news updates

Retail vs Institutional Investors – How meme stocks, defying fundamentals, 5x my wealth in one sweet month!

Here’s a small video that summarizes the news updates this week!

Story Of The Week – How investors made 5x their wealth by investing in meme stocks!

This year was all about meme stocks and how they reshaped the institutional investors dominance in equity markets. Meme stocks are stocks experiencing movement driven by retail sentiments rather than fundamentals – for recent trends, follow Reddit’s channel (r/WallStreetBets). From Gameboy to AMC – the gurus are all over the place with the new rallies by retail investors.

What a journey it has been for AMC recently. Our new meme stock king has grown 500% in just one month with a high of 62.55 from a low of 4.43. Ticking high debt levels, AMC defies all fundamentals and market pundits are still trying to make on their short bets. Though Gameboy experienced a similar pick at the start of the year, AMC seemed to have made the most out of the opportunity. To capitalize on its high stock price, AMC recently sold 11.6 million shares of their stock this week.

Though the upticks in these meme stocks have attracted big investors attention, the major questions are still unanswered – 

Are hedge funds increasing the buzz to piggyback on retail investors?

Can we expect something similar in other equity markets outside the USA?

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Global Equity Market Update

US Markets remain volatile owing to increased speculations of inflation, improved employment report and possibility of reduced corporate taxes. But, what happened on meme stocks such as AMC, has left even big investor gurus on edge.

Commodity Market Update

Owing to OPEC meeting and post COVID demand speculations, Oil reached a two year high of 70.9 this week. Riding the pent-up demand ship, OPEC+ met this week to ensure that they won’t surge the production dramatically to meet this pent-up demand. Though what happens to the Iran deal could turn the tables, investors currently seem to weigh their decisions on increased pent-up demand.

Forex Update

In an attempt to cool the flaring Yuan, China increased the Forex Reserve Requirement to 7% this week. With most countries trying to increase the value of their currency, the Chinese move seems hard to wrap your head around. Let us break this down for you into Why and How!

Why? – When momentum in currency becomes extreme, many central banks take measures like China to curb the volatility.

How? – Increased RRR would help increase demand and reduce supply for USD and thus reduce the current momentum of the Chinese Yuan. Read more about this on our exclusive cover.

On the flip side, turkish Lira hit a record low on Wednesday triggered by the country’s call of reduction in interest rate. Inflation rate of 17% coupled with announcement of reduced interest rate owed to the major drop in turkish Lira

Indian Market Update

In the last week analysis we mentioned that we are bearish on the Market but we saw Nifty gave a little bullish move and was overall rangebound for the week ended 4th June’21.

This move has already eroded premium of the options which is good for option writers but not for the holders. And this was the main reason because of which we ignored our weekly Index expiry option buying trade this week.

Now What’s Next ?

Nifty

We are still Bearish on Nifty because still the PCR of Nifty is at 1.6 which Is not a good indication for the bullish move.

We saw this week that Nifty twice reached at 15740 levels but was not able to sustain and came down, once it reached in the Pre-Open session and once on Friday during the RBI press meet.

We will still be Ignoring Nifty for some time because of lesser volume for a good trade.

Bank Nifty

A different scenario was seen in Bank Nifty, Bank Nifty was good for Scalping traders this week as we saw strong Support at 35200 and Resistance at 35500.

But on Friday during RBI Meet Bank Nifty went up to 35800 but it fell from that level to 35200 again ( 600 Points move was a good trade for sellers).

If we look at the charts of Bank Nifty we clearly see a Bearish Engulfing pattern in Bank Nifty on one day Candlestick chart.

And we have got a good closing which indicates that bearish move will continue in Bank Nifty but PCR shows a bullish move in Bank Nifty as it is trading at 0.7 for weekly and 1 for monthly.

So we will Ignore Nifty for Trading for the upcoming week and will wait for Bank Nifty to break either 35000 or 35500 & then accordingly take the trade.

Note:- This is the analysis by our team & not a piece of advice. Consult your financial advisor before investing.

Companies in Focus – 

  1. Ford saw uticks in market owing to tripled electrical vehicle sales in recent quarter
  2. Twitter revealed its new subscription offering – “Twitter Blue” as an effort to double its revenue by 2023. 

Happy Reading!

Shubham Agarwal (CFA L2 Candidate | Incoming MBA candidate at University of Cambridge, UK)

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