Newspaper Summary 050426

 

While you bottom-fish stocks...

By Aarati Krishnan

After 18 months of going nowhere, Indian stock indices have tumbled another 14-15 per cent in the last two months on US-Iran hostilities. The Nifty50 PE (price-earnings multiple) is now below its 10-year average, while several stocks have corrected 40-50 per cent from highs. All this may nudge you to bargain-hunt for stocks. Here are five factors to keep in mind while you bottom-fish:

1. STRUCTURAL RESET

It is in the nature of stock markets to over-react. But when a bull phase ends and a bear phase unfolds, it is usually because corporate or economic fundamentals are being reset in some way. Understanding what is being reset is important to making the right choices when looking to bottom-fish.

Today, three structural changes are underway, which are likely to impact Indian companies:

• Persistent Supply Shocks: It appears unlikely that the supply shock to crude oil and its derivatives will recede for several months. Sticking to companies and sectors which have wide margins and pricing power to pass on input cost spikes is advised, while giving a wide berth to companies with thin margins.
• Returning Inflation: Returning inflation from elevated crude oil and commodity prices will likely force the Monetary Policy Committee (MPC) to switch from rate cuts to rate hikes over the next year. Higher interest rates make an automatic case for lower equity valuations. Investors need to flip their mindset and look for growth that comes with modest valuation.
• AI Adoption: AI adoption appears to be here to stay and will likely benefit some sectors while upending others. Investors should understand whether a sector or company is a net gainer or loser from AI before investing.

2. DON’T CHASE SMALL-/MICRO-CAPS

When markets bottom out after a sharp fall, small-cap and mid-cap stocks usually suffer more brutal reverses than large-caps. They also slip into a valuation discount to large-caps. This happens because small-sized companies take a sharper earnings hit from external risks, are owned more by retail investors who may panic, and suffer from vanishing liquidity during corrections.

In the ongoing correction from September 2024, while Nifty50 and Nifty Midcap 150 are down about 15 per cent from highs, the Midcap 150 and Smallcap 250 indices still trade at a stiff premium to the Nifty50. This suggests the bottoming out process for these segments may not be over yet. Stick to large companies and sector leaders rather than small-caps and also-rans.

3. SKIP WHAT FELL THE MOST

Many investors believe that what fell the most will rise the most, but this is a sure way to decimate your wealth. When markets revive after a structural reset, the leaders of the new bull market are often completely different from those in the previous one. For example, after the 2008 capex bust, infrastructure and real estate stocks took years to recover, while IT and pharma led the new bull phase. Stay clear of sectors or themes that have tanked much more sharply than the indices since September 2024. Bargain-hunt in sectors which have underperformed for the last five years.

4. DON’T GO ALL IN

New bull markets take shape only after investors swing from optimism to despondency to outright panic. While optimism has turned to gloom, a few market indicators are yet to signal a capitulation phase. India VIX remains at moderate 25 levels, compared to 70-80 during previous panic phases. Because it is hard to predict when the corrective phase will end, don’t deploy all your cash at once. Stagger your entry and hold some dry powder to participate in future falls.

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MIND IT

• Avoid bottom-fishing in small and micro caps.
• Don’t buy merely because a stock has crashed.
• Stagger your entry; don’t deploy all at once.

OFS switch erodes ₹95,000 crore of investor wealth

AFTER EFFECT. Over 60% of fully offer-for-sale issues in the last five years are now trading below their listing-day price

By Dhuraivel Gunasekaran and Kumar Shankar Roy

“By shamelessly merchandising birdless bushes, promoters have in recent years moved billions of dollars from the pockets of the public to their own purses...” Warren Buffett wrote those lines in his annual letter to Berkshire Hathaway shareholders amid the 2001 dot-com saga.

He could almost have been describing a large part of India’s IPO market over the last five calendar years (2021-2026) when price-to-earnings multiples above 100x became common, reflecting an insatiable appetite for new issues, with share sellers laughing all their way to the bank.

In theory, capitalism is presented as a system in which public markets help growing businesses raise fresh capital, expand and create wealth that is shared between founders and new investors. In practice, a surprising number of Indian IPOs have resembled something far less noble. They became a sophisticated wealth-transfer mechanism in which retail investors, armed with ₹15,000 applications and dreams of multi-baggers in the long run, handed over hard cash so that promoters, private equity funds and early backers could walk away with real money, leaving investors holding shares that have since sunk in the market downturn.

COSTLY WAVE

The biggest clue lies in the structure of these issues itself. Over the last five years, India saw around 300 IPOs that had an Offer-for-Sale (OFS) component. Tellingly, 68 of these were fully OFS issues. This means not a single rupee of the ₹1.76 lakh crore raised went into expanding capacities, funding growth, reducing debt or building a business. The only cold objective was monetisation.

Today, the numbers are not flattering. These 68 fully OFS IPOs debuted with a combined market capitalisation of about ₹16.88 lakh crore on listing day (closing). By April 2, that figure had fallen to roughly ₹15.93 lakh crore, a destruction of around ₹95,000 crore of wealth. Here, one should not just look at the number, but also the time value of money since many years have passed for some of these IPOs and also the opportunity cost had they invested it elsewhere including a simple bank FD.

On average, each such company has seen about ₹1,400 crore wiped out from its listing-day value. More importantly, over 61 per cent, or 42 of the 68, are now trading below their listing-day market capitalisation. The listing-day pop, the euphoric anchor-book headlines and the breathless television countdowns proved to be short-lived excitement rather than enduring value.

This is perhaps the clearest evidence that many of these issues were sold at rich valuations. The average P/E of these 68 companies was 57x even though Nifty50 in the last 5 years has traded in the 20-30x band. In IPO of firms such as Vedant Fashions, C.E. Info Systems, and Campus Activewear, valuations exceeded 100x PE — meaning investors paid over ₹100 for every ₹1 of profit.

WIPEOUT

Among the more striking cases is AGS Transact Technologies where the current market capitalisation is lower than the funds raised by selling shareholders through OFS!. The ongoing market correction has begun to expose such IPO excesses. Expensive stories are being repriced. Businesses with weak fundamentals and no real runway are falling hardest.

Yet, this is not a case for avoiding IPOs with 100 per cent OFS altogether. OFS issues including by Mankind Pharma, Anand Rathi Wealth, ICICI Prudential AMC and KFin Technologies are examples of strong businesses that listed at reasonable valuations.

Selling shares via the OFS route at expensive valuations, by itself, is not a crime. Promoters and financial investors have every right to sell. But investors should ask a simple question: If the promoters, private equity funds and early backers are all choosing this moment to cash out, why should the public be rushing to buy in?.

There are lessons in all of this. Investment bankers did what they are paid to do — maximise price and their fees. As Buffett said in the 2001 letter, fee-hungry investment bankers acted as eager postmen for such deals. Promoters and financial backers did what they are supposed to do — sell when valuations are generous. The only group that forgot to do its job was the investor.

Smart strategies in bond investing

DEBT-WISE. Different fixed income approaches suit different goals, risks and market conditions

By Dhuraivel Gunasekaran

With the US-Israel-Iran conflict rattling markets, oil prices rising and risk assets under pressure, fixed income tends to regain appeal. In India, it is still often viewed as a conservative space dominated by bank fixed deposits and small savings schemes. But access is widening through RBI Retail Direct and online bond platforms. Fixed income today is not just about earning interest; returns also depend on how portfolios are positioned across interest-rate cycles and credit risk. Here, we explain the main strategies and what retail investors can take away from them.

ACCRUAL STRATEGY

The accrual strategy is essentially a buy-and-hold approach in bonds. Investors hold securities until maturity to earn steady interest income, much like a bank fixed deposit. It suits those seeking predictable income and capital preservation.

Beyond bank FDs, investors can consider corporate fixed deposits and non-convertible debentures (NCDs) issued by public and private institutions. Returns on these vary with the issuer’s credit rating. For instance, a five-year NCD from AAA-rated Power Finance Corporation offered a coupon of 6.85 per cent per annum, while Adani Enterprises, rated AA-, offered around 8.9 per cent for a similar tenure over the last five months.

Government securities are another key option. Issued by the RBI, these include central government bonds, state development loans and treasury bills, and carry minimal default risk. Retail investors can access them through RBI Retail Direct as well as online bond platforms.

Credit quality, however, remains critical in corporate bonds. Investors should generally prefer higher-rated instruments such as AAA and AA+ to reduce default risk. As bonds are usually held to maturity, this strategy has limited sensitivity to interim rate movements and offers relatively predictable cash flows. But it is not risk-free; rising rates can lock investors into lower yields, and exiting before maturity may still be difficult or costly. Within debt mutual funds, overnight, liquid and money market funds are generally closer to an accrual-style approach.

DURATION STRATEGY

The duration strategy involves positioning bond portfolios based on the expected direction of interest rates. As bond prices and yields move inversely, investors prefer longer-duration bonds when rates are expected to fall, as these tend to gain more in price. Conversely, when rates are likely to rise, shorter-duration bonds help limit losses.

Unlike accrual investing, this approach relies more on active buying and selling and close tracking of macroeconomic indicators, yield movements and timing decisions. For this reason, it is largely used by institutional investors such as mutual funds. Retail participation remains limited, as assessing yields and timing trades can be difficult without sufficient expertise. This strategy can deliver capital gains when rates fall, but it also carries higher mark-to-market risk.

Within debt mutual funds, gilt funds, long duration funds and medium duration funds actively employ duration strategies. In 2024, many such funds extended portfolio maturity on expectations that rates had peaked, helping deliver around 10 per cent one-year returns as of October 31, 2024.

TARGET MATURITY

Target maturity investing involves choosing bonds or funds that mature around a specific year aligned with an investor’s goal. Instead of actively trading, the portfolio is held until maturity, allowing investors to lock in yields at the time of investment. As the maturity date approaches, interest rate risk reduces and returns become more predictable.

Many investors use target maturity funds (TMFs), which are ETFs or index funds that passively track a basket of bonds with similar maturity profiles. This approach offers visibility on potential returns, lower volatility over time, and simplicity. According to ACEMF data, there are over 100 TMFs in the market. For instance, the Bharat Bond ETF maturing in April 2031 offers a yield to maturity of around 7.5 per cent as of April 2, 2026.

LADDERING STRATEGY

A laddering strategy involves spreading investments across bonds with different maturity periods instead of concentrating on a single tenure. For example, an investor may hold bonds maturing in 1, 3, 5, 7, 10, and 20 years. As each bond matures, the proceeds are reinvested at prevailing interest rates.

This approach reduces the need to time interest rate movements. By investing and reinvesting at different points, it helps smooth out the impact of rate changes over time and provides periodic liquidity. This is commonly seen in practice in corporate bond funds and banking & PSU funds, where investments are spread across maturity buckets.

BARBELL STRATEGY

The barbell strategy involves investing at two ends of the maturity spectrum, in short-term and long-term bonds, while largely avoiding the middle segment. Short-term instruments provide liquidity and flexibility, while long-term bonds offer higher yields and potential for capital gains if rates fall.

This approach is often used when the interest rate outlook is uncertain or when the yield curve is steep. It helps balance stability and return potential. In late 2025, Axis Mutual Fund highlighted the use of a barbell approach in its debt portfolios.

TAKEAWAYS

Retail investors do not need to imitate institutional bond strategies, but they do need to avoid random product selection. Use accrual and target maturity products when income visibility matters. Use duration funds only when you understand interest-rate risk and can tolerate mark-to-market swings. Use laddering when you want staggered liquidity and less interest-rate timing risk. In fixed income, the biggest mistake is reaching for extra yield without understanding the trade-off in credit risk, duration risk or liquidity.

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KEY RULES

• Higher yields usually mean higher risk.
• Longer maturity means bigger interest-rate swings.
• Match bond maturity with financial goals.

Money managers hunker down as war rages

MIXED SIGNALS. Five weeks of war in Iran have wiped trillions off global stocks, pushed oil past $100 and kept it there, and repriced wagers on interest rates and inflation.

By Bloomberg

This week was supposed to bring clarity on when, and how, all that disruption would end. Investors are still waiting.

US President Donald Trump’s primetime address on Wednesday signalled more attacks and imminent peace simultaneously, offered no framework for reopening the Strait of Hormuz and effectively told allies to figure it out themselves. By Thursday morning, stocks had plunged — then recovered almost entirely on a single headline about Iran drafting a shipping protocol with Oman. Not a ceasefire. Not a reopening. A monitoring framework. That a market can swing 1.5 per cent on that little tells you where investor psychology stands.

On Tuesday, the S&P 500 had surged 2.9 per cent for its best day since May on hopes the conflict was winding down. That arc — relief, disappointment, panic, relief — is the pattern that has defined this war for markets. The benchmark still ended the week up more than 3 per cent, its best showing since November. But the rally was built on headlines, not resolution.

Brent crude, which has gained roughly 50 per cent since the conflict began — the biggest five-week surge on record — is now trading in a range that forces money managers to reconsider every part of a portfolio. On Friday, the International Energy Agency warned that April will be far worse for oil supply than March.

‘NO CLEAR END GAME’

All that is the backdrop against which money managers are now making real decisions. David Royal, chief financial and investment officer at Minneapolis-based Thrivent with $212 billion in assets, watched the speech from a New York hotel room expecting a defining moment.

“There’s not a clear end game for market disruption,” he said. He’s been quietly moderating growth-stock exposure in favour of value without panicking. “The biggest risk is doing something emotional when uncertainty is at its maximum”.

Others aren’t waiting around. Florian Ielpo, head of macro at Lombard Odier Investment Managers, has already scaled his equity allocation to its lowest since the 2022 energy crisis. “It is better to be safe than invested,” he said. “Sometimes there is a shock and you need to be disinvested”.

He compared the moment to turbulence on a flight — strap in and wait it out — but said oil between $100 and $120 creates pressure that becomes overwhelming if it persists. Ielpo is now publishing daily notes in response to client demand and says outlook calls are drawing roughly double the usual attendance. “There’s a strong need for clarity,” he said. “You hear the word ‘uncertain’ a lot”.

SECTOR OUTLOOKS

David Lebovitz at JPMorgan Asset Management has a bear case of oil averaging $125 for the full year, dragging growth by a full percentage point. His high-conviction idea: own US tech, which he sees as more insulated from geopolitical disruption than almost anything else. He’s short Europe.

In debt investing, the picture is more measured even if private market risks lurk under the surface. Matt Wrzesniewsky, head of fixed income client portfolio management at Vanguard Group, said credit markets have repriced but not broken down — a distinction he attributes to the economy’s underlying strength. Yields remain high enough to keep attracting buyers, and he sees the best value in medium-term investment-grade corporate bonds. “For those considering a move to cash, we would urge caution,” he said.

All of it is playing out against an economy that, by most measures, is still growing. Retail sales are strong, manufacturing is expanding, and consumption is holding up. Thrivent’s Royal notes the US uses a fraction of the oil per unit of GDP it did in the 1970s and is far more energy independent — the structural case for resilience is real.

But rising gas prices are eroding the tailwind from tax refunds, and that pain skews toward consumers who can least absorb it. “This would exacerbate the K-shaped economy,” he said. “There is a growing disconnect between the market rally and the consumer reality”.

BJP releases white paper on ‘financial crisis’ in TN

The Tamil Nadu BJP’s Professional Cell has released a white paper with details of what it calls a ‘financial crisis’ in Tamil Nadu under the incumbent DMK government, highlighting the State’s increasing revenue deficit and debt.

OUTSTANDING DEBT

The report stated that Tamil Nadu’s revenue deficit of ₹69,129 crore as of FY26 stood at 1.94 per cent of Gross State Domestic Product (GSDP) and that the State’s outstanding debt had reached ₹8.34 lakh crore by March 2024, projected to hit ₹10.71 lakh crore by March 2027.

It added that interest payments have surged from ₹36,215 crore in FY23 to ₹76,451 crore in FY27. The government has also incurred hidden liabilities through PSUs such as TANGEDCO, which obscure the fiscal picture, the report said.

Titled ‘Tamil Nadu Government Financial Crisis,’ the white paper was released here on Saturday at a press conference by the party’s State in-charge for the 2026 Tamil Nadu Assembly election and Union Commerce Minister Piyush Goyal, who was joined by other senior BJP leaders from the State.

Speaking at the press conference, Goyal said that the DMK government and the CM’s family are using the State as an ATM instead of addressing the financial issues in the State.

“The Centre has given Tamil Nadu over ₹80,000 crore to the State in GST collections. They have to answer to the people where all this money has gone. This is one of the most irresponsible State governments in the country,” he said.

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Our Bureau Chennai

‘Phygital’ Economy to drive India’s growth, says MeitY Secretary

A good blend of digital and physical infrastructure with skilling is essential to achieve India’s target to become the third largest economy by 2030, said S Krishnan, Secretary, Ministry of Electronics and Information Technology (MeitY).

DIGITAL ECONOMY PROJECTIONS

Citing a study by ICRIER, Krishnan highlighted the accelerated growth of the digital economy, which is expected to reach 20 per cent of India’s total economy by 2030, up from 12 per cent in 2021-22.

He noted that the push towards electronics component manufacturing resulted in exports touching almost $40 billion in FY25. Furthermore, there is potential for the Electronics Manufacturing and IT/IES market to hit $1 trillion by 2030.

NEW FACILITIES AND PARTNERSHIPS

The MeitY Secretary made these remarks while inaugurating new facilities at SASTRA, which include:

• Electronics Manufacturing
• Firmware Development
• E-Mobility
• Semiconductor Testing and Packaging Assembly Line.

As part of this initiative, Bajaj Auto has established the Bajaj Engineering Skill Training Center to focus on capacity building in these technical areas. Additionally, Tata Electronics and Caliber Interconnects signed Memorandums of Understanding (MoUs) with SASTRA to offer Electronic Manufacturing programmes that include a strong industry internship module.

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Our Bureau Chennai

bl interview: ‘While credit headwinds will exist, there is no systemic risk at this point’

THEIR VIEW. Ramki Muthukrishnan of S&P Ratings dissects the mechanics of the over $2.5-trillion US private credit industry and explains why the credit markets are not heading for a 2007-08 redux.

By Hari Viswanath

The war in the Gulf is a battle for the markets too, as high crude oil prices and supply disruptions have turned the tables upside down. But unfortunate as it may be, this isn’t the only battle markets are fighting. Even prior to the start of the war, there were concerns due to AI disruption, a slowing US economy and an elephant in the room called US private credit. The recent tremors in US private credit, in the view of some market veterans, are somewhat reminiscent of what happened in the early part of 2007. Needless to say, when credit markets shake, equity markets tremble. Indian markets, too, bore the brunt of the global financial crisis. So, should investors here worry? Are the concerns exaggerated or justified?

To get answers, bl.portfolio caught up with Ramki Muthukrishnan, Managing Director at S&P Global Ratings, to decode what is happening in US private credit and what risks investors must watch out for.

Interview Highlights

We have been hearing a lot about private credit for the last six or seven months. It first made headlines when Tricolour Holdings and First Brands defaulted in September 2025. Now, we are hearing extreme views—some experts from the US say this is 2007-08 credit crisis redux, while others say they are incomparable. So, for us in India to understand what is happening, can you begin by simplifying to us what exactly is private credit in the US financial system?

Sure. Put simply, private credit is any type of lending where a bank is completely disintermediated. It is non-bank lending to private entities—that is what it was in its primary form: direct lending. Of course, today, it has become larger, little more complex and involved. You have a whole lot of various funds or vehicles that are available to investors who can access the asset class, but in its primary form, direct lending was the primary strategy for private credit. Other strategies include credit opportunity funds, distressed lending, and infrastructure real estate.

It certainly has grown significantly over the last 15 years. Post Global Financial Crisis (GFC), the size of private credit was about $200-250 billion; today, estimates are that it is north of $2.5 trillion. The challenge is it is an opaque market and hence difficult to size precisely.

What exactly has driven this massive growth from $250 billion to over $2.5 trillion?

There are several things. First, it’s the change in the regulatory environment after the GFC, such as leveraged lending inter-agency guidelines, which deterred banks from lending directly to leveraged middle-market companies. As banks vacated this spot, asset managers moved in. The second driver was the low rate of interest following the GFC, which led institutional investors to look beyond traditional 60-40 allocations in pursuit of better yields.

How does it compete with traditional banking or syndicated loans?

Private credit has competed predominantly with the broadly syndicated loan (BSL) market. There is an attraction in terms of speed of execution because there are very few parties involved. It also offers efficiencies like ‘unitranche’ lending, where a borrower deals with one lender or group instead of separate agreements for each debt type. What really brought it to center stage was the predictability it offered in 2022 when syndicated loan markets nearly froze following the invasion of Ukraine.

You mentioned that banks are not part of this lending, but they haven’t disappeared. How are they involved now?

While they retracted from making direct loans, they haven't exited the ecosystem. Banks are now lending to private credit lenders. FDIC-insured banks reported about $1.4 trillion in loans to non-banking financial institutions (NBFIs) in 2025, which is about 11 per cent of their total loans.

Can you explain the business model? We hear about Business Development Companies (BDCs). What are they?

BDCs were created in 1980 to provide capital to small- and middle-market entities. They are required to invest about 70 per cent of their capital in private companies or small public companies. They must distribute 90 per cent of their income to shareholders and are not taxed. There are three types: Publicly-traded BDCs (most liquid), Perpetual non-traded BDCs (quarterly redemptions capped at 5% of NAV), and Private non-traded BDCs (limited liquidity, 5-7 year life).

Let’s talk about redemptions. A BDC managed by Blue Owl Capital recently received 41 per cent redemption requests but is gating it at 5 per cent. Is this a crisis?

Scrutiny stemmed from incorrectly associating defaults like First Brand and Tricolor with direct lending risks—they were actually financed by other markets. Regarding capping redemptions, investors understand there is a 5 per cent limitation on withdrawal; it's not "gating" in a crisis sense. The manager cannot liquidate illiquid assets at a substantial haircut to the detriment of other investors. Our analysis shows there is sufficient headroom to raise added liquidity.

How much is lent to the software sector, where fears are spiking due to AI?

Private equity and credit both like software for its predictable, non-cyclical cash flows. About 20 per cent of our credit estimate universe—around $150-175 billion—is in software. While AI disruption is real, it's nuanced. Companies deeply embedded in workflows are less at risk than those in recruitment or business intelligence. Importantly, these loans have an LTV of 30-35 per cent, meaning there is 65 per cent equity sitting under them.

What are the current default rates?

Based on our performance estimates, the trailing 12-month default rate is 4.45 per cent. This includes traditional defaults and "soft" defaults like cash-pay loans converting to payment-in-kind (PIK). This is higher than the under 4 per cent rate seen in the speculative-grade US public market.

Finally, why is this not 2008 redux?

In direct lending, loans go to companies with demonstrated revenue and cash flows, and GPs act as buy-and-hold investors. The 2007-08 crisis was driven by residential home loans to unqualified borrowers, with incentives misaligned due to securitisation. Bank lending to private credit is limited and over-collateralised. While credit headwinds exist, we do not see evidence of broader spillage to trigger a systemic risk now.

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PROFILE Ramki Muthukrishnan is a Managing Director and heads the Non-Banking Finance team at S&P Ratings. He has close to 25 years of experience in corporate, CLOs, and RMBS ratings.

Short-lived bounce

US MARKET OUTLOOK. The rise last week can just be a correction within the broad down-move

By Gurumurthy K

The Dow Jones Industrial Average, S&P 500 and the NASDAQ Composite witnessed strong bounce-back last week. This has provided some relief after having been beaten down for five consecutive weeks. The Dow Jones rose 2.96 per cent, while the S&P 500 and the NASDAQ Composite index were up 3.36 per cent and 4.44 per cent respectively. Whether this bounce will sustain or if it is just a corrective rise before the next leg of a fall remains the central question.

DOW JONES (46,504.67)

Near-term resistances for the Dow are at 46,700 and 47,050. If the index manages to breach 47,050 decisively, it can gain further strength, potentially taking it up to 48,000-48,300 in the next few weeks. The price action thereafter will be very crucial. Failure to rise past 48,300 can drag the index back down to 45,000, and a drop below 44,900 could see it fall further to 44,000. A strong follow-through rise above 48,300 is essential to bring back bullishness and target 50,000 and higher.

S&P 500 (6,582.69)

The rise back above 6,470 has reduced the immediate danger of a fall to 6,200, though the threat is not completely negated. The region between 6,470 and 6,440 will serve as good immediate support. Resistance is currently at 6,645; a break above this could take the S&P 500 to 6,750 or even 6,800. A strong rise above 6,800 is needed to turn the outlook bullish again, while any reversal from the 6,750-6,800 region will keep the bearish pressure intact.

NASDAQ COMPOSITE (21,879.18)

Key resistances in the 22,000-22,150 region may cap the upside. A downward reversal from this zone could drag the index back to 21,000-20,900 and keep the broader downtrend intact. This would leave the downside open for levels like 20,500-20,300 or even 19,900-19,700 over the medium term. To avoid this deeper fall, the NASDAQ must see a sustained rise above 22,150.

DOLLAR INDEX (100)

The region between 99 and 98.50 is a strong support zone. A rise to 101-101.20 is still possible, and the index is likely to eventually breach 101.20, opening the doors for a rise to 103-104 over the medium term. If it fails to breach 101.20, it could stay within a broad trading range of 98.50-101.20, with a fall below 98.50 needed to turn the outlook negative.

TREASURY YIELDS

The US 10Yr Treasury Yield (4.31 per cent) fell last week, but support in the 4.28-4.25 per cent region is holding well. As long as the yield stays above 4.25 per cent, the bias remains positive, keeping the bullish view intact for a target of 4.6 per cent in the coming weeks. A decisive break above 4.45 per cent will further strengthen this momentum.

Make or break point

INDEX OUTLOOK. The next few weeks are critical for determining the trend for the rest of the year

By Gurumurthy K

Nifty 50, Sensex and the Nifty Bank index fell for the sixth consecutive week. The benchmark indices tested their crucial supports and have bounced back well from there. It is now critical if the indices are going to see a strong follow-through rise from here or not. The next few weeks are going to be very crucial for the Indian equity market. A strong recovery is needed to avoid a much steeper fall, and to get some relief. As such the price action in April will have the potential to determine the trend for the rest of the year.

FPIs SELL

The Foreign Portfolio Investors (FPIs) continued to sell Indian equities for the fifth consecutive week. There was a net outflow of about $2.5 billion from the equity segment last week. The FPIs have sold about $14.8 billion in the last five weeks.

NIFTY (22,713.10)

Short-term view: The crucial support at 22,200 held well last week. Nifty has to see a good follow-through rise from here and rise above 23,000 to get a breather. If it does, then a rise to 23,400-23,500 is possible. The upside can extend even to 23,800-23,900.

If this rise happens in the next few weeks, then there is also a possibility of seeing a sideways consolidation between 22,200 and 23,500/23,900. On the other hand, the failure to rise past 23,000 and a fall below 22,200 can increase the selling pressure. In that case, Nifty can fall to 21,800-21,700.

Medium-term view: As mentioned last week, 22,200-22,000 is a crucial support zone which is holding well now. A strong rise above 24,000 from here can turn the sentiment positive to revisit 26,000-26,400 on the upside again.

An eventual break above 26,400 will indicate a bullish breakout and boost the momentum. It will then clear the way for the rally to 28,000 and 30,000 in the long term. Nifty will come under danger only if it breaks below 22,000 first, and then declines below 21,700 eventually. If that happens, 21,200-21,000 can be seen on the downside.

NIFTY BANK (51,548.75)

Short-term view: Nifty Bank index fell beyond our expected level of 50,500. It touched a low of 49,954.85 and then has risen back from there. The immediate picture is unclear. Crucial support is at 49,900. Immediate resistance is 52,200. If the index manages to breach this hurdle this week, a rise to 53,500-54,000, the next important resistance zone, can be seen.

But, failure to rise above 52,200 from here can keep the index under pressure to break below 49,900. Such a break can drag the Nifty Bank index down to 48,500-48,300.

Medium-term view: Nifty Bank index must sustain above 49,900 and rise above 54,000 subsequently in order to regain the bullish momentum. If that happens, then the rise to 60,000 will come into the picture from a medium-term perspective. That will keep intact the long-term bullish view to see 64,000-65,000 and 68,000-69,000.

There is also a possibility of getting a sideways consolidation between 49,900 and 54,000. Nifty Bank index will come under more selling pressure if it breaks below 49,900 and declines lower than 48,300 subsequently. If that happens, there is a danger of seeing 46,800 or even 46,000 on the downside.

SENSEX (73,319.55)

Short-term view: Sensex broke below 72,250 but did not sustain. It has risen back well after making a low of 71,545.81. Immediate support is at 72,800. Below that, 72,000-71,500 is the next important support zone. If the Sensex manages to sustain above 72,800 itself, then a rise to 76,000-77,000 is possible in the coming weeks. Sensex will come under the danger of a deeper fall only if it breaks below 71,500.

Medium-term view: The region around 71,500 is a crucial support zone. Sensex has to sustain above this support and then rise above 77,500 subsequently to bring back the bullish view. It will then open the doors for a rally to 86,000 in the medium term and 90,000 and even 98,000 in the long term. Sensex will come under the danger of further fall if it breaks below 71,500. In that case, a fall to 69,000 can happen.

NIFTY MIDCAP 150 (19,805.50)

The support in the 19,200-19,000 region was tested last week as expected. This support zone has also held very well in line with our expectation. The index touched a low of 19,218 and then has bounced back from there. So, our overall view continues to remain intact from what we said last week.

As long as the index stays above 19,000, the bias will be positive. A rise to 21,000 can be seen in the short term. An eventual break above 21,000 can then clear the way for a rise to 22,800 in the coming months.

The Nifty Midcap 150 index has to breach 22,800 to gain bullish momentum. That in turn will bring back the chances of the rally to 26,000-26,500 in the medium term and 28,000-28,500 in the long term. The index has to break below 19,000 to negate the aforementioned bullish view. If that happens, 18,300-18,000 can be seen on the downside. Such fall will make it difficult for the index to rise back above 21,000 immediately.

NIFTY SMALLCAP 250 (14,724.45)

The Nifty Smallcap 250 index is managing to hold well above 14,000. That is in line with our broader bullish view. A rise to 16,000 is possible as long as the index stays above 14,000.

A break above 16,000 will then increase the potential for the index to target 22,500-23,000 in the long term. The bullish view will go wrong only if the index declines below 14,000. In that case, it can fall to 13,000.

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CRUCIAL SUPPORTS

• Nifty 50: 22,200, 22,000
• Sensex: 72,000, 71,500
• Nifty Bank: 49,900, 48,500