Latest Indian Share Market Updates

Get all the latest Indian & global stock market market updates, corporate & commodity news along with outlook for the week ahead with the SAMCO Weekly Market Update.

Is Economic Growth Anaemic, Why Stimulus? Can Market Sustain New High?
 
Market traded with slightly positive bias during the beginning of week up eventually gave up all the gains. We had mentioned last week "Exhaustion visible in many sectoral Indices" although Nifty glided a little higher for a while but braced with reality as other peer sectoral indices had already turned lower. Nifty fall was in line with the general decline in the market which had already started prior to Nifty fall. Sometimes Nifty may not be a true indicator.
 
During good news: when the market refuses to go up, this in itself is a biggest indicator to know where Mr Market is heading. TRAI proposed lowering of IUC from 14p to 6p a big boost to Reliance Industries profitability by approximately Rs 2000Crs but guess how the market behaved? Reliance briefly made new high in prices but cracked by the close of the day. Government imposed anti dumping duty on tyres leading to direct benefits accruing to Tyre companies, but after opening higher, all tyre companies came off the highs by the closing. All this indicates one thing, irrespective whether domestic mutual funds are flushed with funds or corporate numbers are still good, Mr Market is refusing to go up and is indicating that it has entered into a deeper correction.
 
Events of the Week:
 
Government is preparing a stimulus package of approximately Rs 50,000/- Crs to boost the economy. If this is what the government feels about the economy- that it is ailing and requires medicine, then why can't market participants see that? Is Nifty50 at 10000 a mirage? If the assessment of the government is right then market staying at New High is an illusion. Someone is drastically wrong, may be the government is right after all they have all the data to analyse!
 
Technical Outlook:
 
Market has decisively reversed after making a double top in the short term. This was obvious given the fact that it was witnessing slowest upward ascent since last three weeks in the entire time frame of seven months rally. The velocity of the uptrend was the weakest since December 2016. The fall has accelerated and is likely to find first support at 9700 in Nifty50. Indeed the chart below correctly maps the future course of action. The oscillator was giving a loud and clear signal of impending fall. Longs should be avoided for now for trading purposes and traders may sell on rise.
 
Nifty Today
 
Nifty 50 Weekly Chart
Expectations for the Week
 
Market indeed took the FED's $4.5 trillion balance sheet shrinking exercise seriously, this will eventually scoop up the helicopter money, although the pace will be slow initially, but it will for sure sooner or later, puncture the global liquidity bubble. This is the biggest threat to the bull markets across the globe.
 
GST implementation has really created major hiccups across business processes. It is estimated that exporters refund to the tune of Rs 65,000/- Crs is pending which has led businesses to standstill due to lack of working capital requirements. The government is postponing the return filing dates due to one reason or the other, but ultimately businesses are suffering. No wonder the statistical evidence that out of every 10 countries where GST type laws are implemented, in 7 countries the growth shrinked between 0.7 to 1% of the GDP. There is every reason now to believe that India too will follow the same path of slow economic growth in the near term.
 
SBI Life IPO has barely sailed through, indicating bearish sentiments for the market. Below par listing of Matrimony Ltd has frightened many investors, but in a way, will have a good side effect that new IPOs will henceforth be fairly priced, leaving some money on the table for the investors. SBI Life IPO was priced at P/E of 70 which was outrageous, whereas other listed peers were trading at 40 P/E. We have been cautioning investors since about a month to stay on the sidelines. This has saved them from not investing in euphoric times a pre requisite for generating above average returns. All the fund managers were selling India story, but we kept our readers out from investing fresh funds. NIFTY50 closed the week at 9964.40 down by 1.20%.

Exhaustion visible in many sectoral Indices
 
Market traded the week with positive bias albeit with lower strength compared to previous few weeks signalling exhaustion at an aggregate level. However stock specific movement in mid and small cap stocks were the key highlight of the week. However by the close of the week again North Korea spoiled the bull party which otherwise such move was expected post sanctions by the UN. However such fears will weaken the strength of the bulls to take the market at New Highs in the near term. Actual wars are the reason for the bull market to flourish but fear of war almost always keeps the bulls away.
 
The week and the month ahead belong to the Indian Insurance sector. Decades ago seeds sown for Life and Non Life Insurance businesses are now ripe to be shared with the Indian investors. Non Life Insurance premium in India currently accounts for just 0.8% of the GDP which is far below then the global average. Life Insurance penetration in India is just 3.5% while for emerge market this ratio is 6.5%, this show the massive untapped potential in the sector. A new sector will now emerge for the investors to park their money for long term gains. The IPO of ICICI Lombard though richly priced but will generate superior compounded returns for long term investors. The Insurance market is expected to grow at 15% compounded for next few years.
 
Events of the Week:
 
Minority shareholders have united to ouster the board of Religare Enterprises Ltd. under the new provisions of the Company law on the pretext of oppression of the minority. Such moves will have a far reaching consequences not only for the promoters, that they have to respect the interest of the minority shareholders, but this move will also inspire minority shareholder community as a whole to bring out such petitions if the promoters unfairly treats minority shareholders.
 
Technical Outlook:
 
The market is witnessing its slowest upward ascent since last seven months. The velocity of the uptrend is the weakest since December 2016. Many sectoral indices are hesitant to touch their previous highs, infact some have given the failed breakouts and have since retraced, for example fertilizers, Pvt Banks Index, Financial Services Index, Auto Index, majority are showing fatigue and therefore ripe for corrective fall. The momentum oscillator as shown in the chart below indicates a marked weakness in the price ascent of Nifty50. This shows that the market is still in the corrective mood. At best longs should be avoided for now for trading purposes and traders should wait on the sidelines to see how the correction is panning out.
 
Nifty Today
 
Nifty 50 Weekly Chart
Expectations for the Week
 
Market will continue to trade in a narrow range due to lack of triggers. However negative trigger of conflicts could cause a sudden downfall but that panic, if arises, needs to be bought aggressively. Market in principle will take clues from US FED meeting scheduled on 19th and 20th September for action plan on shrinking FED Balance Sheet. Rollback of helicopter money would be the biggest threat to global financial liquidity, which is just a matter of time, when and how quickly it will happen.
 
August month was real test to measure the growth momentum of the automobile sales, indeed the sector stood resilient, almost all segments like passenger, commercial vehicles and two wheeler segment posted on an average 14% MoM. This indicates that there is margin of safety in the Two wheeler category which is trading at 22x trailing earnings as contrast to Maruti which is trading at 32x trailing earnings although both are presumably growing at same speed. Base metal prices like Zinc, Copper, Lead etc have sharply declined by 10% hitting a reversal of commodity party, this would have bigger effects on companies like Vedanta and Hind Zinc etc which could result in serious profit booking.
 
These are testing times for the investors, not getting carried away in euphoric times, but sitting tightly on the core holding and waiting for the correction to add more is the real journey to long term superior returns. NIFTY50 closed the week at 10085.40 up by 1.51%.

One more leg of corrective fall to begin soon
 
Markets again repeated the previous sequence by tanking on the news of North Korea missile launches, but this time it was a bomb. Due to such headwinds, however, one good thing that has emerged is that now there will be no surprise element for any emergency if any that may arise. However the resilience of our markets post the mid week fall also indicates that this correction is of sideway nature but may take some more time to complete the sequence. At best one down fall is expected.
 
Eicher Motor's proposed plan to acquire superbike maker Ducati reminds of the hay days of 2006-08 when Tata Steel acquired Corus and Hindalco acquired Novelis to accelerate their growth aspirations, but with time passing by, all those proved otherwise. Similar could be the fate of Eicher Motor wherein the debt equity ratio would increase from zero to 2:1 and the operating efficiency will dramatically fall in the near term. The acquisition could be risky for the long term shareholders, but first let's see the deal details as and when it happens.
 
PMO's office has cracked the whip on the bureaucrats to release the amounts to the contractors to the tune of Rs 70,000/- Crs approximately which were locked up in arbitration litigation, after taking bank guarantee from them. This will act as necessary lubricant to further accelerate the government's infra building agenda. In the era of GST, government will emerge as the biggest spenders and companies driving revenues there from will outperform the general market.
 
Events of the Week:
 
The cabinet rejig will go a long way in achieving rapid economic growth for the country. The defence ministry's sharpened focus on Make In India could shortly release orders of appro 1 lakh Crs for defence procurements, a boon for long time parched sector. The alleviation of new faces in the cabinet indicates that 'only merit matters' with this government.
 
Technical Outlook:
 
The market is witnessing reduced volatility and narrow price action indicating the phase of ongoing correction. Mid Cap and Small Cap indices have reversed their gains after reaching previous highs but Nifty50 and BankNifty are still way below their respective highs thus showing marked divergences. This shows that the market is still in the correction zone and the rise should be used to exit long positions. All rallies should be taken with a pinch of salt before initiating long positions. At best longs should be avoided for now for trading purposes.
 
Nifty Today
 
Nifty 50 Weekly Chart
Expectations for the Week
 
Market is trading in a narrow range indicating that a sideways correction is underway. Immediately there are no home growth triggers that will give direction to the market. However global clues can impact in the near term. The hurricanes havoc in the US would be a sorry state of affairs but that could open up short term opportunities in the refinery sector in terms of higher margins due to shut down in refineries in the US. Stock specific, news based movement will be witnessed till the time market firmly gets the direction.
 
Many new IPOs are underway with Insurance being the flavour of the season. Insurance is highly underpenetrated in India with ratio being just 3.5% whereas the global average is 6.5%. There is huge potential to be captured in India and therefore Insurance companies must form part of the investors' long term portfolio.
 
The market seems to be in a time correction mood but a sudden kneejerk deep correction could also be expected, investors should then start buying on such falls and at the same time start systematic purchases at regular intervals on every decline of quality bluechip stocks in private banking, consumer durables and consumer staples category. NIFTY50 closed the week at 9934.80 down by 0.4%.

Corrections are taking toll on market wide open interests
 
Markets tanked mid week after N Korea fired a missile in Pacific Ocean rattling the world markets.   However the panic was quickly bought into by domestic and retail investors as liquidity is aplenty in the system. Headline GDP numbers came at 5.7% for the month of June, however such numbers are like rear view mirror they have no utility for the markets, what will be forthcoming in the coming months and quarters that really matters for the market and nothing else. Market is expecting a slowdown in the near term due to GST implementation however the same will only be verified once the numbers come out in October. Infy coup is behind us, the new Chairman would bring all the stakeholders at par and hopefully will find an able lieutenant to steer the company to respectable heights. Market witnessed lowest rollover this year indicating that correction is underway and would take some more time before the liftoff finally happening. Nifty Futures witnessed 58% rollover while the average stood at 72% for the year. Some stock specific movements will keep the hopes alive that bull run has begun, but it will take more time to correct the excess valuations before the rally actually begins.
 
Events of the Week:
 
In yet another 'operation clean up' of PSU Banks, RBI has further identified 40 targets for bankruptcy proceedings, accelerating swachh banking system. However the mandate to set aside 50% on such bad loan accounts by the banks would keep them in the ICU for few more quarters as the provisioning that was already made was upto 25% to 30%, but now the balance provisioning needs to be provided before bankruptcy proceedings are filed.  In this cleanup process, private banks and NBFCs will snatch away market share from PSU banks, helping them to post faster growth.
 
Technical Outlook:
 
On weekly chart a hammer is formed and on a daily chart a bull candle is formed this indicates that some more upside is left before the downward correction begins. Various indices are in divergence with the Nifty, for example BankNifty, Infra Index, Financial Services Index are all still showing weakness. This shows that the market is still in the correction zone and the rise should be used to exit long positions and new trades should be avoided unless clarity emerges that the correction is nearing an end. All rallies should be taken with a pinch of salt before initiating long positions. At best longs should be avoided for now.
 
Nifty Today
Nifty 50 Weekly Chart
Expectations for the Week
 
Market is oscillating in a narrow range neutralizing the buying and selling of institutional players. FPIs have sold stocks worth Rs 16000/- Crs in the month of August whereas DIIs have bought stocks worth Rs 16200 Crs. The big money is at the loggerheads which is why the market is in a state of pause. A clearer picture will emerge post second quarterly results but till that time the market will remain in a narrow range but stock specific action will continue to drive the adrenaline of the bulls. NTPC got a tepid retail investors’ response inspite of 5% discounts, this indicates that sentiments can change overnight from bullish to neutral. This incident further vindicates that the correction is underway. Global experts are raising concerns of alleviated risks in equities across the world, RBI too have raised a red flag that Indian market could be entering into bubble territory. All these postulates, it would be safe for the investors to stay on the sidelines and wait for the correction to enter, short bounces should not be considered as beginning of the rally. NIFTY50 closed the week at 9974.40 up by 1.19%.