Latest Indian Share Market Updates & News in Dec 2018

Markets always move against consensus

This week stock markets surprised everyone when there was no panic selling after Congress' win in the major states which proves that realities of economic dynamics always is the guiding factor and politics is only sentiments which has negligible shelf life. Post the rollercoaster ride, Indian bourses strengthened mid-week on hopes that economics of the country are robust, and markets are above politics. Nifty and Sensex recovered from oversold levels despite weak global headwinds, thus bringing in the necessary stability around these levels. Surprisingly corporate houses close to the ruling party did not experience a sharp fall which indicates 2 things - Either Mr. Market expects the ruling party to win 2019 elections or it has become mature enough to withstand the political noise.

On the other hand, Government's targeted disinvestment was around 89,000 crores out of which 32,000 crores has been achieved. Raising balance amount seems to be a herculean task given the current state of the market. An OFS is expected in New India Assurance, GIC, NMDC and NBCC which will keep the stock prices depressed not only for PSUs but for the broader market which will face a subdued effect as liquidity will be sucked out from the system. This will keep markets under pressure till the general elections next year.

Events of the Week:

Appointment of the new RBI Governor and Supreme Court's dismissal of PIL against Rafale deal should calm the sentiments of the masses. Coalition is the last thing that India Inc wants, hopefully public decisively gives a clear mandate is all that Mr. Market is waiting for. A coalition Government would likely impact the growth of the country; stability in the system is the key towards a growing economy. The Rafale deal could be a game changer in the political conundrum next year.

Technical Outlook:

Short term momentum is up but the strength is weakening by the day. Number of advances are steadily coming down which indicates that event-based rally will see profit booking at higher levels. Likely levels for Nifty50 on the higher side is 10900 and second target is 11100 which is nothing but 50% and 61% retracement rise of the entire fall respectively. Selling on higher levels will emerge, therefore traders are advised to be selective on going longs but on any weakness they should be ready to go short.

Nifty Today

Expectations for the Week:

Markets are likely headed towards a broad trading range as the state election phobia is now over. Also, year end profit booking will keep the markets under check.Nonetheless some sectors/stocks have become very attractive given the negative narratives in the market which had plagued them and had seen a decent price correction in them. In the auto sector, there is Mahindra & Mahindra and Bajaj Auto whereas Canfin Homes and Indiabulls Housing Finance have become attractive for investment. Motilal Oswal and IIFL in the financial services sector while Godrej Consumer Products and ITC are available at decent valuations from the FMCG space. All these companies have enough margin of safety and are attractively poised for long-term growth. However, investors must take decisions after taking their individual risks and capital allocation into consideration. Nifty50 ended this week at 10805.45 up by 1.04%.


Expect Nifty to Head South by Year End!

Markets during the week refused to go up inspite of a temporary truce announced on trade wars between the 2 global powers China and US. If such pragmatic decisions couldn't take the markets higher, it was only logical that the global bourses would go lower. The fall was further accentuated with the arrest of Chinese Company Huawei's CFO and daughter of the Founder which led to panic selling across the board fearing further trade war tensions. Also, a sudden change of expectations in the interest rate scenario specially in the US is very surprising but bearish. Bond prices have started to rise giving an indication that US Fed will not increase interest rates atleast in the short to medium term due to looming recession and slowdown in the global markets because of trade war fears.

Due to this sudden change in the global interest rate scenario, equities will not be the preferred asset class for sometime unless the bond markets settle. RBI too has changed its stance from hawkish neutral to now dovish by keeping the repo rate unchanged in the current monetary policy meet. However, it announced a 1.5% gradual reduction in SLR from the Jan quarter which is a welcome step to reduce the liquidity tightness in the banking system. This all boils down to only 1 fact that rate hikes in the near future seem unlikely.

Events of the Week:

OPEC's might haveat last started to dwindle after decades of monopoly with Qatar's sudden decision to quit OPEC. Electric Vehicles revolution which is coming sooner than expected has shaken up the entire cartel. Their meet this week was expected to reduce the oil output by a massive 1 million barrels per day but has avoided any specific decision on the pretext of awaiting Russia's signal who is a non-OPEC member.Thus, the falling power of OPEC is a new normal for the world ahead and good for an oil consuming country like India.

Technical Outlook:

On the weekly chart, Nifty has formed a bearish dark cloud candle suggesting weakness in the medium term. Prices have broken the trend line on the daily chart giving a medium-term target in the range of 10100-10200. The fall will not be a straight one but will have intermittent rallies arising out of optimism, however eventually markets should find strong support around 10100-10200 levels. Traders are advised to stay away till the outcome of State election results on Tuesday, post which contra bets can be undertaken for short terms profits. Sell on rallies should be the strategy with appropriate stop losses.

Nifty Today

Expectations for the Week:

Markets next week will remain extremely volatile due to the election outcome. It is hard to predict which party will win or lose, but in any case, markets will make extreme moves in the short term which will be irrational and therefore a contra position, if any, could be taken. November auto numbers came in this week with 2-wheelers delivering robust growth of over 20% plus and the passenger vehicles segment showing de-growth in numbers which also indicates that the purchasing power of the middle class is waning. This would impact the future growth outlook of this industry as a whole. Investors are advised to keep cash on hand and wait for panics. Ideally, 10,100 Nifty should be good levels for investment,which is expected post the short-term volatility and preferably by the year end. Nifty ended the week lower at 10693.70, down by 1.68%.