Latest Indian Share Market Updates & News in Apr 2019

Is There a Hurry to Buy - No!
 
Markets during the week traded largely sideways with an upward bias although Nifty went up during the week; but the small and mid-cap indices were still languishing indicating that the markets are in no hurry to set a decisive path for themselves yet. Such divergent behavior of the Indian bourses will generate no meaningful direction for the markets. However, in the meantime there are certain risks emerging from the global markets. In the US itself there is also such divergence. Dow Jones is sitting near its all-time highs with far lower momentum strength while S&P 2000, the small cap version of the US market, is far below its all time high showing the unlikeliness that the bull rally will continue in the US.
 
Despite months of efforts, China and US still haven't been able to resolve their trade dispute. Additionally, the US blanket sanction on Iran not to lift crude oil is also a destabilizing initiative which can derail the global bull markets if conflicts escalate and most likely they will. Although economically, the world is at its best time but politically, we are in our worst phase. This is the biggest risk to the bull markets which no one is factoring in currently.
 
Events of the Week:
 
A mixed sentiment from the quarterly results of companies kept the markets on its toes this week. Among the banks, HDFC bank, Axis Bank and AU Small Finance Bank gave strong bottomline growth. Sterlite Tech reported a growth of 68% and Ultratech Cement grew 131% in PAT this quarter compared with the previous year quarter. There were certain companies which disappointed analyst expectations such as Maruti which experienced a degrowth of around 5%, ACC grew only 38% while ICICI Securities degrew by 11%.
 
Technical Outlook:
 
Nifty50 is trading cautiously near its all time high. Nifty50 had made a failed attempt to cross its all-time high but since then it is languishing around those levels. Such consolidation is expected to last longer but any decisive breakout above 11900 will signal resumption of an uptrend. However, in order to protect the long positions, one needs to keep a stop below 11500 in Nifty50 which can take the market much lower if such lower support is broken.
 
Nifty Today
 
Expectations for the Week:
 
Open interest is consistently reducing in the futures market given the already elevated levels and the uncertainty on election outcome. Status quo is expected to be maintained going forward. Therefore, markets are expected to move either 2-3% up or down from the current levels. On a sectoral level, FMCG, capital goods and healthcare are largely sideways with very little volatility. Whereas, realty, mid-cap, auto, metal, power and small-cap are in a corrective mode with further downward pressure going ahead. This further vindicates our stance of a non-bullish case in the immediate time frame of the markets. Investors must therefore not rush into the markets in this indecisive phase and go shopping not atleast till 23rd May when the election results come out. Nifty 50 closed the week flat at 11754.


Markets await a hitch in mid-May?

Markets began the week in full zest and attained lifetime new highs but the participation from Dalal Street players was subdued considering the uncertainty due to the election outcome. From a macro perspective, with a decline in US treasury yields the emerging markets started experiencing a strong inflow from FIIs. Right from February, India started the rally and there seems to be no pause considering the strong number of put writers at 11800. Primary markets are also witnessing a sudden surge in IPOs after the lull in 2018. Polycab and Metropolitan Healthcare opened this week at a premium of 17.6% and ~9% respectively which proves the positive sentiment of the market participants. The sentiment towards India has turned hugely bullish from a short-term perspective, however a speed breaker is expected around mid-May when the election outcome will decide the final direction for the Indian bourses, till then the correction phase will continue.

Fundamentally too, the result season has kick-started on a cheery note with TCS recording a Q4 FY19 PAT growth of 17.7% and ROE of 35%. With a market cap of close to 8 Lakh Crs, TCS has yet again proved to be a frontrunner in its sector surpassing the likes of Infosys, Mindtree and Wipro with its spectacular quarterly performance.

Events of the Week:

The aviation space is undergoing a tumultuous time with Jet Airways temporarily stopping operations and Spice Jet and Indigo rejoicing on Jet's woes with a sudden rise in their stock prices. SpiceJet has risen by a higher margin compared to Indigo and it also expects faster growth given the slots garnered from Jet, better regional connectivity due to more non-metro routes and improved pricing. Therefore, it is in a strong space to meet the valuation gap with Indigo.But all at the consumer's grief who is facing a surge in airfares at the brunt of limited supply and ever-increasing demand.

Technical Outlook:

Nifty50 is currently in an unchartered territory and touched new highs of 11,856. Charts indicate that previous resistance levels have formed a new support for Nifty at levels of 11,730and if markets continue to weaken further, it means that there will be failure to go above the new highs attained.Hence traders must book profits in over-bought counters and not initiate any fresh longs at the current moment.

Nifty Today

Expectations for the Week:

Markets are expected to remain subdued and under pressure atleast till the election season is over. However, volatility will continue to remain on the higher side as knee-jerk reactions are expected due to the ongoing results. Investors must stay on the by-lanes and not rush in to ride the current rally till the uncertainty fades away. The financial services industry will be on next week's radar as important results of companies such as Indiabulls Housing Finance, Yes Bank, M&M Financial, Axis Bank, SBI Life etc. are going to be announced. Nifty50 closed the week at 11752.8, up by 0.9%.



Mr. Market is Boring – Correction Underway

Markets are witnessing a whipsaw phase where neither the bulls nor the bears could make headway during the week. This is typically a corrective phase which the markets are undergoing after witnessing a strong rally from 10600 right upto 11800, which is now being corrected. Statistically, similar such corrections in the past have taken around a month’s time to correct. Therefore, the current corrective phase has just begun and it should last till the middle of May, however the undertone of the market will not be weak. The amount of price correction would be difficult to estimate but time-wise markets will take their own sweet time till May to correct.

The result season will bring in some amount of volatility but that too would be restricted to either intraday or at best till the next day before the impact settles down. Nonetheless, the undercurrent will be of the corrective phase and Indian bourses will continue to remain boring. Therefore, traders should ideally avoid analyzing the markets in the current phase, but instead analyze elections.

Events of the Week:

The US Department of Justice has finally booked 5 of India’s top pharma companies out of 18 global players in price cartelization for selling pharma generics in the years 2012-17. It should be recollected that companies like Sun Pharma and Aurobindo Pharma had their best run-up in the prices as profits and revenues grew. For example, 1 of the Companies had reported CAGR growth of 25% in its topline in the same period, whereas currently the growth is anemic. Potentially, the penalties can go upto a few $100 million which currently the markets are not pricing in but soon companies will have to shell out the abnormal profits that they had earned back to the US Government. Currently, there is no point betting on pharma companies till the cases are concluded.

Technical Outlook:

Nifty50 is consolidating around 11600- 11700 levels and showing strength on every decline. However, since the prices have broken the upward moving regression trend channels, the bullish impulse is over and prices will correct hereon although the price deterioration may not be significant but time correction will be longer. Buy on decline should be strategy for traders with proper stops in place. Stocks trading near the lower price supports should be bought rather than buying breakouts because many false breakouts may be experienced in such corrective times.

Nifty Today

Expectations for the Week:

Markets will continue to be lackluster although some of the corporate numbers will inject steroids to the otherwise dull market.The IT index has made a triple top which suggests that prices are not going to rise in a hurry. Howsoever, the results of IT giants although are slightly better than expected but they will not move into new price territory given the high valuations and built in high expectations. Also, metal prices such as aluminum and copperare likely to witness further pressure and therefore metal stocks should be avoided by investors,but traders can initiate short bets. Nifty 50 closed this week at 11643, down by 0.19%.

Elections - A Speed breaker for the rally
 
Markets during the week surprised many by witnessing profit booking and reversing the intermediate bull trend. Also, since the last 2 weeks, open interest in Nifty Futures was 25% below its normal of the previous month suggesting that fewer participants were convinced in this rally. Moreover, RBI in its first bi-monthly report had observed that since last 3 consecutive quarters there is slowdown and macros were not favoring growth. Globally, the growth engines are slowing given that central banks have turned dovish, which is why RBI too reduced interest rates by 0.25%. Markets need to align to such realities and is therefore heading for a correction, which should probably last till the last week of May.
 
Profit booking is expected in sectors such as PSU, private banks, realty, infrastructure and energy which were a part of the bull run and have witnessed a sharp run-up. A mean-reversion is therefore imminent and traders may consider shorting only these sectors which have a higher probability of correction rather than sectors such as FMCG, auto, metal, IT and pharma which showed no traction during this rally.
 
Events of the Week:
 
Auto numbers are a big barometer to evaluate the health of the economy and last month's numbers were very discouraging given the high inventory levels, production cuts and slowdown in sales. However, Mr. Market is nearing its all time high. This is a macro factor divergence as either auto numbers must increase in order to justify the elevated market levels or markets will have to correct to align with the ground level economic realities, the latter has high chances of happening.
 
Technical Outlook:
 
Nifty50 is showing signs of fatigue, upward price velocity is getting weaker and weaker. Prices nearing a previous top make the likelihood of a double top more certain. The moment prices break the upward moving narrow trend channel, a serious correction of the entire rally will begin. On a closing basis, prices below 11550 in Nifty50 will confirm the break of narrow trend channel. Traders can go short below 11550 for a swift correction on the downside.
 
Nifty Today
 
Expectations for the Week:
 
Both the earnings and the voting season will drive analysts crazy with the inflow of abundant news information and the predictions from polls. But markets are expected to steadily correct albeit with higher amount of volatility. Since the elections are just around the corner and they will dominate the bourses, investors are advised to wait patiently and not get carried away by the current rally or the expectation of election outcome. From a specific sectoral perspective, too many expectations are built around the IT sector and if numbers are below street estimates they will pose as a big risk to the IT space. Nifty50 closed the week at 11666, up by 0.36%.