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Geopolitical volatility to provide re-entry opportunity


Equity benchmark pared initial gains tracking geopolitical worries. Nifty settled the week at 24100, up 1.2%. Broader market relatively outperformed as Midcap gained 2.6%. Meanwhile, beaten down IT index staged a strong recovery post Q4 earnings, up 7% for the week
What to expect: In the upcoming truncated week, we expect volatility to remain elevated tracking geopolitical worries wherein Nifty is likely to consolidate in the broader range of 24500-23300 zone. We believe, over past two months index has formed a durable bottom. Hence, we believe, ongoing breather would help index to form higher base by cooling off the overbought condition after 12% rally seen over past three weeks and make market healthy
For the coming week, strong support is placed at 23300-23000 zone. Meanwhile, on the upside, 24500 would continue to act as immediate resistance
War History: Over past three decades there have been three major instances of escalations due to armed conflicts in India (i.e. Kargil War, 26/11, Pulwama attack). On each occasion it formed major bottom once anxiety around the event settled down and garnered decent return in next 3 months. Even in current scenario, possibility of knee-jerk reaction on escalation of geopolitical worries cannot be ruled out. However, historical evidences suggest that market will eventually stabilise. Hence, we advise not to panic but rather build quality portfolios from medium to long term perspective amid ongoing earning season
Key monitorable which would act as tailwind:
- Bilateral Trade Agreement between India and US
- Continuation of FII's inflow
- Further weakness in US Dollar index post breakdown from two years consolidation
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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