There has been a truncated rally in a few stocks in the Nifty index, which is keeping the index up. NSE’s Volatility Index (India VIX), or the fear gauge, rose by 10% in the last one week to 13.89. The level is far lower than the highs seen in February. Despite the jitters in the broader equity markets, according to the chart given below, in the recent past, the yardstick has remained calm. Edelweiss Broking Ltd. in the last week reports, “This might indicate complacency as India VIX is based on Nifty, which has largely withstood the selling pressure on the back of a few major bluechip outliers”.

In common, strong domestic fund inflows are keeping sentiment upbeat and complacency high. Dhananjay Sinha, head of research, economist and strategist, Emkay Global Financial Services said, “At a broader level, there has been a high level of volatility in India. However, there has been a truncated rally in a few stocks in the Nifty index, which is keeping the index up,”.

The top five stocks in the Nifty 50 index is which have admired the most includes Reliance Industries Ltd, Tata Consultancy Services Ltd, Bajaj Finance Ltd, Sun Pharmaceuticals Industries Ltd and Mahindra and Mahindra Ltd in this fiscal year. Till now, the Nifty 50 index has increased as much as 14.6%. In comparison, the Nifty mid-cap 100 index has risen up 4.4%, while the Nifty small-cap 100 index has fallen by 3.5%.

Sinha added that the uncertainty will keep sentiments cautious. For investors, it is important to know that they will have to live with high volatility in broader markets.

Vinod Karki, vice-president, strategy, ICICI Securities Ltd said, “There were huge downgrades in FY16, but the pace of downgrades has decreased since then”.

There is hope that the earnings upgrade cycle will happen sometime soon.

According to Karki, analysts are taking awareness of the pressure on margins due to rising input costs, but any underestimation on the impact on earnings could lead to more downfalls, going ahead.

This means that the quarterly numbers in the next few quarters will be very crucial. Karki said, “If earnings disappoint, then that will be reflected in the VIX”.

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