InvestorQ : What is your broad market view for 07 January 2021? Is the correction here to stay or it is just a one-day affair?
Arti Chavan made post

What is your broad market view for 07 January 2021? Is the correction here to stay or it is just a one-day affair?

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diksha shah answered.
1 month ago
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The correction finally came on Wednesday after continuous 10 days of rally in which the Nifty and Sensex scaled new highs. The markets fell sharply on Wednesday as there was apprehension that the Democrats winning both the Georgia seats will give them full control of the Senate. Markets were expecting reversal of tax cuts announced by Trump.

The sell-off was seen almost across the board, especially in stocks that had rallied sharply in last couple of months. While banks were the obvious target, IT stocks bore the brunt as the reversal of tax cuts could hit them the most. Also, most IT stocks had rallied to new highs with Infosys even crossing $80 billion in market cap.

After a weeks and months of continuous buying, the FPI were net sellers to the tune of Rs.484 crore while DFIs sold Rs.490 crore on Wednesday. However, there was no panic selling by either the active or the passive global managers. The small amount of selling in cash market indicates that it may be more of F&O action and that is understandable.

On Wednesday, Dow and NASDAQ were weak in trade on fears of tax cut rollback by the Democrats after they got full majority in the Senate. Meanwhile, UK bounced back by a surprising 3.5% on hopes that the embargo by EU may be lifted soon. SGX Nifty has been trading nearly 70 bps higher in early trades and it looks like losses may be recovered.

It is hard to say if the correction will really sustain, but you must keep in mind that the VIX is still in the range of 20-21 and that is hardly a worrying scenario. Secondly, the mid cap and small cap index were still positive even on Wednesday implying that the correction is not broad based. At best, this could be a buy on dips market, not a market to sell.

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