a day lost to second-round polling in the seven-phase general election 2019, the market is expected to trade sideways for another week. PUNIT PARANJPE/AFP/Getty Images

The market is likely to remain range-bound in a truncated week with holidays on account of Mahavir Jayanti and Good Friday on April 17 and April 19 respectively. This will be followed by the second round of polling in the seven-phase general election on April 18. Traders expect the National Stock Exchange (NSE) Nifty and Bombay Stock Exchange (Nifty) to hold on to vital support levels after coming off record highs in the previous weeks. Nifty's vital 11,550-point support has held on to form a triple bottom signalling market strength and the possibility of the markets resuming the bullish rally once the electoral uncertainty lifts following government formation after the results on May 23.

With only three sessions of trade possible, the traders will be cautious not to enter new positions except in individual stocks that benefit from the news. Along with individual stock picks, experts advise investors to watch for dips to build a portfolio of shares they already hold.

Last week was when the bulls ran out of steam for the first time after seven consecutive weeks of higher highs on the weekly chart. Bombay Stock Exchange's (BSE) 30-share benchmark Sensex closed last week is at 38,767 points, up 160 or 0.41 per cent on the final day's session. After closing the previous week at 38,924 points, Sensex hit a high of 39,037 last week before settling at 39,730 points on the final day. National Stock Exchange (NSE) benchmark Nifty closed at 11,643 points last week, an increase of 46.75 or 0.40 per cent. It had closed the previous week at 11,559 points after hitting a record high of 11,761. The fact that the supports have held on repeatedly convinces them that the bears are still far away and bulls could return after the election-induced uncertainty.

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"Nifty is showing strong resilience by consolidating in the tight range of mere 200 points after the rally of nearly 1,200 points. Also, muted reactions to bad news like monsoon forecast and recent negative developments related to FMPs of mutual funds suggest the absence of large selling in the market," Moneycontrol quoted Shailendra Kumar of Narnolia Financial Advisors as saying. He suggests the dips are buying opportunities as the market is showing resilience.

Last week saw a strong inflow of funds from foreign institutional investors (FII) who were net buyers of Rs 4,000 crore worth of shares, taking the total April tally to above Rs 14,000 crore, and Rs 62,000 crore since February against Rs 15,000 crore withdrawal by domestic institutional investors (DII).

The Q4 FY19 earnings season kicked off last week with the better than expected showing by IT giants TCS and Infosys. It will continue to unfold with 38 major firms announcing the results. Among the major companies announcing the results will be Reliance Industries, Wipro, HDFC Bank, RBL Bank, Mindtree, and ICICI Lombard General Insurance. Market observers think all Nifty 50 companies will report strong earnings driven largely by banks.

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