Latest Indian Share Market Updates & News in Jun 2020

Market approaching an intermediate top

During the week, markets got a reality check and cracked heavily but thereafter recovered mildly on back of buying from foreign institutional investors at lower levels. Most of the sectors have exhausted their bull power, especially the Pharma sector wherein a barrage of fundamental triggers like launch of drugs for COVID-19 in India by Glenmark Pharma, Cipla as well as other relaxations in export restrictions are now unable to take the Pharma basket higher. Therefore, the corollary is that all the buyers have almost exhausted their power and the sector is heading for a long-drawn consolidation. Additionally, if earnings for the coming quarter do not come in line with the swift rally, this sector may see cracks in the prices. It is also expected that the government and RBI might again come out with measures to revive the sluggish economy which would hopefully keep the bulls on high spirits but this may not culminate into higher stock prices. International events are at times fearful but at other times it seems like this is only political posturing and nothing substantial at ground level will happen to damage global economic prospects. But fingers crossed on this front!

Surprisingly, the IMF also commented that financial markets are not aligned with realities and financial assets can correct by around 10%. Other international agencies have also revised growth targets, expecting a further cut in the growth prospects of the Indian economy due to the aftermath of strict lockdowns. Given the quantum of helicopter money printed by the US, Gold looks to be better poised for giving positive returns. Investors are advised to allocate some (10-20%) portion of their assets to gold at least for the next 3-5 years.

Event of the week

Petrol and diesel prices have been continuously increasing since last few weeks. What comes as the biggest shocker is that diesel and petrol prices have more or less aligned which is a big negative for freight and transport sectors which are already struggling to find enough load to get trucks back on road and juggling with shortage of drivers, the second effect is the deep cascading effect on the entire economy. Higher transportation costs would bring in higher inflation which might impede RBI's ability to reduce interest rates and distort consumption. This would impact consumption as higher inflation and lower returns on savings would reduce purchasing power affecting the much-needed demand revival of our crippled economy. This is not a good sign!

Technical Outlook

Nifty 50 after rallying almost 38 percent from the lows has formed a spinning top candlestick pattern indicating a moment of indecisiveness. The index seems to be facing a major hurdle at 10550 as this level coincides with a 61.8% Fibonacci retracement of the fall from top to the recent bottom. Though the trend is up now, we expect the upside going ahead to remain limited and test the lower end of the channel drawn from the bottom, which comes at 9700 level.

Expectation for the week

Statistical evidence suggest that sometimes monthly expiries have registered intermediate tops and bottoms. July expiry is expected to begin with lower short interests and therefore the velocity of the up-move rally that was witnessed in the month of May and June may not occur again in July. Infact, July can give a negative surprise and can fall decently, if no fresh delivery-based buying emerges. Markets are still going to be significantly influenced by updates on India-Sino standoff and US-Sino trade talks. While these influences might only be sentimental but if FPIs start selling, markets can really fall from the cliff as they have already bounced back 38% which statistically is a good number for markets to start drifting lower. All the positives, if any, are discounted, however any negative surprises may take markets lower. Investors are advised to be cautious, conserve cash and wait on the sidelines. Nifty50 closed the week at 10,383.00, up by 1.35%.

Heavy Weights Kept Sentiments Upbeat!

Markets spearheaded higher inspite of all the pessimism surrounding economic growth prospects – India China border tussle, India Inc.'s weak quarterly performance as well as slow demand revival in the real economy. 'Hope' the single most emotion is rallying markets higher on the pretext that things will normalize in the next 3-6 months. At the same time, management commentary after quarterly results, in general, suggests that Q1FY21 will be washout quarter. And the insanely disconnected market seems to have even discounted and assimilated this as one of the darkest quarters in history. It goes without saying, if the new world order fails to bring about the same level of visibility and demand revival, markets might genuinely react and discount such negative surprises that have currently mesmerized all participants under the all-weather word 'Hope'; things will eventually improve. It is therefore expected that markets are likely to keep their underlying positive bias at least until Q1FY21 results are being announced. However, post the quarterly announcements markets are expected to correct upon seeing big red cuts in numbers which will then be a good time for investors to buy on declines.

Event of the week

Reliance Industries was successful in raising nearly Rs. 1.70 lakh crore via stake sale in Jio Platforms and issuing rights share, a remarkable feat indeed in such a short span of time! RIL, because of its majority weight in Nifty50, has helped Indian bourses keep the overall sentiment positive which supported the rise in markets during the week. Hence, in a way, RIL was a saviour for Indian bourses that kept them afloat otherwise lower prices would have created a cascading negative effect on the markets and participant's sentiment.

Technical Outlook

Nifty50 after making a big range bar in the previous week reclaimed much of its losses and is now trading at the upper end of the last three week's trading range. However, the occurrence of large long shadows for two consecutive preceding weeks is a sign of sellers available in this zone. The zone of 10100 to 10500 is a very important resistance for the index going ahead which also coincides with 61.8% Fibonacci retracement of the recent fall from the top to bottom. We expect Nifty50 to move in this broader range going ahead and support on the downside is now placed at 9550.

Expectation for the week

Given that there are no major scheduled events both locally as well as globally, indices are expected to consolidate and move sideways. Across the world, markets are trying to decode how the easing of lockdown restrictions will help revive economic demand. However, the current response seems to be a mixed bag across the world and foresight remains blurry as to how quickly the revival in economies pan out. It insinuates a long drawn journey which ultimately will be reflected in the stock prices. Prices are expected to just drag around for sometime till clarity in the real economy emerges. Currently, investors are advised to stay away from investing or at best cherry pick frontline stocks in private sector banks, autos as well as metals in small quantities. Nifty50 closed the week at 10,244.4, up by 2.7%.

A Phoney Rally Nearing An End

The week began with tremendous optimism in Indian bourses and headlines such as "The worst is behind us and a bull market has begun" was heard everywhere. Markets soared as the key theme revolved around "Stocks at Wall Street Remain Red-hot and We See Investors' Sentiment Picking Up Each Passing Day". Indian markets too had reflected the same kind of optimism with a gradual increase in stocks in the F&O ban list currently 6 stocks. This certainly indicates that bulls have started to believe that this is the beginning of a bull market. However, from a historical perspective bear markets take their own sweet time to unfold. And on the way down, they gobble up all the remaining bulls waiting on sidelines. Markets will suck in the last bull remaining before the next down wave begins.

More often than not, Indian markets ape world indices especially the US. However, a correlation between the stock market's recovery and the stimulus infused by their respective Governments portray a different picture. Magnanimous stimulus packages by countries like US, Japan, Italy, Germany on the basis of their GDP were infused and their stock markets have recovered almost 40-50% from their lows. But a comparatively weaker package in India has led to a weaker recovery of around 30-32%. Each country has its own unique economic dynamics and Indian markets will soon start reflecting its own economic realities. Therefore, time has come for the Indian bourses to decouple from global stock indices.

Event of the week

Jerome Powell fails to cheer the Dow as it keeps rates at nearly zero at least till the unemployment rate remains above 6.5%. The plan to further invest in bonds to maintain low borrowing rates will certainly add to the ever-increasing debt pile for the US. This implies that the Fed estimates worst is not over yet. Hence, the outlook for medium term could remain grim for both domestic as well as global markets and it can be inferred that there should be no hurry for the bulls to jump into the markets right now.

Technical Outlook

Nifty50 after a strong opening at the start of the week turned volatile and closed lower by the end. Prices have reversed from a 61.8% Fibonacci extension of the first up leg which also coincides with 30 week EMA and forms a bearish cloud cover candlestick pattern on weekly chart. The market breadth for the week mostly remained weak. The index needs to decisively close above 10,150 to reclaim some momentum strength. We maintain a bearish outlook for the markets going ahead. Traders should sell on rally.

Expectation for the week

The important number to watch out for going ahead is India VIX which is currently at 30-32 levels. In the weeks to come, markets are likely to remain under pressure and VIX is likely to rise which will determine the speed of the market movement. However, US VIX is currently at much higher levels of 40-41 which implies that fear factor is again rising for the US markets after a terrific come back. Results from major PSU banks are awaited but they are also expected to somber the mood of the markets. We recommend investors to preserve cash and not to jump the gun in this phoney rally and wait for markets to correct. Nifty50 closed the week at 9972.9, down by 1.7%.

Liquidity Led the FOMO rally

Markets during the week surprised everyone by moving higher. An explosive price rise was certainly not expected by most market participants as there was bad news coming in from all corners. Moody's downgraded India's sovereign rating a notch to Baa3 along with contraction of GDP growth to 69-quarter lows. However despite this, bourses rallied. Time and again we have experienced rising markets with a contrast to ground level businesses. But Sir John Templeton rightly points out in one of his letters that the trend of businesses is only one influence and there are ample other influencers that drive stock prices. The only justifiable reason to the current momentum is the Liquidity. The investable universe is gradually narrowing with shortage of top-graded stocks whereas the abundant monies available for purchasing them are increasing thus pushing frontline stocks higher which gets reflected in the Indices. Demand- Supply gap has caused the big upmove! Hence, investors are advised to hunt for companies which are next in line after the front runners rather than continuing to invest in the already rallied quality players. This strategy would reap greater benefits going ahead. There will be times when logic proposes not to invest but emotions play FOMO forcing you to invest. During such times always listen to logic and this time is no different as well.

Event of the week

India's oil-to-telecom giant, Reliance Industries successfully concluded mega rights issue of nearly Rs. 53,000 Crs. Now this certainly seems to be a sentiment uplifter when based on plain facts but there is more to the story. Indian bourses have in the shortest possible time witnessed close to 27000-28000 Crs of liquidity being squeezed out from the secondary markets. Numerous businesses offloaded their stake and sucked away the liquidity which otherwise would have revolved in the secondary market. Bharti Airtel's promoter sold Rs. 8,400 Crs of its stake, UK's Standard Life along with HDFC offloaded shares of HDFC Life to raise nearly Rs. 3,200 Crs, Tata Power is mulling to raise Rs. 2,000 Crs through rights issues whereas Uday Kotak sold nearly Rs. 6,940 Crs worth of shares along with Rs. 7,400 Crs fund raising concluded via QIP by Kotak Mahindra Bank. This does not augur well for the Stock Markets in the short term.

Technical Outlook

Nifty 50 posted good performance for the last two weeks outperforming global indices. The index is now approaching crucial moving averages and resistance clusters which might act as resistance going ahead. However, there is no immediate crucial sign of weakness to rely on. The trend on higher time frame for Nifty is bearish and index is trading just above 20-week EMA, which may turn out to be a pullback rally. Going ahead Nifty may face strong hurdles in the zone of 10450 to 10550 which coincides with many pivotal levels such as 61.8% of the Fibonacci retracement of the recent down move. We emphasize on observing how the index responds to this zone while maintaining immediate outlook as mildly bullish.

Expectation for the week

Going ahead, it would be important to watch out for how liquidity percolates in global financial markets. This dispersal of liquidity may hint at a possible long-term direction for the Indian markets as well. This signal will aptly be depicted by FPIs and hence their behavior will have to be observed to understand liquidity flows into India. Ground level reality check next week will also throw important signs for the markets. It is expected that markets would witness profit booking at higher levels in the weeks ahead. Investors are advised to stay away from the current volatilities for the time being. Nifty50 closed the week at 10142.2, up by 5.9%.