Latest Indian Share Market Updates & News in Jun 2017

Unified India Unified taxes
 
Markets opened with nervousness on news emanating from 'Cleanup PSU Banks' that a higher provisions would be required on 12 large insolvency accounts which are being readied to be sent to insolvency courts. But later mid week US market had a seesaw swing which led to loss of bull's power in the Nifty50 by the close of the week. In such cautious times, IPOs had dull listings, sending IPO market into tizzy. Incidentally TRAI has now sent recommendations to the government to ease the stress in the telecom sector, but Mr Market had somehow sensed such an eventuality way back in December 2016 when the entire sector was crying due to free Reliance Jio offer, which led to deep wounds in the telecom stocks, a so called ideal buying opportunity for accumulating the stocks. The price of Bharti Airtel since then has appreciated by a massive 35% against all conceivable odds as compared to 20% rise in Nifty50 Index. The wisdom 'when everyone is fearful (selling) it is time to buy and vice versa for sell, this is so difficult to follow. But time and again the rule has stood the test of time even in the so called worst sector like telecom.
 
Events of the Week:
 
India will attain freedom after 70 years from tax corruptions and pilferages. Come GST from mid night of June 30, 2017 there are win some and lose some for the consumers pocket, but one thing is certain, the government will be the biggest beneficiary as the incremental revenues will flow to them due to reduction in tax corruption and pilferage and increase in tax compliances. This will potentially disrupt many businesses and professions which will lead to lower consumption and growth in the economy in the near term.
 
Technical Outlook:
 
Nifty50 has made large weekly bearish candle on the charts but a small hammer like body on the daily chart on Friday which indicates that a short bounce is expected after which the downfall should resume. There is divergence between Nifty 50 and Nifty Mid Cap indices since last few weeks which does not portend well for the bulls in the short term. The time cycle of the previous bull market and current up moves incidentally are coinciding now which supports a strong base case that a longer and deeper correction will set in. Short term traders should exit all their long positions and may initiate short on rise with 9620 in Nifty50 as stops. Medium to long term investors can consider booking profits.
 
Nifty Today
Nifty 50 Weekly Chart
Expectations for the Week
 
"Change is hard at first, messy in the middle and gorgeous in the end" - Robin Sharma. India entering into a new era of indirect taxation, looks great in theory, but will be very difficult to implement in the near term given the massive population and out of which a good number of beings are not tech savvy. In the medium term therefore there will be slow down in spending and consumption. Many sectors will see disruptions and change in demand and supply patterns. Markets don't like uncertainty arising out of such epic changes and thus is expected to remain in corrective phase. Market will react to Stock specific news flows in the near term with a downward bias. No new investments should be done at current juncture. NIFTY50 closed the week at 9520.9 down by 0.56%.

Equities will be available at discount, the sale has started

Markets opened with positive sentiments on global clues, but sudden sprouts of fear led to weakness by the close of the week. CDSL IPO oversubscribed by a whopping 170 times garnering Rs 64,000/- Crs. This kind of frenzy resembles peaking public sentiments seen during market tops. When smart insiders cum promoters start selling shares in the open market eg Indiabulls Real Estate ltd promoters sell shares to the tune of Rs 660/- Crs or for those matter promoters diluting their stakes by coming out with QIP eg. JSW Steel intending to raise Rs 8000/- Crs, unequivocally suggests that markets are at lofty levels, it is time to sell for investors too when promoters are selling. The ghost of farm loan waiver has attacked with full vengeance, now Punjab and Karnataka governments have also jumped into the bandwagon to smoke out honest tax payers’ money. This is a step backward in the interest of long term economic growth of the country.

Key events of the week:

US government has introduced new bill replacing ObamaCare law by reducing the health care aid to poor and at the same time reducing the tax on the super rich by 3.8% which was earlier imposed to finance the health care bill for the needy. This bill will change the landscape if passed, Indian Pharma companies will have a reduced pie in their fold and will have muted growth prospects in the new framework.

Technical Outlook:

Nifty50 has made a failed attempt to go higher. Shooting star formation near the previous top and subsequent weakness indicates beginning of the correction. Both Nifty 50 and Nifty Mid Cap50 indexes has made a double top / lower top in the intermediate time frame, and engulfing bear in the near term, both of which point to sharp weakness in the short term. On a weekly chart, shooting star is formed a signal of end of bullish up moves since December 2016. Short term traders should exit all their long positions and may initiate short below 9530 in Nifty 50 and medium term investors can keep trailing exits at 9333 in Nifty50 or may partially book profits.
Nifty Today
Nifty 50 Weekly Chart
Nifty Today
Nifty MID Cap 50 Index

Expectations for the week:

The excess froths that were created in the ongoing bull market since last six months will now begin to correct. Auto and Auto Ancillaries, Real estates, Cements, Financial Services and FMCG all are bound to correct in the near term. The pendulum had swung too far on the optimism side and therefore the same should return back to normal before any meaningful rally restarting. The real market action can be gauged from the mid cap and small cap indices which are showing distinct weakness as compared to the front line indices. Thus a proper analysis of such mid and small cap indexes indicate that it is time to book profits on a substantial part of the portfolio and sit on cash. Ultra long term investors may still continue to hold quality stocks. No new investments should be done at current juncture. NIFTY50 closed the week at 9574.95 down by 0.14%.

Market clueless awaiting triggers

Markets opened in negative territory on haunting fears of farm loan waiver the political tool to bleed PSU banks. Strange is the story of PSU banks, on one side RBI is hand holding the banks to clean up the past mess and on the other side they are at the receiving end from the state governments, weakening their balance sheet strength through farm loan waivers. A sorry state of affairs for PSU banks’ investors, this will further increase the valuation difference between public and private sector banks wherein fresh funds will chase private banks for sustained and consistent returns. Surprisingly Airtel added 2.6 million new subscribers more than Reliance Jio which garnered just 4 lakhs new connections in the month of April. Hope the sector has stabilized, giving long term opportunities for patient investors in the telecom space.

Key events of the week:

US Fed for the first time has taken steps to normalize its bulging $4 trillion dollars balance sheet by giving a specific time table to wind down the scale gradually by $30 billion dollars per monthly approximately. This will slowly suck the liquidity from the system, which will someday be the big reason for crash in the US equity markets apart from steadily rising interest rates. The balance sheet normalization step is the seed for the bear market, but when it will grow only God can know.

Technical Outlook:

Nifty50 is heading into a corrective mode spanning into 8 days, however corrections have at best in this entire rally had lasted till 10 days. Hence statistically market is set to bounce, but if it is not able to do so, then a likely larger down fall would emerge. On a weekly chart, evening star is formed a likely signal of end of bullish up moves since December 2016. Short term traders should keep their trailing exits at 9530 and positional and medium term traders can keep trailing exits at 9333 in Nifty50.
Nifty Today
Nifty 50 Weekly Chart

Expectations for the week:

The once in a life time operation “Bad Loan” is proceeding well, the process of bleeding has started as 12 ailing companies are being readied to be sent to bankruptcy court for which massive provisioning would further be required first. A total of 1.5 lakh Crs are on the block, out of which how much would be recovered finally will be the ultimate litmus test, a decent recovery of amount would fire up the PSU banking stocks, but till that time the stocks will just consolidate giving frustrations to the traders.  There are no major events in the coming week and therefore market will just oscillate without any firm direction. Investors should adopt a cautious approach and invest through SIP mode for building long term portfolio of good stocks.  NIFTY50 closed the week at 9588.05 down by 0.82%.

Loss of Momentum - A Bad Omen

Markets opened with slightly positive sentiments on hopes of Monsoon upgrade by IMD which have revised monsoon forecast upwards from 96% to 98% of the long term averages. RBI has kept the interest rate unchanged for the moment but indicated strong possibilities for rate cuts post monsoon. India today has one of the highest real interest rates of 4% which is leading to lot of dollar inflows causing Rupee to appreciating massively this year, RBI will soon have to reduce the interest rates in order to correct this anomaly as inflation is hovering around 3% and nominal interest rates at 7% leading to huge difference of 4% which is the real interest rate. Because of such high real interest rates private investments have not picked up meaningfully and it is only the government that is continuing the spending spree. Some day this mismatch has to correct and even the private sector has to start making capex in order to have sustained economic growth.

Key events of the week:

For the first time Rs 6000 Crs of bad loans from PSU banks have been put out for auction, the winning ARC (Asset Reconstruction Company) will have to pay 50% cash up front and balance 50% in a staggered manner. This is the first concrete action after a long time and if done successfully would herald a new chapter in the revival of PSU banks fortunes, shareholders too will rejoice. Even SBI recapitalized its capital by coming out with Rs 15000 Crs QIP keeping all stakeholders interest in mind.

Technical Outlook:

Nifty50 is moving higher with less participation from individual stocks. The index has formed a small body shooting star. The momentum as measured by MACD indicator is losing steam, this does not mean that the market will come down, it can still go higher, but trailing exits must be placed depending on the style and frequency of trades. Short term traders should keep their trailing exits at 9530 and positional traders and medium term investors can keep trailing exits at 9333 in Nifty50.
Nifty Today
Nifty 50 Weekly Chart

Expectations for the week:

This week the US FED will meet to decide for rate cuts if any, US is running at more or less at the highest rate of employment which makes a strong case for interest rate cuts, which if done would cause some worldwide selling in equities and India will not remain immune. GST rollout will be a massive challenge in a country as large as India, it will throw short term spanners in growth momentum just like what demonetization did during second last quarter of the previous year. Already E-tailers are worried about shortages in the availability of goods prior to the festive season. Currently dealers are selling at discounts on fears of lapsing tax credits. People in general resist change and therefore GST will cause a short term blip in the growth numbers which the stock market has currently not factored in. Investors should adopt a cautious approach and invest through SIP mode for building long term portfolio of good stocks. NIFTY50 closed the week at 9668.25 up marginally by 0.15%

Market awaiting direction from RBI and Rain Gods

Markets opened with positive sentiments on the back of good numbers by the companies. However during mid week pharma stocks nose dived on back of Sun Pharma’s disappointing results and not so promising management commentary for the next year. This led to capitulation in the entire sector, making 11 stocks hit 52 weeks low, an episode seen during major bottoms wherein all stocks falls irrespective of inherent fundamentals of each stock. For investors this offers a great opportunity to build long term portfolio. The accompanying chart of Pharma index shows the clear picture. Companies under Anil Ambani fold faced heavy selling during the week on fears of debt default in Rcom. The collateral fall in other group companies offers a nice opportunity in the medium term to accumulate companies which are running smoothly but the prices of which have corrected anywhere between 20% to 25%. These are the kind of opportunities that one must look upon to encashed in a otherwise richly valued market.

Key events of the week:

North Korea tests third ballistic missile in a month, a total disregard to international peace. Such defiance isn’t good for global peace and may lead to larger conflicts in future hurting financial markets world over. President Trump’s son in law involvement in Russian affairs and high level inquiry does not augur well; the fear of impeachment could slowly turn out to be a real one only time will decide but the repercussion are huge.

Technical Outlook:

Nifty50 is gliding the momentum with less participation from individual stocks. Numbers of stocks making new high are lesser and lesser with each new high milestone in the Nifty50 Index. There is so much divergence in many sectors that Nifty50 an average of 50 stocks throws very little trading signals. However PSU Banking Index and Pharma Index are showing nice bullish patterns after a corrective fall and seem ripe for a rally. The level of 9500 in Nifty50 should be kept as trailing stops for short term trades and 9333 as stops for long positional trades.
Nifty Today
Nifty 50 Weekly Chart
Nifty Today

Expectations for the week:

Major part of the earning season is over. Stocks have already reacted sharply to the numbers and have been now thoroughly discounted. The biggest factor that the market will look forward is, how efficiently the GST will be implemented. Slow down has started to emerge in the manufacturing sector, the stockists are in the process of depleting the inventories. The extent of monsoon will also have an impact on the market. All these factors point to not so exciting journey for the bulls and the market has already gone ahead of fundamentals and therefore any negative surprise would lead to sever corrections. Outcome of RBI monetary policy committee meeting next week would guide the direction of the market in the near term. Traders should buy on dips with stops below 9500 Nifty50 in the short term. Investors should adopt investing through SIP mode for building long term portfolio of good stocks. NIFTY50 closed the week at 9653.5 up by 0.6%.