Latest Indian Share Market Updates & News in Aug 2016

Profit booking to Continue

NIFTY50 opened the week with negative bias and profit booking continued throughout the week.  Low volatility and F&O expiry kept the market on tender hooks. The parting gift from Rajan came, in the form of creation of vibrant and deeper bond markets; these will give an impetus to Companies to borrow funds from the Bond market albeit at a lower rates compared to banks, this reform has created an alternate route to raise debt for the companies vis-à-vis Banks earlier. This will have far reaching consequences on the NIMs of the banks both private and PSUs. The recent IPO of RBL Bank saw applications worth Rs 84000 Crs v/s Rs 1200 Crs sought in the IPO, an oversubscription of 70 Times! This indicates the huge liquidity in the system which is keeping markets buoyant.

Key events of the week:

Cabinet cleared the revised Double Taxation Avoidance Agreement with Cyprus a signal that India will hence forth not tolerate taxation slippages due to treaties. These types’ reforms will in a way curb generation of black money too. The Cabinet Committee on Economic Affairs also cleared Railway projects worth Rs 24000 Crs across 9 states to lay 2000 Kms of rail infrastructure keeping the promise of the Rs 1.2 lakhs Crs government spending target during the current fiscal. Rail related stocks will benefit due to this outcome.

Technical Outlook:

Nifty50 continues in a sideways narrow trading range with slightly lower bias in the short term. The indicators are turning into neutral territory and cooling off from the overbought levels.  The trading volumes are falling and volatility is also at its low confirming ongoing corrective pattern in the market.  Traders should enter long only above 8750 Nifty50 levels for short term momentum gains. Investors are advised to stay away and traders should exit long if Nifty50 penetrates validly 8500 levels.  Existing long positions should be trailed at 8500 Nifty 50 levels.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

Market is awaiting comments from US Fed Chairman this week end for likely course of action at its September 21st scheduled meeting. Till such time market will bounce up and down speculating the interest rate expectations. Welspun India ltd saw its stock tank by 60% on account of allegations of usage of Sub-Standard material by one its large customer. Such events often happen in the corporate world, but how an investor can play safe in such a situation? The Golden rule of effective diversification is the only way for investor which otherwise these kinds of events can happen to any company. A proper diversification is the only way to manage such risk at the investor’s end. Samco Securities ltd has developed Risk Advisor for the utmost safety of the investors which guides them pictorially the extent of diversification both sectorally and individual stock wise. Investors must properly diversify their equity portfolio so that such incidences like Welspun India ltd don’t impact much, both psychologically and financially.  NIFTY50 today closed the week lower by 1.08% at 8572.55

Sideways consolidation in the Market

NIFTY50 went into hibernation this week assimilating the corporate scorecards. Narrow range during the week combined with lacklustre volume made the week boring for the market participants. Last year around the same time the pessimism in the global markets had begun; there was tremendous pressure on various commodity prices. Coal and Crude were hovering at decade low prices, Steel suffered relentless Chinese dumping, base metal prices too falling due to lack of industrial demand. However there has been now a 360% change in the market outlook. Currently coal is running at its yearly high, rising 35% from the bottom, Crude oil has risen by whopping 74% from the nadir lows and steel and metals are buoyant. The results of the companies indeed did reflect the same factum. Metal companies like Hindalco doubled their quarterly profits whereas companies in the Airline sector were impacted by rise in crude oil prices. There were other contrasting reactions in the market. Cipla reported 44% decline in its quarterly PAT but the stock price rose 8% the next day, whereas Lupin reported rise in its quarterly PAT by 55% and stock price tanked by 5.4%. Stock market is a function of expectations. Knowing such expectations is the key for successful traders.

Key events of the week:

WPI came at 3.55% and CPI came at 6.07% scorching ahead of the expectations by rising to levels not seen in the past 24 months. The onset of Kharif crop will soon cool down the inflationary pressure principally caused by food items, opening the doors for interest rate reductions in the Indian economy. SBI has announced the merger ratio with its associate banks clearing the way forward for creating a behemoth in the banking space. SingTel to raise stake in Bharti Airtel by increasing stake in parent company by investing Rs 4400/- Crs a sign of long term faith in the sector when others are deserting it. This is an ideal case study of contra investing.

Technical Outlook:

Nifty50 continues in a sideways narrow trading band. The correction during a strong bull market often takes place with shallow price correction. The indicators in the mean time are cooling down from overbought levels to more sensible levels for creating further room for up moves. The trading volumes are falling confirming the continuation of correction. Traders should enter long above 8750 Nifty50 levels for short term momentum gains. Investors can selectively accumulative quality shares albeit in a staggered manner to avail the benefits of rupee cost averaging. Existing long positions should be trailed at 8500 Nifty 50 levels.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

Market is injected with lot of global liquidity. FPI’s have for the 26th consecutive day invested positively in the Indian market totally to Rs 37600 Crs year till date, whereas DII’s have net invested Rs 7900Crs year till date leading to buoyancy across all categories of the shares. Commodities too have gained due to side effects of liquidity caused due to near zero interest rates across many developed economies. However the ill effects of liquidity in the form of inflation have started to raise the ugly head. The FED too seems to be cognizant of the fact and have hinted to nudge the interest rates in the September meet. Market will slowly start reacting to global events, as news flows from domestic market would be shallow as Parliament is not functioning and result season is likely nearing its end. IPO of RBL Bank may be subscribed for short term listing gains, the pricing at 2.9 times book value with a good track record of 30% plus growth rate since last 3 to 4 years makes a case for listing gains in the hands of the investors. NIFTY50 today closed the week slightly lower by 0.06% at 8666.9
Nifty Today
Note: GBPINR looks poised for a short term rally after forming classic double bottom in the midst of pessimism. Contrastingly UK’s FTSE is hovering nearing its life time high creating a solid divergence in the currency market. Traders can buy GBPINR keeping double bottom as stops.

Bullish Hangover Continues

NIFTY this week opened on a high note but during the week profit booking dragged the indices lower but later bounced back to close in the positive territory. There is some amount of consolidation happening at the current juncture. Results of major companies are almost out indicating acceleration in the general performance and going forward the monsoon too would favourably impact the results for coming quarters too justifying the market’s alleviated levels. M&M reported 16% growth in Q1 PAT, Motherson Sumi 13% PAT growth, Lupin 55% PAT growth, Dhanuka Agritech 16% PAT growth, Manappuram Finance 23% growth, Hero Moto 18% rise in PAT, Aarti Industries 35% growth in Q1 PAT respectively, at the same time Bank of Baroda reported it’s PAT down by 60%, Idea Cellular reported it’s PAT down by 74%. Markets have been quick in discounting the numbers and at the same time monsoon session of the Parliament coming to an end, the market will watch out global factors in the near term.

Key events of the week:

Yes Bank to raise growth capital in excess of 1 billion USD to capture a larger pie in the fast growing borrowing needs of India Inc. Considering the plans, it would be profitable to invest in banks like Yes Bank and other private sector banks as part of investors portfolio for the long term. After a long wait AB Nuvo and Grasim to undergo corporate restructuring, intending to unlock value for the minority shareholders but the street is expecting the other way. HDFC and Max Life merger cleared by the respective boards for creating Insurance be mouth worth Rs 67000/- Crs the largest listed entity.

Technical Outlook:

Nifty50 continues to show resilience inspite of overextended rallies. The higher top and higher bottom sequence is propelling markets to newer orbits. The underlying trend is strong enough that any corrections are of sideways and shallow in nature. Friday’s strong close indicates a strong bullish candle indicating further upside in the coming weeks. The markets can remain at over bought levels for extended periods of time during strong liquidity periods. Traders should trail their stops on their long positions below 8500 levels.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

Market is intoxicated with huge amount of liquidity due to loose monetary policies across the globe which has ushered in unprecedented liquidity in the financial systems putting aside sensible valuation benchmarks. Good quality shares seldom correct meaningfully during the continuation of the bull market, but the wishful hope of buying such quality shares on corrections deprives the fence sitter to participate in the bull market. Although markets are mesmerised by bullish consensus, however ground level macro economic factors too are shaping up the foundation. Passenger vehicles sales grew by whopping 16% in July and two wheelers grew by 13%. However commercial vehicles growth just remained flat at 0.11% causing some concerns whether there is slowdown in the industrial activities, it will however be too early to draw any inferences, but investors should be cautious on CV manufacturing companies and at the same time remain overweight on two wheelers and four wheelers. Investors can stagger their inventible surpluses over next six months for getting the rupee averaging costs benefits. Any correction should be utilized for building long term portfolios. Traders should play the momentum stocks and trail the profits. NIFTY today closed higher by 0.52% at 8672.

New Laws are Raining in India Like Never Before

NIFTY this week opened with high spirit at the beginning of the week, dipped mid week and again bounced back on the back of liquidity gush in the system. PMI data points to acceleration in the economy. Indicators suggest whopping 5.2% expansion in July as against 2.8% in May and 2.8% in the corresponding previous year. Markets too are continuously discounting the encouraging macroeconomic numbers. July automobiles growth numbers surprised the street, passenger vehicles registered on an average 12% growth signally a loud and clear economic robustness in the system. Path breaking new laws will spearhead the country to become the second largest economy in the world by the turn of this decade.

Key events of the week:

Foundation for the historic path breaking tax reform has been laid down, now the super structure will be build over a period of time through the state approvals etc. GST will truly lead India to accelerated corruption free inclusive growth for the masses in the country. Far reaching amendments were cleared by the law makers for speedy and hassle free debt recovery in a time bound manner further enhancing the Bankruptcy Code for making India Bad Debt free economy. Potentially now, the ecosystem for PSU Banks will change permanently and they too will emerge as profitable as their private sector peers.

Technical Outlook:

Nifty50 has renewed the upward momentum amid over extended rally. However the rally is not supported by the momentum indicators. But markets can remain at over bought levels for extended periods of time during liquidity driven rallies. Greed is keeping the markets at alleviated levels. However the sentiments can change from greed towards fear, overnight on occurrence of some negative news, causing corrections to begin. Traders should trail their stops on their long positions and investors should stay on the sidelines till the market comes to touch the lower level of the regression channel which comes at around 8300-8400 levels in Nifty50. Long term trend is firmly intact but short term is ripe for correction.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

Stock Market is mesmerised in hopes of macro factors being in favour for further economic growth and expansion. Market will show lot of activity in the mid cap space and therefore the front line Index may not show the underlying volatility in the mid cap space. Companies operating in the industry where in lot of unorganized player operate will see lot of activities on hopes of GST benefits. Favourable monsoon and coming festive season will keep the market at alleviated levels. Any correction should be utilized for building long term portfolios. Traders should play the momentum stocks and trail the profits. NIFTY today closed higher by 0.52% at 8683.