Welcome to the Megatrend of Automobile Industry

The Wheels of India embraced the challenges faced in the past few years and now it is at the cusp of rapid growth over the next decade. There is absolutely no brake on consumer mobility behaviour when it comes to the adoption of new technology innovations and trends in the Automobile Industry. Connectivity, Autonomous Driving, Shared Mobility, and Electrification (C.A.S.E) are the megatrends driving end-user preferences.

Therefore, the auto industry is not just a traditional business anymore and this transformation of heavy machinery is built with a goldmine of opportunities. Businesses are reviewing how they used to function and are evaluating ways to create new rules for success. This has gained the attraction of a number of industry players from various sectors in the mobility space.

Here’s a look at six diverse sectors that stands to gain an advantage from the disruption!

With a transition into the mobility ecosystem, a network of sectors can leverage their existing capabilities for numerous applications. The new auto ecosystem 2.0 requires taking different approaches, making bold moves, aligning strategic priorities, building new business models, taking collaborative efforts, forging new partnerships, investing in technologies and R&D, and so on. Both, the new entrants and big players with a broader vision in mind are actively exploring opportunities to capture the market’s tremendous economic potential.

The ecosystem will unleash new income streams to foster the growth of futuristic vehicles in India.

To give you a gist, the futuristic vehicles will require battery-related chemicals while increased use of sensors will require a distinct set of chemicals. The rising demand for C.A.S.E vehicles will require more safety, fuel efficiency, and increased scrutiny of environmental impact. Therefore, chemical companies need to be at the top of their game and respond to the changes quickly. On the other side, the domestic production of lithium batteries will reduce our dependency on imports and make electric vehicles cheaper, paving the way for India’s path to electrification. Further, auto tech companies will revolutionize vehicles with the growing number of software-driven technologies.

Various industry players must work hand-in-hand and position themselves differently to reap the benefits.

Therefore, auto ecosystem 2.0 will offer win-win situations for all the players involved and will lead to the New Era in the Automotive Industry. In order to capitalize on the long-term opportunity, investors can pile stocks of fundamentally sound companies from the auto ecosystem.

Technical Analysis:

The frontline index has protected its lower levels and shown positive momentum after finding support near its 50 EMA on the weekly chart. The index re-energized after its previous three months' loss and closed above its previous month's high at 18,065 levels with a gain of 4.06% on a month-on-month basis..

Nifty starts its May series expiry with a follow-through move and trading in a higher high higher bottom formation on the daily time frame. The index has broken its previous week's consolidation range and closed in the green for all five days in the week.

The frontline index formed a doji candlestick pattern on the monthly chart which indicates indecision in a spiky volatile market. The strong bullish candle immediately after the doji formation suggests prices have found support near the low of the candle.

Nifty stands at strong support near 21 EMA at 17,650 levels on the daily chart. If prices fail to hold at a given level, then it's likely to see a further correction toward 17,400 levels. The major hurdle for bulls will be faced near 18,200 levels, if prices break above the said levels, then we will be witnessing a continuation of higher high formation. Nifty50 closed the week at 18,065 up 2.50%.

Time to Ride Along with FIIs!

Foreign Institutional Investors (FIIs) have been on a shopping spree in the past 3 weeks investing a mammoth $1 billion in the Indian markets. Barring a huge deal in March, FIIs have been net sellers in each of the three months of 2023. The premium valuations of Indian markets meant that FIIs withdrew from India and diverted these funds to the other Emerging Markets (EM) which traded at cheaper valuations than India.

So why did FIIs make a comeback to India?

After a correction of nearly 10% from all-time highs, Indian broader market indices which were trading at exorbitant premiums have started to trade at reasonable valuations. Additionally, a sharp rally in EM peers coupled with a corresponding surge in earnings has eliminated the premium, prompting FIIs to flock back to India.

The above chart compares Nifty’s Price to Earning (PE) ratio with its 5 and 10-Year Average PE. Nifty currently trades at a PE Ratio of 20.65x which is well below the 5-Year and 10-Year Average PE of 24.99x and 23.53x respectively. Previously, I mentioned in my article that whenever the index trades below its historical averages, the one-year forward returns have been comparatively higher. Therefore, any fall in PE would make markets even more attractive for FIIs.

Further, as per a recent International Monetary Fund (IMF) report, India’s Real GDP is projected to grow by 5.9% in FY2023, which is the highest in the world. It is further projected to grow by 6.3% in FY24, which remains a tad behind Vietnam’s 6.9%.

Globally, the world is facing recessionary trends. India’s EM peers grapple with their own challenges related to geopolitics, debt, demographics and political stability. In such a macroeconomic uncertain environment, India’s potential to grow unprecedentedly with its resilient and stable macros makes it one of the most attractive bets for FIIs.

The banking crisis across US and Europe further augments the already existing crisis of rising inflation with recession. In its latest meeting, the Fed hiked the rates by 25 bps making it look like we are closer to a rate hike pause. A pause or a cut in the rate hikes would benefit India as FIIs would have an alternative opportunity to invest their funds to earn a higher return.

With its robust economic fundamentals, reasonable valuations, unparalleled growth potential, and the possibility of a pause in rate hikes, India emerges as a compelling long-term investment destination for FIIs.

Technical Analysis:

The Benchmark index started the week with a negative note and had formed a bearish engulfing candle stick pattern on the daily time frame. After forming a bearish candle stick pattern, prices continued to trade lower and ultimately formed a strong resistance near 17,850 levels. Nifty50 on the weekly chart broke its three weeks of continuous upside and slipped into weakness, ultimately closing at 17,624 levels with a loss of 1.14%. On the daily chart, the previous week's index witnessed a falling channel pattern breakout but failed to show any positive price action further than that and has retested its breakout levels.

The index from the last three trading sessions has been trading in a very narrow range of almost 100 points and has formed a small candle on the daily chart. The momentum oscillator RSI (14) has also traded above its breakout levels and firmly held above 50 levels. Over the near term, the trend is likely to remain in a bullish to sideways tone as the bullish breakout of a falling channel pattern is still valid. In the coming days, 17,500 - 17,7400 will be sacrosanct support for the index, while 17,850 could be an immediate hurdle. A break above 17,850 levels will infuse buying towards 18,000 levels. Similarly, a break below 17,400 will open the gate for 17,200 levels on the lower side.

5 Pieces of Wisdom from Marquee Fund Managers to Ace the Index!

Last week I brought to you the key lessons from our top retail investors to Ace the Index. This week I wish to share valuable insights from the marquee fund managers.

During the discussion, fund managers spoke about the do’s and don’ts to outperforming the Index. Further, they guided how to manage market turbulences. Here are some key learnings from the session.

1. Avoid Noise – Uncertainty in the macroeconomic environment often shakes a person’s confidence in a company, leading to a massive sell-off on the street despite it being fundamentally strong. But, do not let the street chatter cloud your judgement. Decisions made under the influence of market noises can often lead to irrational buying, selling, or holding, which can cause portfolio underperformance or even eradicate your capital. If an individual is sure of a company’s growth, it will bounce back soon. A careful and detailed study to make well-informed decisions will aid you to avoid market noise.

2. Be Optimistic and Stay Invested - Off-late we have noticed increased retail activity in the equity markets. They have not had the bitter taste of a bear market. Thus with a mild drop in the index, the retailers panic and sell their positions. The stock market demands patience and optimism to generate long-term wealth and outperformance. If the economy is growing, the markets will compound too. Short-term market fall or consolidation will not be affecting strong companies in the long run. Read how your investments will be impacted by such volatility and take the decision.

3. Risk Management – Fund managers need to follow a lot of protocols while deploying money, retail investors on the other hand are not so heavily regulated. This could give retail investors an edge over fund managers. However, misuse of this freedom could also result in retail investors falling off the edge. One of the most important principles retail investors should learn from fund managers is a comprehensive risk management strategy. In investing, managing risk is as important as earnings returns, Warren Buffet has a popular saying which goes "Rule No 1: Never lose money. Rule No 2: Never forget rule no.1." Therefore, effective risk management strategies should be applied to avoid losses.

4. Exits Are As Important As Entry - In the world of the stock market, a phrase commonly heard is ‘Buy the Dip’ or buy a good company when the valuations have corrected. There are plenty of strategies used by market participants to take a position in a company. But what about exit? Very few people talk about the exit timing. An exit plan works as a fire rescue plan which will aid to sell a holding systematically. One might be outperforming the index but is not sure of what to do next. During such times, an exit plan manages to maintain outperformance.

5. The Fine Line Between Trading And Investing - These words are often used synonymously but differ a lot in practice. People start trading with a small amount and then move on to become investors. Eventually, a dilemma builds up, as to choosing between long-term investing and the thrill of trading. But what if both can co-exist? One can invest a significant amount for the long term while keeping aside a small amount to trade for learning and understanding. Investing a majority of your portfolio in good quality stocks which will garner healthy returns in the long term. Meanwhile, a small portion can be allocated to trading. .

Technical Outlook

Nifty continued its bullish momentum for the third consecutive week and closed higher at 17,828 levels with a gain of 1.30% on the weekly closing basis. Prices have shown a strong reversal from the lower levels and gained more than 5% in just three weeks, which indicates strong buying demand in the benchmark index from the lower levels.
Index on the daily chart continued to trade higher post bullish golden crossover formation of 9 & 21 EMA and prices on the 120 mins chart are trading in a higher high formation which indicates bulls were consistently having an upper hand in the market.
The frontline index has given a bullish confirmation by giving a break above the previous intermediate high and neglecting the lower top lower bottom move. The momentum oscillator RSI (14) has witnessed a breakout of a three-month-long consolidation band and the oscillator has closed above its horizontal trend line with a bullish crossover.
Technically, the view remains with a bullish bias with buy-on dips to be used strategy, with support to be seen near 17,550 levels while resistance is now at 18,000 levels. .

Expectations of the Week

Next week, China's yearly and quarterly GDP figures will be released, providing insight into the country's economic recovery path. With US inflation coming in at an unexpected 5%, jobless claims will be closely monitored. Back home, the quarterly results will gather pace with IT and BFSI companies reporting their numbers. Stock specific movements will be prominent and as investors react to earnings misses and beats, they are advised to assess the company's long-term potential rather than basing the investment decisions solely on quarterly performance. Nifty50 closed the week at 17,828 up with gains of 1.30%. .

Key Lessons from Our Top Retail Investors to Ace the Index!

The Retail Equity market participation has been steadily rising over the years. The numbers have risen exponentially after March 2020. The Number of demat accounts has crossed 10 crores and Retail investors now account for more than 52% of the daily transaction. The rise of equity culture is a strong sign for the economy but the sustainability of the same depends upon whether the retail investors are able to make money in the stock markets.

We at Samco hired Nielsen, a pioneer in consumer insights, and data to conduct a one of its kind study on the Indian capital market. The results were eye-opening. 67% of stock market participants are unable to achieve even benchmark returns, 65% of investors don’t even know what their actual stock market returns are and 63% of investors don’t even target or have any plans to beat the indices.

In an attempt to change this, we have launched “Mission Ace the Index” which we inaugurated at the Samco-Ace-Up summit conducted on 25th March 2023. Apart from the Industry stalwarts we had also invited three of our top clients who have been able to outperform markets and create wealth for themselves. The following are the key learnings from our Index-Acers on how they have been able to outperform the majority of market participants.

The three Index-Acers belong to three different parts of India – Assam, Tamil Nadu, and Maharashtra and just like how they come from different places they follow different strategies to beat the market. This gives us our first learning.

1. There are Multiple routes to one destination – There is no one size fit strategy to create wealth from the markets. All three Index-Acers have their different styles of investing and each has been profitable. One was focused on positional option buying, the other was a bank nifty call writer, while the third index Acer was a long-only investor. Over the years we have witnessed investors from different schools of thought generating wealth. As long as your strategies have a scientific approach and are bereft of emotions it stands handsomely as a strong Index-Acing candidate

2. Become a Market Monk – The markets in the short term primarily get influenced by either facts or noise. Facts for obvious reasons are a stronger indication of the sustainability of a trend. Thus, it becomes important to focus on Facts and not get carried away by the noise. One of our Index-Acer clients shared his experience on how he once got influenced by the market noise and broke his discipline which resulted in him losing close to 70% of his capital invested.

3. Patience is the strongest of all warriors – The art of making money in the market solely relies on two points – The Entry and Exit Points. The one who can control its impulses during the entry and its greed during the exit would perform sustainably well in the long term. Therefore, a disciplined trading plan with precise strategies should be strictly followed.

4. To Earn Serious Returns Treat Investing Seriously – I have always reiterated that most investors treat the stock market as a hobby because they have full-time jobs doing something else. However, if you treat it like a business, it will pay you like a business. If you treat stock markets like a hobby, it will pay you like a hobby, and hobbies don’t pay; they cost you. Even when you are trading for the short term think of it as a long-term business. One of our clients gave a beautiful example of compounding capital over the long run. Rs 10 lakh compounded 1% each week for 10 years can generate a wealth of Rs 17.5 crores .

5. Humility is the foundation of all Virtues – Having the wisdom to appreciate that you do not know a lot of things would go a long way in your investing journey. Because it is only when you accept you do not know you will initiate the process of learning. There will be times in your investing journey when your strategies fail to deliver returns. There is no problem in making mistakes but the problem is in not accepting the mistakes. It is the quality of humility that separates champions from the rest. .

Technical Outlook

Nifty50 continued its previous weeks' bullish momentum and inched higher for the second consecutive week and closed near 17,600 levels with a weekly gain of 1.38%. Prices witnessed a downward-sloping trend line breakout on the daily chart and continued to sustain above its previous week's high. Index on the daily time frame is indicating strength post-breakout and prices are sustaining above their important short-term averages. The momentum oscillator RSI (14) has witnessed a breakout of a three-month-long consolidation band and has closed above its horizontal trend line with a bullish crossover. The prices were trading below their 50-week exponential moving average from the last three weeks but as the index reversed from the lower levels and prices again closed above its 50 EMA which is placed at 17,425 levels. We are witnessing a decrease in volatility as India’s VIX has drifted below 13 levels. Technically, bulls are having an upper hand in the ongoing trend and the index remains in a buy-on-dips mode as of now. A closing below 17,300 – 17,250 may accelerate the bearish momentum towards 17,100 - 17,000 which were the prior support zones for the benchmark index. On the other hand, resistance is capped below the 17,800 level and if prices surpass that level, then the 18,000 level will be the next resistance. .