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Stock Market Updates for February, 2017

23rd February, 2017

High Bullish Sentiments keeps market near Highs

Market danced to individual heavy weight stocks this week, which otherwise were in lack luster mood. Stocks like TCS, HDFC Bank, Axis Bank and Reliance Industries were highly traded for stock specific reasons. The two sectors that stood diametrically opposite to each other, one gliding on extreme bullish sentiments; companies want to dilute stake and at other end wherein the sentiments are bearish and companies want to consolidate. Hindalco and TCS are two contrasting stocks representing their respective sectors which is sending out a clear message to investors where to invest. Hindalco wants to do a QIP to raise Rs.3500 Crs which means that the management thinks the stock is richly valued and it is worth to sell the shares to institutional buyers. Whereas TCS thinks that there is value in the current share price and it is worth buying from the market currently. Thus investors should take the clue from what the management, or the insiders’ of the company think about their own companies, generally they have proved right.

Key events of the week:

Reliance Jio unleashed a competitive war by disclosing the tariff for the first time since its launch. The pricing is predatory and will force incumbents to either match or face the heat of losing customers. Rarely has the Indian market seen such high profile corporate wars to gain control over the market place. In the end, the consumers will win.

Technical Outlook:

The market is standing at a critical juncture with a double top and triple top on a larger time frame. However the underlying momentum suggests that it is only a matter of time before all the tops are taken off, but before that happens, historically it is observed that market enters into a consolidation or a corrective phase to gain strength to move higher up. The sprint of the past eight weeks, looks dangerous from risk to reward ratio for short term trades. Traders should keep a low profile and enter when the market conclusively breaks above 9000 on the Nifty50 or when it corrects meaningfully.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

The market is in the process of pulling up all the laggards now as there is little room for leaders to move ahead. This typically happens during a maturing bull markets, at least in the intermediate term. Stocks from airline sectors which were written off are making a comeback. Stocks like Just Dial and Jubilant Foodworks which are considered by market analysts as secular short stories are roaring again vigorously, and for that matter even Reliance Industries, just after a tariff pronouncement, rose sharply. All the stocks which have under performed are gaining momentum; such trend is expected to continue till market decisively breaks to new high. From there on again the race to pick quality stocks will begin. The undercurrent of the market is strong; investors should aggressively allocate funds to only IT and Pharma sector and hold on to the rest of the portfolio. Nifty50 closed the week up by 1.34% at 8939.50.

17th February, 2017

State Election results may add steroids to bulls

Market began the week in lacklustre mood but mid way slumped on US FED Chief's testimony that interest rates could be hiked as early as March due to rapidly rising inflation. However by the close of the week, the buying spree of FPI's in HDFC Bank led to recovery in the Indices. Report of drivers of Uber and Ola going on nationwide strike highlights the fact of over capacity in the taxi fleets; these are ominous signs of slowdown, which can erase incremental sales demand caused due to taxi hailing companies. These events can spoil the party of four wheelers in India. Thus investors should lighten up the portfolio from four wheeler passenger vehicle companies.

Events of the Week

Govt's pro progress steps initiated recently that will silently change the face of the economy are ESOPS for PSU Bank employees for the first time in the country, government has started enrolling the poor electronically for job cards who will receive benefits under MGNREGA which hitherto was not done at all and this had led to huge pilferage in the system, promulgation for making payment of wages through bank accounts etc. All these steps will lead to silent revolution which will slowly weed out corruption and give the economy colour of integrity.

Technical Outlook:

The market is refusing to go higher. Today's weakness after a strong opening indicates that the ongoing correction will continue for few more days before any decisive up move can be witnessed. The most ideal scenario for the duration of correction is three weeks considering the six weeks of recent rally that the market had witnessed. Traders should keep low profile during ongoing corrective phase and go all out when the market clearly breaks above 9000 on the Nifty50. Traders should buy on dips while investors should hold on to their portfolios.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

The market seems to be no hurry to move before the outcome of state elections, especially the UP which shall be the major test of the present government. The outcome will decide the speed of reforms which is why, this time such an importance is placed to the assembly elections. For the first time in recorded history NASCOM has refrained from setting industry growth rate for next year, this indicates the extent of uncertainty in the sector. As the investing wisdom goes "buy when others are fearful", it is therefore time to lap up the IT companies. In addition the buyback winds blowing over the sector will also make the bottom formation even stronger. Similarly the pharma sector too is in a sweet spot. Inspite of Sun Pharma's ugly quarterly numbers, quarterly profits were down by 5%, whereas the street was expecting a profit rise of 26%, despite all these negatives the stock price rose with vengeance, this is a clear bullish indicator for the entire sector, Sun being the industry leader. The undercurrent of the market is strong; investors should aggressively allocate funds to only IT and Pharma sector and hold on to the rest of the portfolio. Nifty50 closed the week up by 0.31% at 8821.70

10th February, 2017

Market looks tired after running marathon for 30 Days

Market began the week with celebration mode on hopes of rate cut by the RBI, but was disappointed on status quo. Seldom people get what they want. It is the element of surprise that excites the markets. For example during the demonetization spell, the sector on which the worst was supposed to befall was the jewellery vertical and their stocks were hammered like never before. This week when Titan came out with the quarterly results, it surprised everyone. The company posted 15% growth in sales which proved everyone wrong. This episode revives the age old market saying that "everything is discounted in the price" and "the collective wisdom of the market is much more superior then each one of us individually, no matter how high the IQ may be." By the time quarterly results were announced the stock was already up by 30%. Thus investors should keep on accumulating such great consumer focused consumption related companies for long term investments.

Events of the Week

Infosys board spat highlights the resistance to 100% professionalization of management of the companies in India. Recently Cognizant is in the process of replacing 3 permanent board members by independent directors a solid proof of professionalism in running the board which is the diametrically opposite stance that Infosys founders have taken here. However corporate governance is a vague terminology, which is easily used by anyone who wants to paint a negative picture about a professionally run company. Law must strictly define the term.

Technical Outlook:

The market has strong underneath strength which is making corrections shallower and short lived. Markets have had a run up for 32 days which statistically makes the market ready for a corrective spell. Whether the correction will be sharp or sideways only time will decide, but the odds of market going up too far, seems less likely in the short term. Traders should be cautiously bullish. Long positional trades should be trailed with stops below 8500, Traders should buy on dips while investors should hold on to their portfolios.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

The ongoing rally seems to be taking a brief pause. The sentiments are so bullish, although the Indices may move in a narrow range but sectorally the stocks can still rise on one pretext or the other. For example the forthcoming IPO of Dmart has started the rally in retail chain of companies. The quarterly results are better than the expectations. PSU Banks have disappointed on the NPA front but nonetheless have reported improved profitability. Government proposal to scrap old commercial vehicles if implemented would in a small way kick start the spending and consumption cycle in the economy. The undercurrent of the market is strong however at higher levels the market could jittery. Investors should keep on holding stocks in their portfolio. Nifty50 closed the week up by 0.17% at 8793.55.

3rd February, 2017

Bulls have taken the Budget in the right spirit

Market began the week with Trump's salvo, this time on Pharma sector which led to a gap down opening for the sector but it later recovered by the close of the week. Market reacted maturely by giving thumb's up to the country's AGM popularly known as the budget delivered by CFO Arun Jaitley. The media, captains of industry and analysts all have rated the budget very high. Market men have once again turned bullish. Media headlines are again vying for new highs on the indices, the IPO of BSE, Asia’s oldest exchange listed at whopping 40% premium over its issue price, all together singularly point out that the sentiments have turned very bullish. It is to this set of optimism that one has to remain cautious, as neither the FPI’s have done any meaningful buying nor have they started to commit fresh fund allocation into India. The underlying strength of the Indian market is still robust but market does not go up in a straight line.

Key events of the week:

Budget this time had a simple approach. Focus was to invigorate the economy by focusing  on ease of doing business, lower fiscal deficit targets thereby creating room for lower interest rate regime, increasing disposal income in the hands of middle class by lowering direct tax incidences, encouraging honesty by capping cash transactions either in the form of expanses or donations. Budget policies in a way were step towards driving simplicity, honesty and meritocracy for the Indian citizens.

Technical Outlook:

The market is heading upwards with small doses of regular correction. The momentum has slightly weakened as can be seen from the MACD indicator. A mild divergence can be seen in the price of the Nifty50 and the indicator underneath.  At higher levels market will face profit booking around 8800 to 8900 levels. The prices have touched the upper channel which will most likely attract profit booking.  Long positional trades should be trailed with stops below 8550, while short term traders may partially book profits and re-enter at lower levels. The under current is mildly strong. Traders should buy on dips while investors should hold on to their portfolios.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

The ongoing rally has matured after rallying for about 5 weeks in a row. The volumes in the market have soared to high levels but there is no alarming increase in the open interest in the market which gives a comfort level that the momentum can continue upwards for some more time at least till the RBI’s monetary policy is out by the mid of the next week. Since the government has pegged the fiscal deficit target of 3.2% this will create an opportunity for the RBI to reduce interest rate next week by 0.25% as now the fear of US Interest rate hike will haunt, if any, only in June.  Corporate results are above expectation for the majority of companies. Post budget there is consensus bullishness for sectors like Cement, Infra, Auto, Banks and FMCG and therefore momentum traders and investors having high risk appetite can buy the stocks. However there is bearish consensus for sectors like Pharma, IT, Telecom and Oil and Gas which is good for contrarian investors who can lap up these companies for the long term which have margin of safety.  Nifty50 closed the week up by 1.15% at 8740.95.

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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