Latest Indian Share Market Updates & News in Jun 2018

Can the regulatory whip - ASM be the reason to sell?
 
"Stock Markets enter panic mode", "Madcap selloffs send mid and small-cap stocks tumbling"," Traders go for bearish bets" - The week gone by saw these kind of headlines in financial dailies and guess what happens thereafter? Not once but every time when the market witnesses such pessimism a recovery is inevitable. Indeed market experienced a V-shaped reversal in small and mid-cap stocks after a panic bottom caused due to ASM measures. Nifty mid-cap stocks declined by over 9.8% from the start of 2018 compared to Nifty 50 which is up by 3%. Also, BSE small cap index dropped to its lowest level since Oct, 2017 on Tuesday. There are no reasons shares should be sold just because the exchanges imposed stringent rules. Fundamentals should guide and not such a one-off event.
 
Events of the Week:
 
After over 4 years, RBI hiked interest rates by 25bps which to a layman would mean negative for the markets but the markets surprisingly rose, why? Because the rate hike was in the interest of our market to fend off any dollar exodus. The move was in tandem with the global monetary tightening policies adopted by our international peers and not motivated by domestic factors. Had RBI not raised the interest rate, there could have been a currency attack which is not in the interest of our Country where 80% of crude oil requirements are imported.

For the first time, HDFC bank's fans were in for a rude shock witnessing dull activity from the FPI's in the counter. This could be a new normal, how investors look at HDFC from a larger trend perspective given the uncertainties on how the banking world will be disrupted and who will take the lead in disrupting the business model. The demand for HDFC Bank is indeed weak which should worry domestic investors.
 
Technical Outlook:
 
Nifty50 and Nifty MidCap indices both have different trade set up. While Nifty50 has limited upside potential, but Midcaps have good possibility to go higher. Risk to reward ratio is far better in mid cap shares than in front line shares. Stops for mid cap shares are small and potential target is higher which offers better risk to reward ratios. Buy on decline mid cap shares with current weekly lows as stops.
 
Nifty Today
 
Nifty Today
 
Expectations for the week:
 
Markets can expect lot of activity in the PSU banking space given the President signed the ordinance to finetune the insolvency law. FM and PSU banks' heads have discussed constructive action plans. Any positive outcome on the recovery front should rerate PSU banks. Few banks like Indian Bank and Vijaya Bank hopefully should perform better as their books are far cleaner than their PSU peers. Additionally, markets are likely to take cues from the global macros as the domestic news-flow is almost over. On the industry front, we believe the pharma stocks have made a confirmed double bottom pattern in charts and have began their upward journey. Investors can allocate pharma stocks in their portfolio for long-term horizon. Nifty50 weekly closing up by 0.66% to 10767.65.

Directionless Divergent Market
 
Markets had a roller coaster week, it started on negative note on account of the Italy crises but later sharply bounced back cheering good corporate numbers. Markets showed divergent behavior with frontline stocks inching higher whereas small and midcap stocks were badly bruised. It was because HDFC twins and Bajaj Finance kept Nifty stronger than other small and midcap indices. Be that it may so, this is an indication that markets will eventually correct further before any sustainable bounce happening, frontline will fall harder in the next round of sell off.
 
GDP growth was the fastest in the last 7 quarters at 7.7%. Markets have already discounted this a while ago and this shouldn't be considered as a new trigger for the bull market rally as GDP numbers are lagging indicators, construction and cement sectors have registered higher core growth than the rest which is reflected in the quarterly numbers of infra companies like KNR Constructions, Ashoka buildcon Limited registering 30% plus growth rate. Whether such momentum will continue is all that market is interested in, we think such momentum will slow down eventually and the sector too will correct.
 
Events of the Week:
 
Avenue Supermarts Ltd stock showed surprise strength inspite of promoters selling 1% equity to abide by mandatory regulations. The rise in the stock price post digestion of huge liquidity shows how strong the business model is and investors aren't worried although valuations are in triple digit P/E multiple which stands at 125x. Auto numbers have shown excellent performance wherein Maruti and Bajaj have increased sales by 26% and 30% respectively which shows that at the ground level the economy is still buoyant and consumer spending is intact.
 
Technical Outlook:
 
Market is in non trending phase which is considered worst for the traders. On one hand Nifty50 is showing strength and rising while other indices including small and mid cap indices are falling and refusing to rise. Such divergence will eventually give way to sell off in Nifty50. Traders may buy puts at higher levels for low risk low return strategy.
 
Nifty Today
 
Expectations for the Week
 
Markets are likely to narrow down the gap between the frontline and small and midcap stocks which had hitherto performed divergently. The room for further decline in small and midcap stocks seems limited given the sharp correction that they have already witnessed since last few months. However there is still scope for frontline stocks to correct further. Additionally, rate hike fears from the RBI's monetary policy in the coming week are expected to keep markets under check. There is a likelihood that rates might increase due to inflationary tendencies of high crude oil prices which will translate into higher consumer price index. Investors should wait and watch for the right opportunity before investing. Nifty50 closed the week up by 0.86% at 10696.20.