Latest Indian Share Market Updates & News in Jul 2020

Indian Robinhood Traders Drive Nifty Rally

Markets during the week moved higher on hopes of a COVID-19 vaccine coming to everyone's rescue earlier than expected. Bourses across the world are also riding on early availability of a vaccine inspite of unstable economic growth. Another round of shutdowns in a few countries is frightening but hopes of a drug/vaccine are keeping markets upbeat. A peculiar historic trend during bull market tops is observed currently. From beginning of April wherein general markets have moved higher, there are dozens of companies with negative equity value, aka Penny stocks have moved higher hitting daily circuit filters. Some of them like GTL Infrastructure, JP Associates, Unitech, R Power, Jain Irrigation, Sintex Industries etc. having moved higher by 300-500%. No wonder market veterans are surprised by the rally in frontline stocks but the underlying reason which is driving the stocks higher can be deciphered from this strange movement in penny stocks. It is further surprising that this trend of Penny stock buying is also visible in US and other countries as well. Therefore, it is the retail investors (Indian version of Robinhood traders) who are at home during this lockdown tapping prices higher. It is quite likely that they may also have invested in frontline stocks; however, conspicuously their high interest in penny stocks is quite visible and frightening. Handful of these penny stocks have also now started to reverse the trend and are hitting lower circuits. It’s time to be cautious!

This week, Gold surged to its lifetime highs crossing USD 1780 per ounce which indicates that the prices are going to remain strong despite decent equity returns. In general, when equities perform, which indeed has happened in the past 3 months, gold does not perform. But this time around, gold too seems to be in a strong bull grip with high probability of touching 1900-2000 levels in medium term. During these uncertain times, those who think have missed out on the equity rally are advised to allocate some portion of their portfolio to gold atleast for the next 3-5 years.

Event of the week

Urban India has been impacted more by the aftermath of lockdown compared to rural India which is witnessing a faster recovery and normalcy. Auto sales numbers too paint a similar picture. In June 2020, though the pace of monthly declines in sales volume has slowed down in four-wheeler segment but they are still down 53-54% odd on a YoY basis. This shows that odds are not in favor of four-wheelers yet. Whereas, the largest two-wheeler manufacturer Hero MotoCorp reported 4.5 lakh units wholesale dispatches for June 2020 which is around 75% of June 2019 volumes and this reckons a faster recovery in business operations which is now reflected in their stock price. Hence, business houses which largely focus on rural and semi-urban India have seen major traction in demand during these uncertain times.

Technical Outlook

Nifty 50 after forming a spinning top candle in the previous week has rallied swiftly. The index is now hovering around 10,600 mark which had acted as strong support on the way up and might turn into a crucial resistance. Each leg of the rally from March till now is getting narrower in the price range and the whole rally has occurred in the form of a rising wedge pattern which is bearish and might be nearing its termination. Though there is a lot of optimism on the Street and global equities on the hope of positive developments on drug trials, we assume the market is overbought in the short term and expect limited upside. Going ahead we suggest investors to remain cautious as any negative development on global equity might trigger a risk aversion sell off. Support for the index is now placed at 10,200.

Nifty50 Update 03 July 2020

Expectation for the week

A tug of war between bulls and bears have now come to a grinding halt. Whatever bulls had to buy is already done and bears too have covered their large part of shorts. In addition to this, given that open interest across all series is muted and delivery volumes too are lower than the previous month, majority of stocks are at or near their 200-Day EMA. Markets are expected to remain sideways and range-bound, unless some dramatic triggers turn the wheel either up or down. India-Sino escalation may turn out to be a show spoiler, on which markets may react negatively in a sustained way. Further, continuous selling pressure from FPIs in the secondary market may not let the bulls take charge. There seems to be an absolute lock-jam and July 2020 is anticipated to be a boring month for both traders and investors. It is expected that a definitive movement in markets may be visible once India Inc. unveils its Q1FY21 earnings performance with its first-hand analysis of ground level reality. In general, both investors and traders are advised to stay away from the vicissitudes of current market. Nifty50 closed the week at 10,607.35, up by 2.2%.