Latest Indian Share Market Updates & News in Jan 2019


Politics Taking Precedence Over Economics
 
Market during the week continued its whipsaw movement with a downward bias with shallow depth. Secular sectors like FMCG have delivered good numbers but cyclicals have disappointed the market. Moreover, the retail category surprised everyone by delivering double digit growth. Organized players have indeed gained at the cost of SMEs and MSMEs which can be seen from their quarterly numbers. This is also a vindication that GST and demonetization have impacted larger portion of the population which is also what is worrying the Government since the elections are around the corner. Hopefully, the Union Budget next week will assuage such concerns of the middle class, however, being a populist budget, it might not be welcomed by the market given the effect it might have on corporate profitability. Nonetheless, all eyes will beon it for clarity on policy initiatives.
 
The political fever is hitting high day after day wherein economics has taken a backseat in all the decision-making processes of the Government which will further keep the markets under pressure. In addition, very little has come out on the trade war settlement front between the US and China which is casting a big doubt on the resolution.
 
Events of the Week:
 
Uncertainty is atlast over on Yes Bank's CEO issue with Ravneet Gill taking over the reigns by March 1, 2019. This will not only give stability to the share price but will also be welcomed by the market participants. Whenever such changes have occurred in the past such as in Jubilant FoodWorks, SpiceJet etc. markets have rewarded the Company and hopefully, Yes Bank too will get the same treatment. On the results front, Asian Paints stole the show with a 14.6% increase in PAT. Indigo reported a 75% decline in its bottomline, Ultratech Cement with 15% de-growth in PAT and ITC posting a mere 3.9% growth in its PAT - Disappointing!
 
Technical Outlook:
 
Nifty50 after registering a failed attempt to move higher has now given a bearish signal by penetrating the triangle on the lower side. The indecisiveness of past few weeks now seems to be resolved and it is expected that the prices should steadily head lower. However, a break below 10650 in Nifty50 would further confirm much lower prices with 10300 in sight a possible scenario. Sell on rise should be the strategy for traders. Individual shorts can be initiated on stocks which are below their 100 day moving averages.
 
Nifty Today
 
Expectations for the Week:
 
Mr. Market is overcrowded with a lot of uncertainties given the global geo-political scenario, little clarity on US-China trade settlement, EU slowdown, BREXIT indecisiveness, US Government shutdown and domestic political conundrum which will certainly scare away the bulls. Due to these uncertainties, bulls are not going to commit money in a big way which will keep the indices in negative to sideways trading zone. Next week's Budget and thereafter the monetary policy will give further clarity to investors. Currently, markets have taken a negative stance wherein the velocity is expected to remain albeit muted. Investors stay on the sidelines but keep money ready for deployment on any deeper panics. Nifty50 closed the week lower at 10870.55 down by 1.16%.
 

Stocks are Non-aligned to Ground Realities

Markets during the week crawled up on the back of global cues and some good corporate numbers. Nonetheless, the breadth was not encouraging and participation was weak. However, there seems to be a lot of optimism from a short to medium term perspective but it is not supported by ground level realities especially the universe of small and midcap shares which are still languishing for want of buyers. Markets are unlikely to move higher till at least 1st week of February when policies from both the Union Budget and MPC will be announced, which will drive the bourses appropriately. Whether the budget will be pro-public or pro-corporations will also be an important trigger to determine the market's movement. Additionally, the resolution of trade wars and US shutdown has impacted the economy but the same doesn't reflect in the stock price. Sooner or later stock prices will align to global realities.

On the quarterly results front, margins of big companies have taken a hit be it Infosys, TCS, Reliance or D'Mart. But, Reliance reported an 8.8% increase in PAT for the current quarter with robust growth in its consumer business and Jio which rose by 65% in terms of PAT. Another FMCG major HUL delivered double digit volume growth and a 9% rise in its bottomline. While, Federal Bank and MCX delivered a 28% and 124% increase in PAT respectively.

Events of the Week:

The Jet-Ethiad deal is yet another hot topic of the month with Jet Airways being a ticking bomb which can explode just like Kingfisher. Last 3 years' numbers of Jet and Kingfisher were similar before Kingfisher's doom to bankruptcy. Hopefully, this time due to IBC the bankers will have an upper hand but if a quick resolution isn't arrived at soon, the shareholders will suffer the most. Equity value of Jet is anyway already in negative given the accumulated losses and a huge mountain of debt.

Technical Outlook:

Nifty50 is facing strong resistance at the 11000 levels. It is hovering near its 200 DMA and had given a failed triangle breakout which means that there are higher chances for it to fall further. Volatility is low which indicates that Mr. Market is readying for a move. Additionally, oscillators have also turned neutral near zero, hence, traders must see whether the triangle breakout sustains or turns out to be a false breakout. Waiting for a confirmation would be safer rather than out guessing. The ongoing corrective is likely to continue further which will give traders false breakout signals. Hence, this is the time to avoid trading and best is to sit on the sidelines till a clear trend emerges.

Nifty Today

Expectations for the Week:

Stock prices are likely to continue sideways with a downward bias. Although they may abruptly rise but that should not be considered as a buying opportunity. An ideal buying situation would be when the worst of things are happening and the stock prices react negatively. Currently, ground level realities are tough but stock prices are not reacting negatively. Also, Q3 results of companies such as Asian Paints, Kotak Bank, Biocon, Edelweiss, Yes Bank, Maruti etc. are expected next week which will keep the market in the tender hook, but markets are in general expected to remain under pressure. Investors are advised to wait and watch rather than doing bottom fishing. Nifty50 closed this week at 10,907 up by 1.03%.


Opening Batsman have disappointed Market.

With corporate results for the 3rd quarter of FY18-19 starting to trickle in, NIFTY 50 had a good week with 3 green and 2 red days. Some big companies that came out with results this week were TCS, IndusInd Bank, Bandhan Bank, Delta Corp and Tata Elxsi. Even though few of them posted good results, the market did not reward them and instead were in red. For instance, TCS after posting the highest ever Q3 profit and highest revenue in the last 14 months, the stock closed at Rs. 1842.55 down 2.44%. This is an indication that 2019 will be negative for the entire IT sector as the best is behind, expected US slowdown will impact these going forward.

IndusInd Bank reported a 5% profit growth (YoY). The expected higher growth did not show up in the numbers and not fully providing for IL&FS, kept the stock under pressure. While, Bandhan Bank, also hit by IL&FS provisioning reported profit growth of 10% but it has provided for IL&FS as NPA. IT stalwart TCS posted profit growth of 24.1% YoY while Tata Elxsi reported a mere 5.14% rise in profits YoY due to margin compression.

A look at the global scenario suggests that "ALL IS NOT WELL" with the trade talks between the US and China, which were concluded this week to discuss and negotiate about the ongoing trade war. It was extended to an unexpected third day which suggests its seriousness. But the results of it are still not made public. The delay in disclosure of results of this closed-door meeting point towards something unfavourable, if it would have been positive, the details would have been out by now. No sooner the details are out the markets will react sharply; most likely disappointment is around the corner.

Events of the Week:

This week witnessed yet another merger of a young bank and an NBFC. Bandhan Bank acquired Gruh Finance in an all-share deal with effect from 1st January, 2019. This was done primarily with an objective to lower the bank's promoter holding and expand its housing finance portfolio. It will bring the promoters stake in the bank down to around 60% which is still much higher than the cap of 40% as per the requirement of RBI. In the previous month, IDFC Bank and Capital first completed its merger announced earlier in the year. A new order is emerging; mergers of NBFCs and young banks, pooling their war chest thereby creating synergies to be able to compete against larger rivals. Merging is more of a requirement during the times of crisis like this one as liquidity is drying up and margins are compressing. More such mergers can be expected in this space and incumbent private banks may face tough competition from these merged entities if run efficiently.

Technical Outlook:

NIFTY 50 has formed a Triangle Pattern which means that Mr. Market is not certain in which direction it will move going ahead. Also, major moving averages (200, 100 and 50 EMAs) are converging which further confirms that the market is in an indecisive phase and about to move sharply, most likely the move will be downwards given the structure of the triangle. Sell on rise is advised with stop above 11,000 Nifty50 levels.

Nifty Today

Expectations for the Week:

Next week may be volatile if the indecision in the market participants goes away. Also, market will wait for the disclosure of details of the trade talks between two superpowers which affect the financial markets around the world. Investors are advised to be on the side lines and book profits at higher levels. Buying at lower levels would be prudent given the uncertainties and muted corporate numbers. Major results to look out for next week are Wipro, SBI Life Insurance, Zee Entertainment, ICICI Lombard, L&T Infotech, AU Small Finance Bank, Mindtree and ICICI Securities. Nifty50 ended the week at 10,794.95 up by 0.63%.



Indian resilience now slowly visible
 
NIFTY 50 continued its downward spell in tandem with the global markets albeit with good resilience. Gloomy forecasts are running high on the streets as trade war tensions and geopolitical posturing seems to be overriding concerns for the world. In India too micro concerns are emerging, NBFCs and HFCs are expected to report a steep 50% reduction in the top line (interest income) as there were serious liquidity issues post the infamous IL&FS saga. Corporate quarterly results for Q3, which will start coming out from the next week, are likely to be moderate. NIFTY 50 companies are expected to report a growth of mere 6-7% compared to 13% last year. Companies in the Auto, cement, oil & gas, pharma and telecom sectors are expected to post disappointing numbers whereas private banks, IT, Insurance and FMCG are expected to maintain their growth trajectories.
 
A look at the global markets suggest that everything seems to be going wrong with the US markets whether it be US Fed tussle with President Donald Trump or slowdown in the economy at ground level. Moody's has forecasted a flat growth of just 1.5% in the year 2020 as against 2.5% in the year 2019 which indicates that a significant slowdown in the economy is around the corner for the US economy which will further impact the global market growth. "It is like the US sneezes and the world catches a cold". But hopefully India is expected to remain strong given the young demography and resilient economy, nonetheless the stock market may remain subdued till the general elections.
 
Events of the Week:
 
The government has at last moved ahead with the merger of Bank of Baroda, Dena Bank and Vijaya Bank, the combined entity will be the "Third Largest" bank in the country. However, it would be unwise to arrive at an investment decision until a clear picture about the merged entity becomes available. Investors would fare better in the private sector banks rather than betting on the dark horse.
 
The auto sales numbers were out this week with the majority of the manufacturers reporting flat growth or de-growth which was somewhat in line with the market expectations except for Eicher Motors which posted a 13% de-growth YoY. Even though a majority of weakness was discounted already, the Nifty Auto index fell a massive 3.05% on 2nd January followed by a 1.52% fall on the next day with Eicher Motors as the top loser losing around 13% in just two days.
 
Technical Outlook:
 
Market is expected to oscillate in a range with 10950 on the upper side and 10500 on the lower side with a further downside support at 10300 in Nifty50. The movement is expected to be rangebound which will prove to be a nightmare for the traders. Stock specific moves will be the highlight for the coming weeks but Nifty50 is expected to be in a range. Traders can take contra bets on stocks that rise significantly due to quarterly numbers and at the same time buy stocks which are beaten down due disappointing numbers.
 
Nifty Today
 
Expectations for the Week:
 
The market will shift its focus to corporate numbers which will keep off the global gloom for the time being. Since Q3 numbers are widely known and predictable, very few surprises are to be expected and markets are not likely to overreact. However, stock specific action may be witnessed in some scrips. IT stocks are expected to drift lower, as the trigger for INR devaluation is already over, and there is every possibility that INR will appreciate from here on given the high Real interest rates prevailing in the economy which will attract dollar inflows from FPIs. One should book profits in the IT sector on every rise and not make any fresh investment in the sector at current levels. No sharp correction is expected due to results season save and except due to the impact of global events. Investors are advised to stay away currently and begin buying selectively post results season. Nifty50 ended the week at 10727.35 down by 1.22%