Latest Indian Share Market Updates & News in May 2018

Are PSU Banks on the brink of a turnaround?

Markets this week had a roller coaster ride with Dollar and Crude hitting higher levels taking markets lower, however, when crude oil relented markets immediately bounced back. The change from bearish to bullish sentiment overnight was little surprising to all. SBI - the country's biggest lender reported its second straight quarterly loss of Rs. 7718crore on account of surging provisions for bad loans and erosion in profitability from its core lending and securities trade business. The bellwether of the Indian economy did not meet the street expectations, however, the stock bounced back post results.

This depicts that there was huge pessimism among the investors and traders, despite SBI reporting worst numbers stock price bounced higher suggesting that the worst may be over at least in the interim period. There is very little room left for the stock to go down further in the short term. Also, the commentary of the management that the worst is over for the bank instills confidence that the coming fiscal is one of hope as there are chances of recovery of Rs. 78,000 crore from the cases in the first 2 lists of NCLT. However, on further analysis it looks like smaller PSU banks such as Allahabad Bank, PNB and a few others would recover a much higher amount in terms of percentage of their Market cap from IBC resolutions compared to SBI.

Events of the Week:

Prices of sugar which are prone to highest cyclicality are facing existential crises. Sugar prices have plunged by 30-40% creating a dent in the operating margins of companies who are unable to pay the farmers. But is this the turning point for the mills as the Government is willing to help the battered industry by revisiting the Fair and Remunerative prices offered. If the government indeed passes protective measures for sugar mills, the stock prices are going to bounce given that internationally sugar prices have moved up by 10% giving higher realizations to the exporters.

Technical Outlook:

The market has bounced back from oversold levels, more of such bounces are likely to happen after which Nifty is again expected to start its downward journey to touch the lower support levels. Mid cap and small cap are expected to bounce more vigorously as they had corrected more sharply in terms of percentage terms. For traders buy on dips with current weekly low as stops should be adopted, but market is expected to be volatile so stops have to be little wider.

Expectations for the Week

Markets can expect some amount of volatility on account of expiry and the declaration of results by a couple of companies such as NTPC, Oil India, Aurobindo Pharma among others. Key sectors to watch out for would be oil and gas, IT and cement. With the rising uncertainty on the global front, the markets are not in a hurry to begin their northbound journey. Investors can hold on to their investments and invest in quality stocks to build their long-term portfolios. Buy on dips should be the strategy. Nifty50 closed the week marginally up by 0.08% at 10605.15.

Has crude made a top?

Markets this week started losing steam and slumped due to the twin pressure points rising bond yields and crude prices along with rupee crossing the 68/$ mark. Frontline FMCG companies surpassed growth expectations by posting double digit PAT. HUL reported 14.2% rise, while ITC delivered 9.8% increase while Britannia increased PAT by whopping 25% which have kept Nifty indices on a strong wicket. However, the same is not true for the small and mid-cap stocks. They have been beaten down hard due to the weak sentiment and lesser liquidity in the system due to the rising interest rates. Sooner or later even the heavy weights will correct inline with the small and mid-cap indices.

Headlines in the media "Crude on boil", "Oil a big worry", "Crude to touch $100", "Iran to drive oil higher" - all these indicate sentiments are super bullish, but then that is how tops are made. The oil chart below shows a contrarian picture that it is time for bears in crude oil and the bulls will soon run away. The chart below is self explanatory.

Events of the Week:

"The Karnataka conundrum" does it really matter for the investors to base their decisions on the outcome of results? The swinging political fortunes in the Karnataka elections being the most watched out event of the year; popular media opinions and perceptions were too heated that to a common man the election outcome would have been a make or break event. But Mr. Market is far more mature and is really not bothered about the outcome of the state elections save and except short lived knee jerk reactions.

Technical Outlook:

Market has made an intermediate top by forming a shooting star. Lack of momentum since previous few weeks had given the indication of fatigue in the market, but eventually shooting star confirmed the top. Other small and mid cap indices are still weaker and expected to make bottom sooner than the Nifty50. We will assess at that time when the bottom is made. Currently market is expected to head lower. Traders should not short but wait for lower levels to enter long position.

Expectations for the Week

Markets will remain extremely volatile with a corrective bias since majority of the result season is over and there is worry of rising interest rates. US bonds yields are kissing their 7-year highs, there is no reason why it can't still go higher and this will keep the markets under pressure. Panic will strike if and when US bond yields reach the 4% mark but till that time it will certainly negative influences. Look out for some key results next week such as Cipla, Bosch Ltd, MGL, Dr. Reddy, IOC, including Karnataka floor test result which will add to the existing volatility. Investors are expected to be on the sidelines till a clear unfolds. Nifty50 closed the week at 10596.40 down by 1.94% for the week.

Elections or No Elections markets to witness profit booking

Markets opened on a good note with frontline indices showing keen interest in reaching higher levels but small and midcap stocks diverging and underperforming the market. With the constant depreciation of the rupee, the RBI finally stepped in on Monday to calm the currency markets. This indicates that most likely the rupee should stay in the Rs. 67/$ - 68/$ range which will effectively keep the inflation under check. Markets are extremely unpredictable and some pleasant surprises appear in the foray when we least expect it. ICICI Bank was one such stock which gained by 7% without any extraordinary numbers infact an increase in the Net NPA from 4.20% in Q417 to 4.77% in Q418 was disappointing, on the other side Jubilant Food works delivered supersonic numbers stock was down by 3.5% for the week but that's how Mr Market behaves.

There have been some stellar results this week by companies such as Titan, Nestle reporting strong growth of 70% and 38% respectively in their bottom line. However, with higher US bond yields, a peaking earnings cycle and volatility spikes in the currency markets the Indian markets have been negative commentaries in the medium term.

Events of the Week:

The Burman-Munjals have prima facie cracked the Fortis deal but the other suitors will not remain silent, they will up their ante and bid aggressively over and above Rs. 176/share. Shareholders should wait for the race between the suitors to begin. Also, this week's news about the US retail giant Walmart acquiring a significant stake (77%) in Flipkart should keep valuations of other offline retailers at the higher level as they could be the next target of Walmart as India still controls 88% of the trade through offline retailers.

Technical Outlook:

Nifty 50 is marching upward with lesser velocity. The upward rally has lasted for nearly 32 days and statistically these many days rally turn out to be a turning point. Hopefully coming week could be a turning point for the market. Other indices are showing divergences which indicates that Nifty50 is the lone runner but other sectoral indices are still under pressure. Break of upward sloping trend line will confirm the profit booking phase of the market. Traders should wait for trend line breach to initiate a short trade with highs as stops.

Expectations for the Week

Although everyone is looking out for outcomes in the Karnataka elections which might have insignificant effect on the market, the real threat may emerge from the Iran-Israel conflict which can escalate into a war-like situation after the withdrawal of US from the nuclear deal with Iran. High crude prices and a strong dollar are a bad omen for the bulls and therefore the markets should remain under pressure given the uncertainties. Numbers have mostly been discounted for but the valuations are quite rich. Investors should partly book profits and stay on the sidelines while waiting for the markets to correct. Nifty50 closed for the week at 10,806 up by 1.77%.

Markets begin their sideways journey!

Markets remained flat this week with a negative bias. The US Fed kept interest rates unchanged on Wednesday but an expectation of gradual rate increases is still intact. The week was lightened up with strong auto numbers that have maintained a double-digit growth pace with Tata Motors posting 84% yoy growth, Ashok Leyland 79% indicating that at the ground level macro factors are still intact and consumer spending is boosting economic growth. However, commercial vehicle growth seems a one-off event as such massive growth will not sustain for long. This sudden one-time demand may be due to adjustment of logistics to new GST laws.

On the other hand, PC Jeweller Ltd. had tanked by a whooping 65% in the past 4 weeks (from 2nd Apr to 2nd May,2018). This stock is a big lesson for long-term investors that stop losses are equally important for investors too. Sometimes numbers, management commentary and media may not show the true picture but market prices do. Investors should have protective stops in order to manage their portfolio risks in the Indian context. Buy and hold may remain good in theory but risk management is a practical lesson.

Events of the Week:

This week has witnessed a slump in the aviation stocks, the biggest in recent history. At last reality dawned on the aviation sector which was trading lofty valuations. There are certain industry-specific factors that are hampering growth. Airports in the tier-I cities have limited capacity and infrastructure to handle an additional pipeline of scheduled flights. This capacity constraint along with jet fuel prices would be a huge setback for the aviation players causing a dent to their bottom-line.

Technical Outlook:

The upward rally of nearly a month has come to an end and this weakness was evident in the MACD oscillator which has been indicating a loss of momentum. A divergence in price rise and a loss of upward velocity were evident since the last few days. Finally, when the trend line was broken a signal of corrective fall was generated. Nifty 50 could find support at 10200 -10300 range. Traders should initiate long at lower levels only.

Expectations for the Week

The market is still in a corrective mode. Results will not make any material impact on the stocks and markets but the outcome of Karnataka elections will be a crucial event to watch out for before making a move. "Markets can still be predicted but no one can foresee the election results when it comes to politics. Thus, markets will have to wait and watch!" On the sectoral front, realty, pharma, power, oil & gas, metals, cement are expected to continue its correction journey whereas expect profit booking at higher levels in IT and FMCG. On the whole, May will would be a lackluster month except for the election results. Nifty50 closed for the week at 10,618.25 down by 0.57%.