Stay away from volatile equity markets

At a time when the Indian equity market was grappling with geo-political and global crisis, especially US-China trade war, the news of the Reserve Bank of India (RBI) governor resigning has made things look ugly for our markets. While the RBI governor cited personal reasons to step down, the market will react negative to the news, as the timing of the RBI governor resigning clearly deepens the rift between the central bank and the government. The news of RBI governor resigning will be a big dampener for the market which will see the market opening in red on Tuesday.

Trade wars, elections will keep market jittery

Investors should stay away from the market till the dust settles in the domestic market. With sentiments going from bad to worse, it's not going to be a runaway market and retail investors will get ample time to accumulate good quality stocks. The market movement will also be dictated by the outcome of state elections, and any result disappointing the street or cheering the street will move the market on either side. If the results disappoint we may see an index correction of 3-5%. The market may have partially discounted the state election outcome.

The ongoing tension due to trade wars will also keep our markets jittery. The US and the China coming to midway solution of cooling down the trade war situation between both the countries will have a positive bearing across the globe with both US and China having agreed to stop imposing any further tariffs for the next 90 days. However, the market is still uncomfortable following the arrest of Huawei technologies CFO, China's largest telecom company by Canada on behalf of US will further deteriorate relations between US and China. Going ahead, in the near term the roller coaster ride to continue, the trade war between US & China and election outcome will have a huge bearing on the Indian market.

Oil cooling off the silver lining

Meanwhile, the OPEC meeting that ended over the weekend has seen the OPEC countries and countries outside OPEC to cut the oil output to have some stability to the falling oil prices. This move by these nations clearly shows that the supply in oil is higher than the demand and thus the risk of high oil prices or the oil price going back to $85-90 seems low on back of global slowdown in growth. Muted oil demand shall keep oil price low and that shall go well for oil importing country like India. Rising oil prices has huge impact on India's twin deficit and on the Indian rupee. Low oil prices will certainly improve sentiments in the market. Meanwhile fall in oil price and appreciating rupee will help our markets from any major damage during bad election results. With capacity utilisation crossing 70%, we may slowly see a pick-up in investment which will augur well for the Indian market.

The writer is head, privilege client group, Reliance Securities