Investors should not indulge in risky trades
 
Bulls have started taking a breather given the spectacular sprint of Nifty50 in the month of August. Reliance Industries, this heavy weight has most likely turned the tide and correction has now set in which will eventually encompass the entire market. Surprisingly, markets are not pricing in the disruption that will be caused by the Sino-US trade wars and currency depreciation. Such disregard is not newand, in the past, it has been observed that the late 2007 Bear Sterns had gone belly-up and it was only in early 2008 that the global bourses had priced in the risks of exotic derivatives and had spiraled down causing the massive financial crises. Same facts/situations don't repeat but principles do repeat! Current trade wars although may not immediately impact the markets but the underlying businesses no doubt are impacted and soon the changing equation will be felt in the stock prices.
 
There is too much noise around the rupee vis-à-vis dollar touching new lows but statistically speaking there is not much correlation between the rupee depreciation and bear markets. E.g.Between August-October 2013, rupee depreciated by 17.6% while Nifty was up by 2.1% in the same period. Looking at another instance, between August-December 2011, rupee depreciated by 22.7% while at the same time Nifty fell by 12.1%. This indicates that rupee might not be a spoiler in the sustainability of the bull rally but other factors could.
 
Events of the Week:
 
After a postponed announcement, Jet Airways finally reported a disappointing quarter with a loss of Rs. 1323 cr on account of rising fuel prices and foreign exchange losses. The Company has come up with a revival plan to turnaround the operations by engaging in various cost-reduction initiatives, but seldom such initiatives bear fruits in an ailing industry. US reported best evergrowth in its consumer spending this quarter and the inflation figures met the 2% target for the 3rd straight time this year.Thus, strong domestic demand, a tightening jobs market and rising inflation all point to an imminent rate hike by the Fed this September end.
 
Technical Outlook:
 
Nifty 50 is losing its strength with every passing day. The same can be captured in the MACD indicator. The indicator is showing negative divergence with the price action indicating that the prices are moving higher but with lesser and lesser velocity. The upward channel trend line is also acting as a strong resistance. Short term traders should reverse their long positions if Nifty turns below 11600 and medium term positional traders should exit their long positions if Nifty 50 falls below 11400, till such time traders should enjoy the bull ride.
 
Nifty Today
 
Expectations for the Week:
 
Markets are expected to remain largely under the profit-booking zone. IT stocks are undoubtedly riding on the bandwagon of rupee depreciation but in the short to medium term they have reached their overbought levels and are likely to correct soon. However, other export-oriented industries like textiles, auto-ancillaries have still some more room left for an up move. The Indian Government's rhetoric to merge PSU banks will not create short-term fireworks in the PSU Banking space but they still remain value buys for patient long-term investors. Traders should rotate their portfolio and book profits in companies like Reliance and other consumption stocks and enter stocks like SpiceJet and metal plays like Vedanta. Nifty50 closed this week at 11680.50up by 1.06%.

Just another bumpy macro-led week!
 
Markets seem to be enjoying a see-saw ride by taking cues from the global tides. The entire globe was filled with terror with the escalation in the Lira crises. On fears of trade wars escalating into a full-blown crisis led to the spiraling of the rupee along with the depreciation of other emerging market currencies across the world. Indian indices tried its best to withstand the global onslaught and closed the week in positive territory - commendable strength indeed. With the results season almost at an end, it will mainly be the macros which will decide the fate of the Indian bourses, but the currency ghost will not die soon which will keep the bulls on their toes.
 
Mid-caps and small-caps which had been beaten down since the start of the year are seeing some traction as mutual funds and other investors have started accumulating the value picks. The fear and pessimism have created good opportunities in a few stocks for value investors, however, one must be cautious because the kind of volatility and valuations that the large-caps are witnessing is an un-encountered territory. An investor must cautiously go shopping on Dalal-Street and not blindly pick up all the beaten down mid and small caps.
 
Events of the Week:
 
Rupee crossed the Rs. 70/$ mark this week ahead of the 72nd Independence Day. Erdogan-Trump head on collision created a bloodbath in the markets which caused the rupee depreciation. On the other hand, the commodity prices witnessed huge blows which led the investors and traders to stick to defensive plays and take refuge in the IT stocks. On the Q1FY19 results front, SunPharma stole the show with a stellar performance in its bottomline by reporting a PAT of Rs. 982cr this quarter compared to the previous year loss of Rs. 424Crs. Cadila, Jain Irrigation, Balkrishna Industries, Tata Steel, Grasim, DHFL are few other companies which showed robust growth in their profits this quarter which led to the respective sectoral rallies which was quite encouraging.
 
Technical Outlook:
 
Nifty50 seems to have exhausted in the near term. Time cycle suggests that a sharp correction is overdue. The upward channel is acting as a strong resistance and its seems that the market will respect the same. Oscillators have turned distinctly negative suggesting loss of momentum on the upside. All long positions should be exited below 11300 and shorts can be initiated below that level. No fresh trades are advisable unless 11300 in Nifty50 is decisively breached, till that time hold all long positions with a stop at 11300.
 
Nifty Today
 
Expectations for the Week
 
Markets are a function of liquidity, greed brings liquidity, but fear takes it away. Markets are not pricing in worsening scenario which in a way is rational, but not everyone is rational especially the politicians. India can't be an island, in the integrated world order, no sooner the world political leaders act irrationally fear would rein in thus choking liquidity impacting all markets including Indian markets. But it is better to remain little optimistic and ride the wave so long as it lasts. There are imponderables but sticking to quality stocks would be sensible. The recent correction in HDFC Bank is a good opportunity to accumulate. Indiabulls Realestate looks ripe for a powerful rally once its buyback is over, which is in the last leg. Pharma seems to have begun the bull market and taking a basket approach would be the best strategy. Lupin, Aurobindo, Cadila and Dr Reddy would be ideal options. With the tremendous inflow in the technology space in the previous week it would be advisable to avoid new fresh buys in this sector. Nifty50 closed the week at 11470.75 up by 0.36%.

Nifty New Highs - Is this a mirage?
 
Indian stock markets celebrated this week by touching new highs on every single day and the market breadth was somewhat better with small and midcap shares also participating in the rally. Our indices were resilient inspite of negative global headwinds regarding tariff wars, sanctions on Iran and political slugfest between US, China and Russia. Once the result season is over, Mr. Market will hopefully adjust to the global realities and will be in-line with the global indices which have started to move lower. S&P 500 index is nearing a double-top which can be a big signal for global equities, incase the double top turns out to be a long-term reversal, then entire global bull market is at risk. Bull markets are currently ignoring the confrontational attitude of the US with the rest of the world which could lead to a major disaster. One must always remember that "Bulls prosper in peace but bears prosper in turmoil"
 
The current new-high anatomy of the market is very peculiar and the internal health of the market is far weaker than the recent Jan-2018 top. This is evident from the fact that the number of shares making 52 weeks high are currently 36 but were a massive 162 during Jan-2018 top. All time highs currently are only 27 but were 95 during Jan-2018 top. Such a weak configuration of the bull market could never be the basis of a sustained rally and therefore the market sooner or later is expected to reverse the direction and move south.
 
Events of the Week:
 
Key results this week were - Lupin PAT down by 43%, PNC Infra PAT up by 244%, AU Small Finance PAT up by 24%, Future Lifestyle PAT up by 20% and Bharat Forge PAT up by 33%. Numbers overall were very good this quarter and it seems that India Inc. at an aggregate level will post double-digit profit growth this quarter bringing around gains of GST and the benefits of demonetization into the formal sector.
 
Technical Outlook:
 
Nifty50 is nearing its upward parallel line which indicates that soon resistance will emerge on the higher side. Some of the sectoral indices are showing both weaknesses and strengths which suggests that lot of stock specific divergent movements can be expected. In large cap some of fatigue is visible but as such the momentum is still up and therefore a trailing exit stop should be placed below 11350 Nifty50 levels.
 
Nifty Today
 
Expectations for the Week
 
Largecap bulls are expected to take a breather and smallcap stocks should catch-up with the rally. But overall the market is expected to be muted given that the global sentiments are currently not favoring the bulls. There is high probability that the turmoil can snowball into the equity markets worldwide and India will no longer remain immune. Since markets are in an unchartered territory, investors should remain cautious and not put in fresh funds at the current levels, partial profits can be booked. Large caps overall can be avoided as they are currently too overvalued while on the sector specific front there can be some traction in the real-estate and infrastructure sectors in the coming weeks. Nifty50 closed the week at 11,429.50 up by 0.60%.

Markets and its gimmicks - Which sectors are safe?
 
Markets this week have maintained its upward journey by touching new highs but mid-week turned jittery due to higher valuation concerns. The quarterly results have been throwing surprises which have increased the volatility of the markets. In general, among the various sectors, FMCG was the star performer by delivering excellent numbers. Dabur posted its decade best numbers with a rise of 25% in its bottom-line and 18% growth in EBITDA for Q1FY19. PSU Banks were no less, they have been increasing their asset quality, lower fresh NPAs and pick-up in interest incomes.
 
Non- PCA PSU Banks such as Bank of Baroda posted a steep 29% increase in its Net Interest Income with slight improvement in NPAs this quarter. Given the numbers it seems that non-PCA PSU Banks are neck to neck in capturing incremental loan demand by posting growth in line with its private sector peers. This quarter, therefore, will be the turning point for private sector banks which are expected to head lower from the current levels on account of de-rating while the PSU banks should move higher on account of re-rating.
 
Events of the Week:
 
RBI for the second straight time raised interest rates by 0.25% on the pretext of rising inflation fears caused due to local and international factors, but little will change as these factors will continue to exert pressure on inflation. Rising crude oil, falling currencies and more than average increase in MSPs - all these factors combined will continue to push inflation higher. US Fed's guidance of interest rate hikes for a few more quarters will keep the global interest rate cycle on an upward trajectory. Thus, on a whole RBI's neutral monetary stance might only be to calm the effects of future interest rate hikes. But the current looks precarious for global and local equities if interest rates keep on rising.
 
Technical Outlook:
 
Nifty Today
 
Nifty 50 may face resistance on the upper channel line where profit booking is expected. The indicators are near the overbought levels but still confirmation is required for trend reversal. For fresh positions it would be safe to enter the market when Nifty comes near its lower end of the parallel channel without which there is no margin of safety for trading positions, for existing long positions, they should be held on with a stop at 11110 Nifty50.
 
Expectations for the Week
 
Since the US Fed left the interest rates unchanged this time, there are high chances that they will stick to their plan to gradually lift the borrowing costs as growth in the US looks good; this will in turn alleviate risks for global and local equities by the close of the calendar year as US Fed hikes interest rates by that time. Moreover, in the Indian markets, airline stocks seem to be going through a panic-like situation with aviation players such as Indigo undergoing through a dismal performance due to the increase in fuel costs and currency turmoil. This should be a good opportunity for long-term investors to accumulate Indigo and Spicejet as these stocks may be nearing their bottoms soon. In this volatile market, it is also a good time to allocate fresh funds in pharma, PSU banks and book profits in FMCG and private sector banks. Nifty50 closed this week at a record high level of 11,360.80 up by 0.73%.