Latest Indian Share Market Updates & News in Aug 2019

Mr. Market Forces Government to Act

Markets continued its wild swing with a downward bias by pulling down the heavy weights too with itself. However, now local factors have largely been discounted for and there are no unknowns yet for causing further pain on the bourses. Nonetheless, any negative cues from global countries can further dent Indian markets too but the chances of that being are low currently as the Asian markets are slowly emerging resilient in the middle of adversity in the US. Too much is talked about inverted yields and the impending recession but Mr. Market is smart enough and has already factored in these factors. The downhill journey of 1000 points has finally woken up the Government to act. A stimulus is expected to be announced which can reverse the markets in the short term. Historically Governments act at the tail end of the economic downturn which in many cases has seen a positive impact on the stock market. This time it will be interesting how the stimulus causes a turnaround but till that time markets should hold on to its feet.

Gold has become a crowded trade with majority of hedge funds increasing their long bets in contrast to Dec-2017 when the very same guys had maximum short positions after which gold started its upward ascent. Also, since gold is in the process of making an intermediate top means that equities have made an intermediate bottom. It is risky from a trading perspective to be long on gold and short on equities, in fact a reverse would be a far safer play.

Events of the Week:

Paradox in the stock market this week - During bear markets when companies announce expansion plans the stock gets hammered but during bull markets the same expansion plans are cheered. Balkrishna and Endurance Technologies are live examples of such paradoxes. When both companies cancelled their expansion plans, there was some respite on the stock price which stabilized. However, that could be detrimental to the long-term future of the Company but in the short-term the stock has satisfied the traders at the cost of long term investors.

Technical Outlook:

Market is trading in a broad range of 500 Points in Nifty50. On weekly chart it has made a hammer on the closing basis indicating a rally in the short term. Indicators are deeply oversold making a possibility of a bounce even stronger. Market will continue to remain stock specific and range bound for some more time. Traders are advised to be cautious but selective longs can be initiated on stocks trading above 200 EMA.

Nifty50 Update 16 August 2019

Expectations for the Week:

The result season has come to an end and majority of the companies delivered a disappointing quarter. With the slowdown looming on the economy, the Companies could do very little to revive this quarter and are now mostly dependent on the Government to boost sentiment and bring about a change at the grass root level. Markets are likely to receive some boost next week due to Government's impetus unless the trade war issue intensifies further. Risk taking investors can get into certain pockets of quality companies for the time being but otherwise remaining on the side lines would still be a better option. Nifty closed the week at 11047.80, down by 0.55%.

A tussle to Watch-FPIs and DIIs

After witnessing ultra-pessimism, equities made a smart recovery pinning hopes on the Government to grant relief in the form of reduction in FPI surcharge tax which may or may not happen. Such sharp rallies are often a result of some pep talk or some relief measure which often fizzles out trapping the bulls who bought on the hopes that a new rally will begin. For the fact that Mr. Market was so deeply oversold, a rally was in any case expected. So long as gold depicts strength it would be safe to conclude that people still have lower allocation in equities as gold and equities have an inverse correlation to each other and whenever there is less faith in equities, the Street turns towards gold as a safe heaven. That is the reason FPIs have sold Rs 8603 Crs in equities month to date which actually have been countered by Indian domestic retail investors who have bought Rs 8113 Crs of equities in the same period. As it is a close tussle between the two, who would eventually outsmart the other only time will tell.

In the short to medium term, the bourses seem to have assimilated all the poison and negative factors from the economy. Slowdown has also been well discounted for including the trade war concerns which makes an ideal case for markets to show short-term rallies. Metal prices too have shown knee-jerk reactions to trade wars but for a fact consumption will not stop irrespective of who imports/exports. However, underlying stock prices do offer contra buying opportunities given the risk of cyclicity which may further dampen stocks but when cycles turn the returns would be far above average in metal stocks.

Events of the Week:

RBI's latest unconventional rate cut by 0.35% and allowing increased exposure limits of banks to a single NBFC is a bold move in favour of lubricating the economy whose effects will be seen in the next quarter. Markets were in urgent need of Government intervention and this decision to take pressure off the bond markets and reduce the cost of capital in the economy was necessary in order to kick start the investment cycle from the private sector. This policy will percolate liquidity into the system and provide immediate relief to the existing crises.

Technical Outlook:

Nifty50 has made a hammer like pattern witnessing a sharp bounce from the lows. The rally is not supported by good volumes and therefore early to call a major bottom. However, the market was deeply oversold and therefore the bounce was expected. Selective buy on declines should be the strategy for the traders, however markets will face strong resistance at 11450.

Nifty50 Update 09 August 2019

Expectations for the Week:

Markets will see speculative swings given that there are no important events ahead be it the local or global factors. Falling bond yields, currencies, trade wars, corporate results, domestic stimulus etc are all done with. Now the market participants will in a way filter stocks and sectors that are promising and have delivered good numbers by giving them thumps up by making them rise while the weaker stocks whose fundamentals have deteriorated will decline. Selective private sector banks now offer good value to buy and autos will offer sell on rise opportunities in the coming weeks. Pharmaceuticals too, given the positive surprise in numbers, offer a value buying opportunity. Investors may selectively invest even from a short to medium term perspective in the above-mentioned sectors. Nifty50 closed the week at 11109.65, up by 1.02%.

Time to Cover Shorts

Markets continued to bleed this week too wherein across the board selling was witnessed irrespective of the quality of the underlying businesses. To add to it, auto numbers again disappointed the Street with Maruti being the biggest shocker having reported a 33% YoY decline in its July auto sales. Local woes were at its peak but now even global factors have started to exert negative pressure on the market. Dow Jones has begun its downward descent from its lifetime highs despite Fed reducing interest rates by 0.25% with a dovish outlook. All is not well with global equities as an asset class but gold can be a defensive play given that a reversal in interest rate cycle has begun. Active investors seeking higher returns must allocate a good chunk of their portfolio approximately 30% to gold and lower their equity weightage in order to sail through these testing times.

The selling spree in India can be attributed to the higher taxation on trust entities of FPIs combined with the slowdown in the economy. We think soon the Government may act by diluting the excessive provisions in the law. That may act as a relief, for that matter, any reversal in the Budget provisions which was taken negatively by the bourses might bring about a relief rally arresting the fall.

Events of the Week:

Zee's recent deal for a 11% stake with Oppenheimer hasn't been cheered by the Street as the business conditions are so bad that a fantastic business such as Zee couldn't even get at a 25% premium. Also, instead of benefits of a strategic investor to add synergies of vast global presence and a higher open offer price, the deal was signed with a financial investor, belying the hopes of open offer for minority investors. Nonetheless, we expect the deal to put some pressure on the debt funds since the recovery for now is to a lesser extent than expected.

Technical Outlook:

Nifty50 has swiftly moved south with higher velocity, decisively breaking the rising trend lines. However, markets are in oversold territory which can lead to quick upward short covering rallies. Volatility has increased giving intraday traders good opportunities provided they are on the right side of the market. Traders may cover their short positions and wait for rallies to create further short positions. Long trading positions should be avoided from trading perspectives.

Nifty50 Update 02 August 2019

Expectations for the Week:

The vertical waterfall that the market witnessed may get a sharp bounce and witness short covering if the Government proactively acts in soothing the nerves of the bourses. However, it is not the time for bottom fishing and all rallies should be taken as an opportunity to raise cash in the portfolio levels. It is extremely difficult to identify bottoms when there is liquidity crisis. The very same analogy was observed in the 2009 crash due to the subprime crises. But for the moment market has settled, relief rally is expected from these levels. Nifty closed the week at 10997, down by 2.54%.