Latest Indian Share Market Updates & News in Jun 2018

Trump's rhetoric keeping markets on its toes!
 
Markets this week were in for a rollercoaster ride with negative sentiments running across the media giving a feeling that markets will collapse, but that seldom happens. Newspapers are filled with fearful headlines "Rupee could see a new low; Trump Tariffs give a bear hug; One-third of the emerging markets in bear territory" - In such fear psychosis, irrationality makes investors sell-off their holdings. But these are times to accumulate good quality stocks rather than sell. Is it too late to sell now? Following the crowd when everyone is selling is an incorrect strategy and the time has gone to sell when the markets have already slumped-It is time to accumulate.
 
Trump's rhetoric-'Increase in shrimp export duty; oil embargo from Iran; Trade war with China, EU, Mexico and Canada have led to a jittery and ambiguous business environment which has impacted the valuations in the market. But it is only when the prices come down, can investors take the opportunity to accumulate a good quality portfolio of stocks because whenever fear is created by whatsoever reasons that has always been a buying opportunity.
 
Events of the Week:
 
This week margins were increased on certain volatile stocks which added more fuel to the fire, which led to the sudden selling in mid and small caps. However, this will not sustain going forward and things will settle soon. On the stock front, Tata Motors was in news for planning to invest Rs. 1.2 lakh crore in JLR in next three years. This was the biggest capex plan in its history and the sentiment towards this stock has been negative as the Company hasn't been generating sufficient free cash flows and returns and has been aggressively infusing more money into JLR. Such massive capex does not augur well for long term investors in the stock.
 
Technical Outlook:
 
Nifty50 has made a V shaped recovery in intraday charts after a panic like fall indicating that the market has stabilized and bottom for the immediate term is in place. In weekly chart a hammer is formed suggesting that the correction phase will be tighter and sideways kind of movement is expected. Time corrections and not price correction is the likely scenario. Traders can go long at lower levels with a stop at current weekly low in individual stocks which have fallen hard as such position is expected to generate higher return on capital deployed.
 
Nifty Today
 
Expectations for the Week
 
Markets seem to be left with very little cushion to fall further. Although crude oil prices are on a sudden uptrend, NY gasoline prices are way below the highest levels. This divergence more often than ever doesn't work. This indicates that crude prices will eventually fall and stabilize at lower levels. Also, rupee too will stabilize soon as RBI has been continuously intervening and trying to cool the market. Rupee has been down by almost 9% in the past 6 months and there is very little room left to go beyond these levels in the medium term. Markets are likely to pull back, hence, selective investments can be made in good quality stocks. Investors sitting on the sidelines should start buying. Nifty50 closed the week down by 0.99% at 10714.30

Can the regulatory whip - ASM be the reason to sell?
 
"Stock Markets enter panic mode", "Madcap selloffs send mid and small-cap stocks tumbling"," Traders go for bearish bets" - The week gone by saw these kind of headlines in financial dailies and guess what happens thereafter? Not once but every time when the market witnesses such pessimism a recovery is inevitable. Indeed market experienced a V-shaped reversal in small and mid-cap stocks after a panic bottom caused due to ASM measures. Nifty mid-cap stocks declined by over 9.8% from the start of 2018 compared to Nifty 50 which is up by 3%. Also, BSE small cap index dropped to its lowest level since Oct, 2017 on Tuesday. There are no reasons shares should be sold just because the exchanges imposed stringent rules. Fundamentals should guide and not such a one-off event.
 
Events of the Week:
 
After over 4 years, RBI hiked interest rates by 25bps which to a layman would mean negative for the markets but the markets surprisingly rose, why? Because the rate hike was in the interest of our market to fend off any dollar exodus. The move was in tandem with the global monetary tightening policies adopted by our international peers and not motivated by domestic factors. Had RBI not raised the interest rate, there could have been a currency attack which is not in the interest of our Country where 80% of crude oil requirements are imported.

For the first time, HDFC bank's fans were in for a rude shock witnessing dull activity from the FPI's in the counter. This could be a new normal, how investors look at HDFC from a larger trend perspective given the uncertainties on how the banking world will be disrupted and who will take the lead in disrupting the business model. The demand for HDFC Bank is indeed weak which should worry domestic investors.
 
Technical Outlook:
 
Nifty50 and Nifty MidCap indices both have different trade set up. While Nifty50 has limited upside potential, but Midcaps have good possibility to go higher. Risk to reward ratio is far better in mid cap shares than in front line shares. Stops for mid cap shares are small and potential target is higher which offers better risk to reward ratios. Buy on decline mid cap shares with current weekly lows as stops.
 
Nifty Today
 
Nifty Today
 
Expectations for the week:
 
Markets can expect lot of activity in the PSU banking space given the President signed the ordinance to finetune the insolvency law. FM and PSU banks' heads have discussed constructive action plans. Any positive outcome on the recovery front should rerate PSU banks. Few banks like Indian Bank and Vijaya Bank hopefully should perform better as their books are far cleaner than their PSU peers. Additionally, markets are likely to take cues from the global macros as the domestic news-flow is almost over. On the industry front, we believe the pharma stocks have made a confirmed double bottom pattern in charts and have began their upward journey. Investors can allocate pharma stocks in their portfolio for long-term horizon. Nifty50 weekly closing up by 0.66% to 10767.65.

Directionless Divergent Market
 
Markets had a roller coaster week, it started on negative note on account of the Italy crises but later sharply bounced back cheering good corporate numbers. Markets showed divergent behavior with frontline stocks inching higher whereas small and midcap stocks were badly bruised. It was because HDFC twins and Bajaj Finance kept Nifty stronger than other small and midcap indices. Be that it may so, this is an indication that markets will eventually correct further before any sustainable bounce happening, frontline will fall harder in the next round of sell off.
 
GDP growth was the fastest in the last 7 quarters at 7.7%. Markets have already discounted this a while ago and this shouldn't be considered as a new trigger for the bull market rally as GDP numbers are lagging indicators, construction and cement sectors have registered higher core growth than the rest which is reflected in the quarterly numbers of infra companies like KNR Constructions, Ashoka buildcon Limited registering 30% plus growth rate. Whether such momentum will continue is all that market is interested in, we think such momentum will slow down eventually and the sector too will correct.
 
Events of the Week:
 
Avenue Supermarts Ltd stock showed surprise strength inspite of promoters selling 1% equity to abide by mandatory regulations. The rise in the stock price post digestion of huge liquidity shows how strong the business model is and investors aren't worried although valuations are in triple digit P/E multiple which stands at 125x. Auto numbers have shown excellent performance wherein Maruti and Bajaj have increased sales by 26% and 30% respectively which shows that at the ground level the economy is still buoyant and consumer spending is intact.
 
Technical Outlook:
 
Market is in non trending phase which is considered worst for the traders. On one hand Nifty50 is showing strength and rising while other indices including small and mid cap indices are falling and refusing to rise. Such divergence will eventually give way to sell off in Nifty50. Traders may buy puts at higher levels for low risk low return strategy.
 
Nifty Today
 
Expectations for the Week
 
Markets are likely to narrow down the gap between the frontline and small and midcap stocks which had hitherto performed divergently. The room for further decline in small and midcap stocks seems limited given the sharp correction that they have already witnessed since last few months. However there is still scope for frontline stocks to correct further. Additionally, rate hike fears from the RBI's monetary policy in the coming week are expected to keep markets under check. There is a likelihood that rates might increase due to inflationary tendencies of high crude oil prices which will translate into higher consumer price index. Investors should wait and watch for the right opportunity before investing. Nifty50 closed the week up by 0.86% at 10696.20.