Latest Indian Share Market Updates & News in Dec 2017

Can falling Govt revenues jeopardize rising stock Market

Market continued to trade choppy possibly due to year end blues. Market was hyper responsive to news and events. Focus on bankruptcy and debt resolutions were the key highlights of the week. Rcom surprised the market by a wide margin. The stock price zoomed past anybody's expectations. This is the habit of market to take everyone by surprise, when none is expected. Courtesy the sword of IBC, at last Rcom has relented and voluntarily arrived at a resolution. Year 2018 will see lot of debt resolutions happening which will be positive for public sector banks.

The year 2017 had been exceptionally good in terms of massive domestic liquidity to the tune of Rs 90,000/- Crs being funnelled into the financial markets. Contrastingly, FPIs removed Rs 44,000/- Crs from the market. GST collection has been faltering continuously month after month from a peak of Rs 94,063/- Crs in July to Rs 80,808/- Crs in November. This has strained the govt finances which led them increase their borrowing limits to borrow additionally Rs 50,000/- Crs in the next three months. If GST collections do not increase, govt's ability to spend will be constrained which will not augur well for the stock market.

Events of the Week:

Hard work of RBI and Govt has started to show results, under IBC, NCLT candidates have started to receive bids, results though are not encouraging. On an average buyers are offering only 25% to the lenders, that means banks will have to permanently forgo approximately 75% of their advanced amount which is huge and they had only provided to the extent of 50% in their books, the rest will have to be provided in current financial year. Aion-JSW steel are offering 25% to the lenders for Monnet Ispat, Dalmia Bharat Cements offered 20% to Murli Industrie's lenders.

Technical Outlook:

Market is slowly inching higher towards upper channel. The break of downward falling corrective pattern indicates that the upward movement has resumed. Low volatility means the upward movement will gain momentum once the consolidation phase is over. Traders should go long keeping stops at 10,375 on Nifty 50.

Expectations for the Week

Market is expected to trade with upward bias. Year 2018 will begin with budget expectation rally. Stock specific movement shall be the way forward. Front line indices will witness low volatility but will steadily rise till the budget.

Year 2018 will also witness massive IPOs rush especially from PSU banks in the form of QIPs or FPOs. Sectors to watch out for would be agriculture, cement, realty catering to low cost housing, Public sector banks, dairy, power and ports; these sectors can witness heightened activities in the pre budget rally.

Investors should continue investment in the form of SIP in front line stocks till Budget every week so that the cost is averaged out over a period of four weeks. NIFTY50 closed the week at 10,530.70 up by 0.36%.

US passes Pro Rich Tax bill but India may go for Pro Poor budget bill

Market continued its celebratory mood throughout the week, with mid and small cap shares being the most sought after category inspite of doubly expensive valuation tag than the front line large cap stocks. Mid Cap indices are trading at 54 times whereas front line indices are trading at 24 times.

FPIs have been selling for 5 consecutive months in a row and the yearly net outflow tally would amount to Rs 45,000/- Crs second highest since the financial crises. Whereas domestic institutions have poured in the highest in decade, Rs 90,500/- Crs on the back of huge domestic savings being channelized into the financial assets.

A record 6.25 Cr demat accounts were live with two of the depositories. Approximately Rs 80,000/- Crs have been sucked from the primary and secondary market in the form of IPOs or QIBs this year. The year 2017 was the biggest year of fight between domestic and foreign liquidity, the results however would be out only in the year 2018. Who will surrender first, will certainly set the tone of the next big move in the market?

Events of the Week:

US finally approves the most dramatic cuts in the corporate tax rates from 35% to 21% and one time repatriation tax at 14.5%. This is the game changer for many thriving industries in India which were growing by exporting goods and services to US. India's export oriented industries will be the first to be directly hit at least in the short term. MNCs operating in India will also shift back some of their operations to US in order to avail lower rates. By this bill US wants to nullify low labour cost advantage enjoyed hitherto by the developing economies which can now massively derail their growth engines. Sectors such as textiles, Jems and Jewellery etc may face the heat soon. Investors must be cautious in these sectors

Technical Outlook:

Market has broken the downward falling corrective movement (red) line indicating that the upward movement has resumed. There are wide divergences in the indices. Mid and Small cap indices have catapulted to new highs by a big margin but Nifty50 is just hovering near previous new highs not being able to break decisively, which could lead to some amount of consolidation and then a up move could be expected. Traders should go long keeping stops at weekly lows.

Expectations for the Week

Market is expected to trade with upward bias. Front line stocks are expected to maintain low volatility because largely big institutional players will be absent, however mid and small cap will have lot of actions based on news flows.

Not all stocks will participate in the rally going ahead in view of high valuations and upcoming huge line up of IPOs and divestments. These will suck up the floating liquidity in the system. HDFC twins are expected to scoop up around Rs 24000/- Crs, Tata Steel is expected to raise Rs 13000/- Crs from rights issue. In January PSU banks will come in the market to raise capital. Though Rs 24000/- Crs have been returned to the shareholders in the form of buyback proceeds from two of the India's largest IT companies, Infosys and Wipro but the amount of outflows from the hands of public would be much more in next few months.

Market is poise itself for a budget rally beginning the first week of January. The budget of 2018 would be the most awaited budget by India Inc and investors alike which will set the tone of bulls sustenance throughout the year or could prove to be a sharp correction depending upon the extent of the populist measures announced.

Investors should begin investment in the form of SIP till Budget every week so that the cost is averaged out over a period of five weeks. NIFTY50 closed the week at 10493 up by 1.54%.

Race to New High will take some more time

Market had a roller coaster ride on speculation of outcome of Gujarat elections. After the exit polls, however the market had a sigh of relief at least for the time being. The actual outcome on Dec 18th would therefore be now more of a sentimental nature without substantially affecting the market rhythm in the near term.

Inflation surprised the market which rose to 4.8% in November registering 8 months high, while IIP number were muted at 2.2% for October, lower than 3.8% in September and 4.5% in August respectively. Both the numbers indicate that the health of the economy is not good. Continuous reduction in IIP numbers indicate that restocking due to GST is done and there is no incremental demand coming in leading to slowdown. Rising inflation will also dash the hopes of interest rate reduction in India as US has guided for 0.75% or higher interest rate hikes by 2018 which will clip RBI's ability to reduce interest rates in India, a factor detrimental for sustained bull market.

Events of the Week:

Out of 28 accounts shortlisted by RBI, PSU banks have only sent 23 accounts to Bankruptcy Court which is a big positive, 5 accounts would have arranged to repay the loans otherwise fearing loss of control. The purpose of IBC has been achieved. Bids are being submitted for the 12 accounts and the race seems to be gaining momentum. UCO and Allahabad Bank have sold their account in Jai Balaji to an ARC thus accelerating the clean up process. PNB and Union Bank are nearing to raise money through QIPs. With Gujarat election giving thumbs up, govt and RBI will now swiftly clean the bad loan mess quickly and make PSU banks again an investment grade sector which hitherto was written off.

Technical Outlook:

Market is moving in a downward moving channel which if broken decisively on the upside would begin the rally to new highs, but till such time the market will oscillate in a range. Nifty50 can test upper range of 10420 after which a corrective fall is expected towards lower end of the channel, however such hypothesis will be nullified if the market decisively trades above 10500 which will indicate resumption of the rally to new high. Longs should be avoided for now for trading purposes and traders should buy on decline.

Nifty 50 Weekly Chart

Expectations for the Week

Market would initially rejoice the victory when results are finally out by Monday but soon the correction would resume. Only for a week the market will be active after which year end holiday mood will grip the whole world. The Parliament session will have some fireworks which the market will be watching. The mood of the market will remain buoyant and stock specific movement will dominate the week but in general the wait and watch phase will continue.

Some sectors have corrected decently and are therefore ripe for bounce, Metal stocks particularly base metals looks promising in the near term given that correction in the overseas market in these metals are mostly over. Stocks like Vedanta and Hindalco will have action. NBFCs too have corrected deeply and should attract the attention for positional traders. Housing Finance and Consumer Finance companies like DHFL, CanFin Homes, Bajaj Finance, L&T Finance etc should see traction in the short term.

Investors should begin investment in the form of SIP till Budget every week so that the cost is averaged out over a period of six weeks. NIFTY50 closed the week at 10333.25 up by 0.65%.

Bulls comeback with Vengeance before election outcome

Market started the week in lackluster mood awaiting signals from the RBI. However pronouncement of a neutral stance had a saving grace for the market. International markets were turbulent and are expected to remain so at least in the near term before the upcoming US Fed meeting.

Dow Jones after hitting new highs retreated sharply inspite of Senate passing massive tax cut proposals for the American corporations. This proposal of reduction in taxes from 35% to 20% will potentially have tectonic effects on the global economies as and when implemented. This may cause major disruptions in the smaller economies of the world as businesses may shift back to US on the back of massive tax savings. US contributing 40% of the global economy will certainly have far reaching consequences. Indian corporates too have started making noise for lower tax regime which if ceded could potentially derail the fiscal deficit targets of the government. But for the time being such worries will be sidelined by the markets.

Events of the Week:

Biocon became the first Indian company to get USFDA nod for its biosimilar drug Herceptin for breast cancer. This shows India’s capability to deliver world class medicines at affordable prices, the same holds true for even the IT industry. This will reiterate the faith of both foreign and domestic investors in the Indian Pharma story though currently in limbo, but soon the companies will emerge stronger and more compliant to capture the huge growth opportunity offered by the US markets.

Technical Outlook:

Market has made a strong hammer on weekly chart. Such hammer when formed after a correction of three weeks or more is more powerful and reliable signal for higher prices, however more confirmation is awaited to confirm whether the uptrend has resumed or still the corrective phase is continuing. For traders buy on dips will offer more favorable risk to reward ratio with 10020 as stops in the Nifty50.

Nifty 50 Weekly Chart

Expectations for the Week

Global markets will keenly await US FED commentary on interest and inflation outlook. Although it is now certain that interest rate will be raised by 0.25bps this time. Any hawkish outlook on the inflation front can cause a worldwide selloff in equities and commodities alike.

Market is slowly factoring in the muted outcome if any from the Gujarat elections, therefore any positive surprises later, will lift the market into new bull orbit, but at the same time any negative surprises can equally whack the market into panic mood. Such eventuality if it happens would be another opportunity after demonitization to invest aggressively in the market. Nifty ended the week at 10265.65 up by 1.42%

GDP booster for the Government but will Market sustain?

The government will heave a sigh of relief, at least for the time being. Q2 GDP data may give edge to BJP in poll bound Gujarat, but the relief will only be short sighted though! Q2 GDP at 6.3% marks a turnaround after declining for five straight quarters. While 7% growth of manufacturing sector on the back of festive season brought relief, weak agriculture and construction sector growth at 1.7% and 2.6% respectively remains a cause of concern.

The biggest risk to the market is the government's fast approaching fiscal deficit at 96.1% of the budgeted target. The ability of the government driven capex will stand markedly reduced for next 4 months in addition, the govt may aggressively divest in order to maintain fiscal deficit target. Going forward the market is bound to get impacted. The valuations should come down to reasonable levels on the back of liquidity moving out of the system.

Events of the Week:

SBI gave a negative surprise to the bulls. The bank has decided to hike interest rate on bulk deposits by 100 bps which was also followed by PNB. This signifies one very important factor that liquidity is fast evaporating from the system. The bull market theme that 'Demonetization had brought huge liquidity in the system and the same was being funnelled into the stock market' has gone for a toss. If that being so, the massive IPOs lined up and divestment target of the government will further create massive pressure on the stocks in the secondary market.

Technical Outlook:

Market has started to correct sharply. The fall in the market is accompanied with good volumes which also indicate that the correction would go longer and deeper. The market had faced strong resistance on the upward channel. We had mentioned this for the first time on Nov 10, 2017 note that "Market has witnessed cracks in its uptrend" indeed that was the ultimate top when no one was ready believe. Second chart below is of Nov 10, 2017 for ready reference. Traders should wait for rallies to short.

Nifty 50 Weekly Chart

Expectations for the Week

Market is likely to remain volatile for the week ahead as fresh triggers looks weak going forward. RBI's MPC is likely to maintain status quo on the interest rate front and considering OPEC's decision of maintaining production cut will in a way adversely impact inflation in the medium term thus constraining the ability of the RBI to reduce interest rate. Possibility of US Fed increasing the interest rate is likely to dampen the sentiments further. Global markets will also watch anxiously US senate which will vote for tax legislation that aims to cut corporate taxes in America. Back home market will be anxious to see the outcome of Gujarat polls. Market to remain in profit taking mode for some more time. Nifty closed for the week at 10121.8 down by 2.57%.