Markets climbing a wall of worry

Much to everyone's surprise, Nifty and BankNifty touched new highs this week. Buoyancy was visible in equities across the globe inspite of rich valuation concerns, trillions of dollars in negative interest rates, Trump's impeachment and other geo-political unfavourable equations. FIIs spearheaded the indices with aggression which led the bourses to attain higher levels, while DIIs showed hesitation and shied away from investing in the market. This divergent behavior between FIIs and DIIs show that Mr. Market is now climbing a wall of worry. Currently, there are only a few stocks making 52Week Highs which is one of the least in the past few years, whenever indices have touched new highs. This is indeed worrisome as majority of small and mid caps are still languishing near their 52 Week lows. All these facts point out that there is still a long way to go before markets achieve their true bullish potential.

Maximum bullishness is still far away albeit with skepticism! Increase in number of stocks in F&O ban or a line-up of IPOs with frenzied listing are a few indicators that signal indices have topped. But such aggressively optimistic signs are not visible currently and hence there is a lot of room for further upside. Investors should however maintain caution as currently all the positives are already factored in and the road ahead can be rocky for sometime.

Event of the Week

In a surprise move RBI announced a special open market operation by buying bonds worth Rs 100 Billion and selling bonds simultaneously. This move is taken specifically to lower longer-term yields as they have consistently been on an upmove since the RBI kept repo rate unchanged and slashed its forecast of economic growth rate to a decade low. All the bond market enthusiasts and PSU banks will cheer this move as the yield curve has steepened sharply despite RBI's constant efforts to lower rates since the start of the year.

Technical Outlook

Nifty50 is moving upwards albeit with caution as it enters into an unknown territory. Market is trying to gain strength and signaling further upside however there is strong resistance at the current levels. Volumes are also not strong enough therefore there is a high chance that indices may correct before bouncing back. But if the current resistance is broken then traders can go long till levels of 12400 which is the next resistance level. Traders should buy with caution in the coming week.

Nifty50 Update 20 December 2019

Expectations for the Week

The year end is likely to witness extremely stock specific movement with only a few pockets showing strength. A lot of rotation is also expected from highly priced stocks/ sectors to value buying in cyclical and commodities. Investors having a one-year horizon can allocate capital to metals, cement, sugar and ceramic sectors. One can look at FMCG too as it is also giving opportunities to accumulate at the current levels. But invest only in quality companies from the above sectors to secure your portfolio from any micro risks. Nifty50 closed the week at 12271, up by 1.5%.

Merry Christmas to everyone!

Bullish on Nifty but for how long?

The week began in red with markets showing signs of a correction but thereafter Nifty50 bounced back due to the liquidity inflows especially from domestic investors. Additionally, global cues kept the markets buoyant as there were no negative shockers. Instead there seems to be some relief on the trade war front as the US President agrees on a phase one deal with China. Postponement of new tariffs on Chinese goods is a sigh of relief not only for the Chinese economy but for many others across the globe. In the bay as well, IPOs seem to be the mood of the season as investors pick up Ujjivan Small Finance Bank in hoards. All these factors are keeping Indian markets afloat as the undertone seems strong on the back of domestic institutional investors who are not willing to liquidate their holdings.

The Government too is stepping out of their comfort zone and firing all cylinders to push the growth rate. Recently, it made further amendments to the Insolvency and Bankruptcy Code by giving immunity for offences committed by previous managements or promoters, if any. Given the underlying slowdown in economy, such Government dispositions are sending apt signals which could boost the economy.

Event of the Week

In the recent Fed Meet, Chairman Jerome Powell envisions good visibility for the US economy for the next 1 year. A status quo stance implies for sustained expansion of economic activity which will further boost demand. Now, as the CRB Commodity Index is trading at its 10-year lows, it has very high chances of rising in the future given that demand is likely to pick up. Base metals and to some extent steel stocks should start giving out handsome returns to shareholders.

Technical Outlook

Nifty50 continues to show bullishness as it heads towards 12,100 levels. It has made double bottom within a period of 3-4 weeks which indicates bullish bias in the medium term. It bounced back after taking support at 11,800, thereby showing strength. On the weekly chart, a hammer pattern is formed indicating further upside with profit booking likely to be faced at 12,150. Traders should buy on dips with weekly lows as stops.

Nifty50 Update 13 December 2019

Expectations for the Week

After Boris Johnson wins the UK elections by a majority, markets will keenly await the verdict on Brexit as fate of Indian companies having an exposure to the EU lies on this deal. Additionally, GST council's meet next week will also keep the Street under pressure as there are expectations of tax hikes for certain goods. If rates increase then markets may witness corrections from current levels. Investors can invest in cyclical, commodity related stocks with a focus on metal stocks. Nifty closed the week at 12086, up by 1.4%.

At last inflation worries pull the trigger

Markets stayed resilient inspite of GDP weakness and negative macros but by the end of the week, inflation become a scapegoat that caused the hammering in the markets. In fact, RBI's status quo acted as a mood spoiler; an interest reduction was very much needed to kick start the economic engine but RBI threw the ball back into the Government's court which actually cracked the whip on the market. Going forward, the budget in 2020 will be the next major turning point as far as domestic factors are concerned, but until then international factors will keep the markets on its toes. One good thing is that liquidity inflows are strong which will prevent the markets from correcting heavily in terms of price but correction by time will continue till the beginning of next year.

November Auto sales numbers, even though showed slight improvement compared to the previous month, have overall been lower on a YoY basis. The expectation of a strong pick-up isn't entirely visible in the current month's auto numbers. Higher CPI numbers due to supply constraints will also act as an impediment for quick economic growth. The sooner the CPI numbers cool down the better it is for economic recovery.

Event of the Week

Investors were taken aback by RBI's decision to put a pause on the rate cut spree. In the past, RBI had cut interest rates for 5 consecutive times and this could have been the sixth, but cut did not happen. This indicates that there is little room for monetary easing after full year of rate cuts. Going forward RBI too has moved to wait and watch mode to see how the economy moves.

Technical Outlook

Nifty50 has changed its bias from uptrend to corrective stance. Double top stands confirmed which will make markets correct either time or price wise or both. Generally such corrections take lot of time to correct. Momentum indicators had already weakened now it is visible in the price action. Traders are advised to book profits in long positional trades and initiate short on rallies keeping weekly highs as stops.

Nifty50 Update 06 December 2019

Expectations for the Week

Markets are expected to remain volatile in the coming week as many factors, globally and stock specific will influence the bourses. US Fed Meeting outcome, advancement in Trump's impeachment process will be major international events while listing of Ujjivan Small Finance Bank IPO, fundraising by Yes Bank will be some domestic factors traders can keep an eye on. Investors can look at selective stock pockets which are giving an opportunity to accumulate as these companies are available at decent valuations. Metals, refining, beaten down infrastructure stocks are a few areas which have opportunities. Nifty closed the week at 11921.50, down by 0.80%.