 |
| Moods of Friday |
Some people might argue that it was a day when the Mines and Minerals Development Regulation (MMDR) Bill caused mining companies to lose about 34,000 crore of market cap leading to negative sentiments and causing the market to fall.
In my opinion, what happened today in the Indian Stock markets, was what I term as 'Friday Stock Market' syndrome. There is no such theory or hypothesis, hence you might term this as pure fiction. However, it has been my observation over a period of time that the stock markets more often than not move slightly differently on Fridays compared to the rest of the week. It is as if, they have followed some kind of trend during the week and at the fag end of it, they are in preparation mode for the next week. Unfortunately I do not have the statistical numbers but it will be interesting to see Friday volatility indexes over the last few years. My sense is that Friday always tend to surprise on volatility. And most of it somehow tends to happen in the last 1 hour of trade. So, if the whole week has gone well Friday tends to reverse the mode especially in the last hour of trade. Similarly, if the week's been a disaster, Friday tends to provide that ray of hope for the next week. This is more so in times of listlessness and range-bound market movement.
However, in secular bull or bear runs, the behaviour is slightly different. Friday still continues to be volatile, however, trend reversals(which happen during range bound market movement) do not take place. Infact, Friday sums up the week's trading. So, in times of bull runs, markets would tend to end up in a flourish on Fridays. In times of bear runs, markets would continue that trend and infact perform their worst on Friday.
We are early into July 2011, My sense is that the recent market upmove may not last long. It is all building up towards the earnings season and the timing synchronizes well with global cues. Markets across the globe have moved up in the last 6-7 sessions or so. Just glancing through global economic news, I see more gloomy than cheerful news. The Fed's recent announcement that the pace of growth of the US economy has been slower than expected doesn't make it better. In my opinion QE3 will not happen, as it would weaken the dollar further and experts are yet to come to consensus on whether QE2 was a success at all. To have a significant upmove, we need sustainable triggers such as outperformance of a majority of companies during this results season, a good monsoon, fall in inflation and the corresponding drop in interest rates and so on. At this point, I'm not quite sure if we can get a good combination of the above factors. Hence, what we will get in the stock markets will be a couple of more months of listless range-bound trading. Of course things can change quickly. It's all about sentiments. I will be keeping my eyes open for those Infosys results. For Infy, this is a last chance. Another bad quarter and I am going to dump my holdings in this stock(Infy has the largest share in my stock portfolio and I have held it for several years now).
That's it for now. Next week I have a feeling we might end lower than where we are now. Though I am praying for otherwise, Infy results are likely to disappoint which will impact sentiments and pull the market down. I will be considering buying an Infy Put option on Monday and squaring it off post results.
Posts
