Market hits a ton, celebrating 100 days of nonstop bull rally

Markets opened with sombre moods pushing stocks lower inspite of good numbers. State Bank posted excellent standalone numbers, Suzlon had a turnaround, posting profits for the 4th quarter, still the stock was beaten down by 10% to 15%. However during mid week market hit a panic button on news of cross border firing and thereafter bounced back with a vengeance. The government's mission of electricity for all is driving up sales and profitability for consumer electronics companies like Voltas wherein the quarterly profits nearly doubled. The sector should do good going forward. Government's road construction program is also running at full swing which can be vouched from the quarterly numbers of Dilip Buildcon which also nearly doubled its quarterly profits. Tangible results are now being felt in the economy after three years of rule of the new government. Such percolation will be seen in all most every sector of the economy sooner or later. Investors need to keep patience, the hardest element in successful investing.

Events of the Week
Government adopts private sector approach by firing erring and corrupt bureaucrats by giving them early retirement, a move which will give a stern message to 66000 babus to serve the country in the right spirit. If this is how the country will be governed, India sooner could be the fasted growing economy in the world, propelling bulls to the moon.

Technical Outlook:
The correction which was much anticipated arrived swiftly and sharply especially in the mid and small cap space making the necessary foundation for the Nifty50 to move higher. Although the market did not go below 9300 levels which were the trailing limits for investors and positional traders. Engulfing bullish candle has been formed on the daily chart putting bulls back into action. The fresh breakout will now keep the momentum going higher for some time and therefore traders should ride the wave keeping weekly lows as stops. The sequence of higher tops and higher bottoms is still intact which will lead to newer highs for the market. The level of 9333 should be kept as trailing stops for long trades.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:
Market has regained the velocity to go higher, after a brief pause, correcting the excesses quickly and swiftly. PSU banks, Auto Ancillary stocks, cement and other pockets where stocks had run ahead of fundamentals on hopes and expectations had corrected sharply and the rest of the stocks had normal corrections. For IT sector the tide is changing rapidly, US States have started giving out red carpet treatment in the form of fiscal incentives to Indian companies to establish offices to hire local talents a welcome step for the entire sector. Pharma sector had mayhem on account of poor results but they are expected to bounce back this week on bottom fishing. Shares which have corrected sharply will take time to rise and therefore investors should exercise patience in holding them for long haul. Investors should restart investing through SIP mode for building long term portfolio of good stocks. NIFTY50 closed the week at 9595.10 up by 1.77%.

An Appeal for LBW for President Trump has sent Bulls hiding
Markets opened with positive sentiments during the week but the same got punctured when the noise about impeaching US President became louder. Irrespective of such rhetoric the Indian market had moved ahead of its fundamentals although the corporates results were no big surprises. PSU banks had reported mild profits after previous year of heavy write offs but in some cases the asset quality had further deteriorated during the quarter but the stock prices have still defied the gravity. Many of the PSU banking shares have doubled in last 3 to 4 quarters, such price actions are totally divergent from the underlying fundamentals. Therefore a serious correction is overdue in the market in order to correct such anomaly erupting in many pockets of stocks. Even good numbers too are very well known and discounted in the market, Hindustan Unilever posted great Q4 numbers but the stock has stalled, JSW Steel posted 47% growth in top line and profits had tripled still the stock was down by few percent points. Bajaj Auto Q4 profits were down by 17%, Aditya Birla Nuvo profits were down by 52%, but the current alleviated stock prices do not reflect such reality and hence the correction would be a safety check for the market.

Key events of the week:
GST rates are finally done, in general they are non inflationary and fair to the pockets of vast majority of the population. The rates are progressive which will go a long way in reducing income inequality and promote inclusive growth in the economy. The setting up of the investigation committee headed by former FBI Director Mueller to look into the charges of Russian interference during Trump’s Presidential campaign would be very significant for the global financial market. If the charges are proved, then the Impeachment would be certain leading to massive selloffs in the US market as was the case during President Richard Nixon in 1974 when the market had fallen hard by 25% when he resigned in August 1974 fearing an imminent Impeachment.

Technical Outlook:
The market’s upward trajectory has at last come to an end. On the weekly chart a shooting star formation confirms the most likely course of action, i.e. down in the short to medium term. The upward velocity since last two weeks was already weakening and the formation of a shooting star creates a high probability scenario of corrections now setting in the market. Bank Nifty chart also suggests that the 15 months old bullish channel shall act as a major resistance and selling pressure is likely to increase. Traders are advised to book profits on all long trades. Shorts could be initiated if the higher top, higher bottom sequence is broken below 9300. When the level of 9300 is broken in Nifty50 there is possibility of deeper and longer corrections.
Nifty Today
Nifty 50 Daily Chart
Nifty Today

Expectations for the week:
The euphoric mood of the market has overnight turned cautious and if history is any guide, the situation is going to further worsen before it will get better. The market oscillates between cycles of optimism and pessimism on all time frames. It seems that the pendulum has swung too far towards optimism, which can he confirmed through the BankNifty, wherein an All Time High Open Interest is hiding silently whereas the world is looking at Nifty50’s open interest which is still much below the previous peak. The leadership has changed and so will the market change its direction in the intermediate term. It would be wise to book substantial profits currently and go for summer vacation. Investors should wait for some time before restarting their investments in quality stocks.  NIFTY50 closed the week at 9427.9 up by 0.28%.

Monsoon injection props up bulls for now
Markets opened the week with directionless movements, but propped up mid week when IMD forecasted normal rains for the coming monsoon season. Stocks from FMCG, Real Estate and Agriculture input stocks moved higher during the week. Sentiment indicators are running very high on optimism. This can be confirmed from reading market's reaction to the corporate earnings. BhartiAirtel reported 72% decline in Quarterly numbers still the stock price rose 9% that day, Hero Moto reported 14% drop in profit; the stock price went up by 4%. There were companies which reported lower profits and still their prices have gone up violently. This indicates that the sight of the market is on hopes and expectations of future earnings, which indicates that in the short term the market has run ahead of its fundamentals. HUDCO IPO a company with ordinary fundamentals got oversubscribed 80 times this speaks volumes of the current state of heated affairs of the market.

Key events of the week:
Ministry of Power has set the ball rolling to disrupt the traditional sectors by proposing to introduce electric vehicles in all government depts. Not only this, they have further mandated to use electricity generated from Solar panels. Solar power tariff has hit new low of Rs 2.62 per/KWH in a recent auction conducted by Adani Renewable ltd which indicates that going forward the sun is setting on the new demand for thermal power plants.

Technical Outlook:
The market's upward trajectory is getting weaker and weaker. The prices are not able to rise near the upper channel of the bull track established since last four months. The MACD indicator which measures the momentum is faltering since last few weeks. Market is moving up cautiously. The higher top, higher bottom sequence will be fractured if the Nifty50 breaks below 9225, which should be the trailing stops for all long trading positions and levels below which even investors can partially book profits in over heated stocks. When the level of 9225 is broken in Nifty50 there is possibility of deeper and longer correction ahead. Traders are advised to book profits below 9225 Nifty50 levels and stay away from the market if it falls further.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:
The market is sitting at alleviated optimism, but the domestic liquidity is holding on the market. The extent of over subscription in recent IPOs vindicates such fluidity of the market. Volatility has increased and so has the option premiums. But all these volatility will slowly subside by the end of this month. Market will continue to have bouts of buying and profit booking situations. Once the QIPs are over the stocks have cooled down as can be seen from the recent past. Kotak Bank too could follow the same fate.  During the fourth quarter there was 21% increase in home sales in top eight cities. The real estate rally seems to have begun after a decade long hibernation and will continue for more years to come, as the real estate has long cyclical forces in operation. Passenger vehicle sales are scorching and so are the valuations of these companies leaving no margin of safety at current valuations, but Commercial vehicles (CV) hasn’t picked up and therefore the stocks are available at fair valuations. When the momentum in the economy further picks up, CV sales should also pick up. Conservative investors can accumulate shares of CVs and Two wheelers which will perform well in times to come. Investors should wait for some more time before restarting their investments in quality stocks. NIFTY50 closed the week at 9400.90 up by 1.24%.

Bulls are slowly losing their grip as the mercury is rising
Markets opened the week with positive sentiments backed by all round optimism. Media headlines were also adding fire power to the bulls but somehow Mr Market was in no mood to respect them. The headlines read as “Stocks at peak..., Market at New High.., Ready Steady Soar.., SIP inflows at Rs 4200 Crs an all time high..” These are the kind of headlines and sentiments needed to make intermediate tops in a large secular bull market. Surprisingly this time, instead of Nifty, there is an all time high open interest in BankNifty which certainly sends a cautious signal for the bulls. Some sectors that are heading at diametrically opposite direction are Pharma and IT. Pharma in particular saw massive sell off during the current week, what is in store for them would be known shortly as the ObamaCare has finally been repealed with the new American Healthcare Act in place. But the current levels of pessimism surely will make conservative investors with deep pockets to go after the industry leaders like Lupin, Sun Pharam and the likes as the world can’t go without medicines irrespective of the valuation bets the stock market guys are betting upon.

Key events of the week:
At last RERA has been put into force heralding an era of shift of power from the builders to the consumers. This will potentially go a long way in developing a healthy and competitive real estate market which will actually help in building huge stock of housing which will not only shelter the masses but also add to the GDP. For the first time an IPO of Investment trust, IRB InVIT has hit the market which will mark the beginning of new chapter for fund raising to build a deeper capital market in India.

Technical Outlook:
The upward velocity of the market is slowing down.  As can be seen from the chart below, Nifty50 is unable to touch the upper trend lines. This is an indication of fatigue in the market, but considering the longer term bull market cycle that Indian market is currently witnessing; these bouts of weakness, slow movements and stock specific movements shall continue to play out. In all likelihood a phase of deeper and longer correction has started. Traders are advised to book profits below 9225 Nifty50 levels and stay away from the market if it falls further. However major support continues to be 9000 in Nifty.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:
The market in general and Pharma in particular will react to the new health care law passed by the President Trump. Raw materials and commodity prices are falling hard on fading hopes of America being rebuild - the political rhetoric of Mr Trump on the back of which the elections were won. Markets cannot go up only on hopes is the important lesson that has to be learned from the commodity episode. International Sugar prices are down by 30%. Crude oil is down by 20% from its recent peak. Base metals like Zinc and Nickel are down by 15 to 20%. All these will in turn lead to fall in the stock prices as the cyclical time frame of commodities are larger and therefore the underlying commodity prices will dent the profitability of the companies. IPO of HUDCO can be skipped by long term investors but can be applied by retail investors for short term listing gains only as a discount of Rs 2/- per share is offered. Valuations of Nifty50 stocks are at 22.2 Times Trailing Twelve Months P/E, the market does not appear cheap. Investors should partly book profits if Nifty50 falls below 9200. Investors should wait for a while before restarting their investments in quality stocks. NIFTY50 closed the week at 9285.30 down by 0.20%.