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Stock Market Updates for March, 2017

24th March, 2017

Market climbing the wall of worry

Market opened the week on Wall Street worries but climbed back slowly on positive sentiments reflected through block buster D-Mart listing. Nifty's reaction on US jitters isn't a good sign for the Indian market. Market's relentless up move has lead to 12 Stocks in the F/O ban list which is on the higher side, the first day listing premium, an indicator of bullish sentiment, are pointing to high bullish sentiments which is the reason why any negative event from global markets lead to gap down opening in India. The ability of the Trump administration to pass key legislations would be the key to US market's future and investors should keep an eye on such developments.

Events of the Week

The famous quote of Abraham Lincoln, the most respected President of the Century had once said "Government of the people, by the people and for the people shall not perish from the earth" holds true for the present government in India, as, hence forth the new policies will allow profits to the government too from the projects that are handed over to private companies. The abnormal profits that will be generated by the private enterprises will flow to the government a policy rarely followed in India. This government seems to work for the people as well.

Technical Outlook:

The market is entering into profit taking zone. Indicators have turned overbought at these levels. Prices therefore can cool down or enter into sideways movement. The market may come to fill the gap and touch the 9000 levels before making any decisive move up. Traders should buy on dips. All long positional trades must have a strict stop at 8850 levels on the Nifty.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

Global stock market movement will guide the direction for domestic markets in the short term. The passing of Affordable Health Care legislation will test the strength of President Trump and hence the mood of the market hinges on this event. Australia's most respected weather forecast department has predicted El Nino this year which could potentially derail the rural recovery party, although it is still early to worry about this. The year ending compulsions would keep the market range bound subject however to US market response to Affordable Care bill. The market is likely to remain in sideways zone with a firm bias. Investors should remain invested and traders should buy on decline with strict stops. Nifty50 closed for the week at 9108 down by 0.57 %.

17th March, 2017

This Bull market has a long way to go

Market fired all cylinders at the beginning of the week taking Indices to new highs pulling along with it every sector in its fold. The electoral mandate vindicated the past policies and therefore such reforms will now further accelerate. Markets have already sensed this, which is why new highs are being made. FPI’s have re-started their buying spree with full force. They have made purchases of upwards of Rs 15000 Crs in March which includes HDFC Bank and Kotak Bank large deals. Rupee is also touching its yearly highs. If countries were to be labelled as stock scripts then currencies would represent their measuring barometer.  The strengthening of Rupee to yearly highs in the midst of faltering currencies of other Asian peers indicates that our country when seen in terms of stock script is far more resilient and strong than any of our Asian peers. So if country, measured by the strength of the currency is strong, there is no reason to fear about new highs in the stock market, they will keep on moving higher, remain invested.

Key events of the week:

US FED once again raised the interest rate by 0.25% with guidance for two more this year and three hikes next year. The current spell of supersonic Bull Run in the US is ignoring this policy outlook, but sooner such tightening will have an implication of derailing the bull party. Lessons from early 90s are forgotten when era of irrational exuberance were bombarded by, with interest rate hikes by Ben Bernanke resulting into bull party getting over.

Technical Outlook:

The market has given a valid breakout above 9000 levels in Nifty. Some Indicators have turned overbought at these levels. But during price breakouts, it is better to avoid indicators, as most will signal a red flag. Breakouts must be bought at market prices. On weekly charts the breakout price pattern indicates a powerful rally unfolding. Traders are expected to place bets at the market price during times of breakout and keep stops at appropriate levels rather than waiting for corrections.  Long positional trades must have stops at 8850 levels on the Nifty.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

The market has indeed given a valid breakout. Sceptics should not be fearful about the markets’ elevated levels. If US can scale newer highs every day, why can’t India go higher with much more robust fundamentals, sensible governance and a great political leadership in place. Nowadays news are playing important role in stock specific movements. The effect of news is short lived but it certainly causes high volatility in the stock. For eg news for Tyre sector that China will curtail exports to India, lead to flare up of Tyre stocks, but nonetheless it was short lived. Trading news events in a mature bull market is a sensible strategy. There are no major triggers before the end of this financial year and hence the market is likely to remain lacklustre but firm. Investors should invest currently a good portion of their liquidity at current market levels for long term superior returns. Nifty50 closed for the week at 9160.05 up by 2.52 %.

10th March, 2017

Ignore Exit Polls but look for Actual outcome

Markets traded unenthusiastically for the whole week, awaiting the outcome of election results in some of the key states. Generally such state level elections are non events for the market, but this time the outcome will have some impact on the reform agenda going forward. The exit polls have given a coloured view based on the vested interests and therefore at best they should be ignored. US is trying to create roadblocks indirectly through tactical delays in giving Visas, but the stock prices of IT companies are unperturbed and are slowly marching ahead on the stock market defying everyone’s logic. The same is the case with Pharma stocks, Dr Reddy after receiving USFDA observations for one of its plant was down by just 3%, even Wockhardt got USFDA observations last week, yet the stock price stood resilient. All this clearly depicts that both the sectors IT and Pharma are forming a major bottom and will offer solid buying opportunities once the market enters new high territory, which will happen soon.

Key events of the week:

Uday Kotak sells his 1.5% stake in Kotak Mahindra Bank for Rs 2500 Crs to comply with ownership guidelines of the RBI. However, the stake sale could also indicate that private sector banks are now richly valued, he being the industry veteran is the best judge on valuation of banks.

Technical Outlook:

The market is on the cusp of breaking out of a narrow range of sideways price movement. A decisive break out above 9000 would restart the bull rally to newer highs. However a breakout below 8850 should be a wait and watch situation. If market recovers, then, longs can be initiated. On weekly chart there is Flag formation which is a continuation pattern and should be traded on breakouts only. Traders are expected to place bets on the long side with fresh and trailing stops for long positional trades at 8800 levels on the Nifty.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

The market is on the verge of a breakout in either direction. Breakouts can be best traded by following them and not going against them. The government has cleared around 50 regional airports for renovation which will boost the fortunes of domestic airline industry. Even Warren Buffet for the first time has acquired the shares of US airline companies which hitherto he was admonishing. Airline sector is one such sector which holds promise for even the Indian investors to invest currently. The IPOs of Music Broadcast ltd and Avenue Supermarts ltd have received an overwhelming response. This will now potentially kick start the next wave of IPO’s in the primary market this year. As more and more IPOs are lined up, they will suck the liquidity in the system which in a way is bad for the secondary market but so far no worries. Undercurrent of the market is strong; investors should currently hold on to their portfolio and accumulate more on every decline. Nifty50 closed for the week at 8934.55 up by 0.41%

3rd March, 2017

Mr Market always knows but majority were surprised at 7% GDP

Market began the week with mild optimism rising mid week to cheer No Negatives from President Trump, but continued profit booking brought down indices by the close of the week. GDP numbers came at 7% growth for Q3 compared to previous year, which was a pleasant surprise to many economist but Mr Market knew it all. Markets had continuously sprinted since the beginning of this financial year as seen with the 1000 point rise in Nifty in previous two months, contrary to majority opinion on the street that due to demonetization the performance of the economy will get impacted. Even the so called most professional players the FPIs or the FIIs have also not been able to invest in this 1000 point rally. But collectively, Mr Market is far more intelligent and well informed as to what the future holds for it. That is why it is said, people cannot predict correctly all the time and therefore it is advisable to follow the Market rather than predict it.

Key events of the week:

ONGC is all set to take over complete control of HPCL from the government and forward integrate its operations. Whether or not the synergies will accrue, only time will tell, but one thing is sure such divestment will not affect the liquidity of the market, otherwise government divestments are the biggest show spoilers for bull market.

Technical Outlook:

The market has entered in a narrow range of sideways corrections.  On weekly chart there is a formation of small dark cloud indicating that the upward momentum has stopped for a while. Weakness in NIFTY50 inspite of index heavy weights rising indicates that the market is actually in a swift corrective mode but is not visible on the front line indices. The rally of two months has practically gone uncorrected and hence a natural correction is expected and the same is likely to continue for some more time. Traders are expected to trail their long positional trades at 8800 levels on the Nifty. Traders should keep low profile during corrective phase and go all out when the market clearly breaks above 9100 on the Nifty50.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

The market is in no big hurry to move before the outcome of state elections until March 12th, which will give a signal, if any, to FPI's and domestic investors to commit fresh funds. There are many IPOs lined up for the month of March & April, the rush is probably the highest in last 5 years. Such rush of IPO's approximately worth a billion dollar also poses a threat of short term volatility in the market amid rising barometer of optimism, however the quality of IPOs are good and must be subscribed by the investors for long term gains. IPO of Music Broadcast Ltd and Avenue Supermarts Ltd should be subscribed to. In view of this optimism in the IPO market and keenly awaited assembly election results in some important states, market is likely to remain in a range bound zone. However the undercurrent of the market is strong; investors should currently hold on to their portfolio and accumulate more where prices of quality stocks have corrected. Nifty50 closed for the week at 8897.55, down by -0.47%

Disclaimer* : The views in these articles are not to be construed as investment advice or recommendations. These reports are purely for information purposes. Investments in markets are subject to risk. SAMCO Securities shall not be held responsible for any liability that may arise with the use of this document. Readers may take professional advice before acting on this information.

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