Latest Indian Share Market Updates & News in Mar 2018

Will the New FY bring joy to Bulls

The market had a rollercoaster short week with the year ending and F&O expiry all culminating on a single day. On the whole, the micros in the form of earnings are showing signs of improvement; however, the macros pose a huge challenge in terms of rising yields, rising crude oil prices and increased barriers to international trade which have created headwinds for our indices.

But the offshoots of recovery are visible in some of the sectors this week. Markets have principally reacted to the global cues but the same is likely to change beginning April wherein the first set of numbers will be released. All the pessimism has already been captured by the markets; the last date of free LTCG combined with the F&O expiry should create a launching pad for good recovery at least in the month of April while elections in Karnataka could again pose jittery for the markets in May. But let's hope for the best.

Events of the Week:

Indian Bond yields cooled slightly on Government's assurance that H1- FY2019 borrowings will be lower than expected which if implemented in letter and spirit would slightly ease the pressure on interest rates. This should help the NBFCs to keep their borrowing cost little under control in an otherwise rising interest rates regime. However, currently there is too much pessimism that interest rates will rise further, which may not turn out to be the reality, given the sharp run-up that we have already witnessed in the bond yields. Mr. Market has punished highly priced IPO of ICICI Securities in the form of under subscription. This should be a big lesson for merchant bankers that Indian investors have indeed become smarter.

Technical Outlook:

Nifty 50 has sharply bounced after making a 38.2% correction of the entire rally beginning December 2016 till January 2018 (total rally of 3278 points). The correction (38.2 % of entire rally) comes to 1252 points, which when deducted from a high of 11172 gives a target of 9920 in Nifty 50. Market tested 9951 and sharply bounced back inspite of negative global clues which indicates a sustainable bounce is in the offing. Nifty50 is expected to test 10600 on the higher levels in the medium term. Buy on dips should be the strategy for the traders with stop loss placed at 9900 for Nifty50.

Expectations for the Week

The market is slowly expected to gain momentum in the month of April and bounce back from lows on the expectation of good numbers. Pharmaceuticals can surprise; wherein the base of last year was low and any incremental growth in profits will have a high beta impact on the stock prices.

There is still uncertainty regarding how the US markets will unfold and the impact of trade wars if it heightens, but more or less the same has been factored in and therefore the markets should perform better than what the majority are expecting on the Street. It's time to be patient and look out for sectors such as pharma, IT, NBFCs and good quality private sector banks. Investors should deploy a part of their capital in good quality stocks at current levels. Nifty 50 ended the week up by 1.16% and closed at 10,113.70.

Shift from Globalization to Localization has just begun

Bears seem to have casted a strong negative spell in the market and are continuing to show an upper hand in the ongoing bull vs bear tussle. Every effort to bounce back is being thwarted as lot of pessimism is surrounding the market and bears seem to be in no mood to given in yet. But hopefully with the onset of new financial year things should improve.

Media headlines are all turning bearish "Uncertainty here to stay traders sell on every rise", "Markets may be heading for a bear phase". These types of headlines indicate extreme bearishness and therefore at least in the short term markets can swiftly bounce back. During bearish spells IPOs also go unsubscribed -Hindustan Aeronautical Ltd got lukewarm response, all this indicates that a deep correction has already happened in our markets and further downfall may only be limited, unless something drastically goes wrong on the tariff war front. Trade war by the world's largest economy is causing an escalation of fear among investors in an already weak market.

Events of the Week:

US Fed raised interest rate by 25bps and maintained a dovish stance on further tightening the lending rate this year. Good thing about the new Fed Chairman is that he has given clarity on interest rate hikes till 2019 which will give lot of clarity to the markets going ahead. However US - China trade war with US imposing a tariff on $50B worth of Chinese goods could be a game changer for the entire world trade. An era of anti globalization could be beginning of a new threat to the global bull market.

Technical Outlook:

Nifty 50 has decisively penetrated 200 EMA with low velocity as can be seen from MADC indicator. On a worse case scenario, prices can touch 9700 at the lower channel of the downward sloping trend line (red). Incidentally Nifty50 has a strong previous support at 9700 which shall be a power full reversal point for the index going ahead. The market is entering a complex corrective pattern which should correct the entire rally since the last year, however intermittent rallies are also expected in the mean time. Sell on rise should be the strategy for traders.

Expectations for the Week

The current degree of pessimism in the market warrants a reversal albeit of a shorter term in nature. However, with the fears of trade war aggravating and the political climate heating up domestically, there is bound to be acute pressure on the bulls from medium term perspective. Year end liquidity crunch would keep investors at bay but beginning new financial year liquidity should improve and the same would be reflected in the markets too. Mutual funds inflow on account of ELSS should boost their buying power thus lending support to the market. Investors should keep a list of value driven companies ready as ample opportunity will emerge as the year passes by. Nifty50 closed at 9998.05 down by 1.93 %.

Year-end Liquidity woes to keep Markets under pressure

Market continued to trade negatively throughout the week. Despite favorable IIP and CPI numbers for the month of February the market seemed to be in no mood to show signs of strength. The fallout of PNB scam will impact other sections of the economy. RBI has decided to scrap LOU's and Letters of Credit, this step will affect credit flows to importers and exporters alike impacting their finances. This will have a cascading impact on the growth as investors continue to lose faith in the state-run banking systems.

Recent observation by World Bank on India's growth projection at 7.3% and 7.5% for the next two years isn't encouraging. World Bank's observation is against the analysts consensus of accelerated growth for Indian Corporates, amongst them who will be right only time will decide. But as such the Word Bank's forecast is not encouraging.

Events of the Week:

US has marched further on trade war with the announcement of a three-fold hike in the anti-dumping duty on Indian Shrimp imports. However, Indian companies are unlikely to be affected as the rising demand provides a strong shield, but the threat of further hikes in import duty will always remain. US have further threatened to impose duty on auto and auto ancillaries which will take away the high growth trajectory of some of the Indian companies, if done. Global trade war at WTO legal forum is likely to begin.

Technical Outlook:

Nifty 50 rebounded from 200 EMA during the previous week, but the bounce was just a dead cat bounce as expected. We had mentioned on March 9, 2018 note "Ideally the prices should pull back to the lower trend channel which could be a good shorting point for the traders". Nifty 50 indeed bounced to test the lower trend channel thereafter restarting the downward journey. Prices are likely to fall decisively below the 200EMA a sign not good for bull market. The market is entering a complex corrective pattern which should correct the entire rally since demonetization. No one can predict the length and depth of the correction, how far the correction can go but only when the correction is over the factum can be verified by observing the volume pattern. Currently there is no such indication of correction nearing an end. Sell on rise should be strategy for traders.

Expectations for the Week

Going forward, market seems to remain volatile as valuations are expected to come down further to reasonable levels on the back of liquidity moving out of the system. Also, the financial year-end liquidity pressure will only strength bears case.

Global headwinds are negative and will decide the direction in the short-term. A massive line-up of IPOs and the disinvestment plans of the government will keep the liquidity tight and further create pressure on the stocks in the secondary market. Selling is also likely to increase as long-term capital gains currently enjoy zero taxation till current financial year. Additionally a subdued performance in UP bypolls will also have some more side effects. Investors are advised to stay on the sidelines currently. Nifty 50 closed the week at 10195.15 down by 0.31%.

Value Emerging at Lower levels in some pockets of Market

Market had a blood bath during the week scaring even the staunchest bulls in the market. Global and local events led the carnage. Trump's surprise levy of import tariffs on steel and aluminum imports led to global sell off on fears of retaliation and cross retaliations between large economies of the world.

PSU banks were at the receiving end as the saga of bad loans and banking frauds kept on deepening. Irrespective of value, all stocks spanning across all sectors were beaten down. Next to PSU banks, sugar stocks were also heavily marked down on expectation of bumper crop this year at 29.5 MT which will keep sugar prices subdued impacting sector profitability. Sugar price cycle alternates; the year of excess sugar production will lead to fall in sugar prices consequently reducing the production for next season which again self perpetuates, rise in sugar prices thereby increasing the profits for the companies. This goes on and on: Sugar companies are very good for trading but not for long term investments.

Events of the Week:

US the biggest proponents of global free markets was able to keep inflation below 2% for long time inspite of loose monetary policies, but all these will change permanently with the imposition of import tariffs at 25% on steel and aluminum at 10%. Subject to larger repercussions on the global trade practices henceforth, the inflation will rise in US which will further push FED to increase interest rates harder thereby puncturing the equities rally across the world. The world's economic order will change, breeding inefficiencies and thereby increasing cost of capital and therefore interest rates will remain alleviated.

Technical Outlook:

Nifty 50 has broken the long term trend line this week which was valid since last one year, indicating that a serious and long drawn correction is under way. Ideally the prices should pull back to the lower trend channel which could be a good shorting point for the traders. Nifty 50 generally respects 200 SMA and therefore odds of prices rising and touching the lower trend channel are greater. Currently the market is risky for want of safe shorting levels.

Expectations for the Week

Market is undergoing through a state of rapid iteration with capital shifting from fundamentally weak businesses to stronger ones particularly those companies which are catering to India focused markets. Export oriented businesses are expected to take a hit going forward in the new world order. Currently domestic factors have taken a back seat, but beginning new financial year, when results are rolled out, the market will take important clues after assessing the corporate scorecard till that time market is expect to remain subdued to range bound. Selective investments in only bluest of the blue stocks can be done at these levels from long term investments perspective. Nifty 50 closed the week at 10226.85 down by 2.21%.

Make No Hurry - Stocks Will Be Available At Lower levels

Market bounced back in the beginning of the week from oversold levels but closed moderately lower compared to previous week levels. Local and international issues were hotly contested by bulls and bears trying to overpower other’s territory, but none won. Govt has given ultimatum to PSU banks to report all the skeletons of fraud within 15 days this is expected to keep bulls away till that time but all is not bad for PSU banks.

Binani Cement lenders will face zero hair cut which has been acquired by Dalmia Bharat ltd for Rs 6700/- Crs through the Bankruptcy Court. Fast track loan recovery mechanism should eventually recover a good part of approximately Rs 6 Lakh Crs which are choking the financial system. However the current pessimism surrounding the PSU banks should slowly turn positive when the recovery bounty begins.

Events of the Week:

MOIL has increased the price of magnesium ore between 5% to 10%, NMDC has regularly hiked the prices of Iron Ore by 25% since last two months, Aluminum, Copper, Zinc and other commodity prices are increased every fortnightly, SBI has increased interest rates on all deposits by 0.5%, local and global inflation rates are on rising spree, US Treasury bonds are rising on expectation of increase in interest rates. All these factors historically are against the equity bull markets.

Technical Outlook:

In the last week note we had mentioned that market will test 10630 levels which it did during the week after which the fall accentuated. The market is decisively into a correction of long haul. One more bounce is expected, but irrespective of that another leg of downfall will begins sooner or later. Market will trade range bound for some time which is the worst time for traders to participate.

Expectations for the Week

Market is glued on the global state of affairs currently. Domestic economy has kept the momentum at ground level, February auto numbers prove such a fact. Maruti, Eicher Motors and Bajaj Auto posted 15%, 25%, 31% YoY Growth in their respective vehicle sales numbers, which are encouraging, This should support bullish case for the market.

Comments of new US FED Chief were nothing but reiteration of previous policy stance which has again rattled the bulls across the globe. Treasury yields are slowly falling after a rapid rise which should offer some solace to the equities for the time being. But if the yields go beyond 3% for 10 year US Treasuries than a massive fall is expected across the markets. It is time to be cautious and wait patiently before investing. Profits can be booked at every rise. The longer term trend is under pressure. Nifty 50 closed the week at 10458.35 marginally down by 0.31%.