Latest Indian Share Market Updates & News in May 2020

Dancing to Dow Jones' tunes

Indian markets during the week oscillated and inched higher aligning to global cues. Domestic bourses moved in sync with developed markets like the US disregarding covid causalities. Dow Jones Industrial Average which has proved to be the most resilient market globally has seen a strong recovery from the lows of March 2020. A trend worth observing is that Stock markets of most countries, irrespective of number of COVID-19 casualties and quantum of stimulus package from government, have mirrored US bourses. The VIX, often termed as the 'fear index', too has eased substantially which has progressively made financial markets across the globe more coupled than ever before. On the contrary, Indian markets have underperformed its emerging market peers dramatically over the past few months as well. Further, it is imperative to note that the US markets have outperformed the emerging market index by a huge margin. Indian market's underperformance can be attributed to the stringent and extended lockdown and lack of near-term direct benefits from the government to jump start the economy. This bull bear tussle phase is likely to continue for a few more months before investors can see any significant lasting up move in the indices.

Event of the week

During such times, quarterly results are considered a pseudo-event but management's commentary across sectors is an important yardstick to assess the future. While pharma's commentary was not encouraging given the existing pricing pressure from the US and the fact that the domestic market does not offer the runway for increased growth visibility. Cement sector CEOs on the other hand gave an impression of near-term better outlook on the back of pickup from pent-up demand and further room for price rise across regions. Commentary from the auto space too was bullish as they expect demand uptake due to non-participation in public transport on fear of coronavirus transmission. Given that markets are forward looking, all the sector specific ifs and buts have already been factored in the current prices.

Technical Outlook

Nifty50 formed a big bullish candle after occurrence of hammer candlestick in the weekly chart, thus confirming a bullish scenario for the short term. We expect Nifty50 index to catch up with global markets and move in tandem with other indices as an equity asset class since the problem is more global in nature and not only country-specific. The last week of May has been quite bullish with broader market participation returning and mild optimism back on the Street, which suggests a likely test of 10000 on Nifty50. However, a decisive break of the range of 9900-10000 still looks quite difficult and another round of equity sell-off cannot be ruled out unless we test and retest this range.

Expectation for the week

Going ahead markets will look up to the most buzzing word on the street: 'LOCKDOWN'. Markets will take cues from the decision of ending of lockdown 4.0 which is expected to cease at the end of the month. If the lockdown extends, it would without a doubt create increased pressure on our financial system which might culminate into a knee jerk reaction in the stock market especially the financial stocks. If the lockdown subsides, bourses might witness a relief rally but investors should stay away and infact book profits as this rally might be short-lived. As the Oracle of Omaha, Warren Buffett says: 'The stock market is a device for transferring money from the impatient to the patient.' Hence, investors are advised to be patient and not invest any new monies but wait till markets adjust to ground realities. Nifty50 closed the week at 9,580.30, up by 6%.

Escalating Global Macro Tensions To Keep Markets Under Pressure!

During the week, markets witnessed a see-saw movement and by the end of the week closed in red on fears of global tensions and lack of short-term stimulating measures from the Indian Government. DIIs have started to hammer the sell button on the back of domestic redemption pressures and have sold to the tune of Rs. 7,965.50 Crs in April alone, highest since March 2016. This is expected to further accelerate in times to come as domestic investors may require liquidity to restart their normal life/ operations post easing of lockdown, which most likely is expected from June 01, 2020. FPIs too were seen selling aggressively which is in divergence to their stand in developed markets; since US markets on the back of liquidity and stimulus is attracting global capital for risky assets. The firm stance taken by Governments across the world against China may lead to further deterioration in economic relations which would keep markets under pressure in the medium term. Non-occurrence of good news in the horizon may take markets lower with a soft landing and market is expected to reach 8500 levels in the near term.

Event of the week

In the wake of rising recession concerns in our economy, the central bank tried to give its best in terms of monetary easing by slashing the repo rate by 40bps and extending the moratorium by another 3 months. This extension of moratorium without-a-doubt would ease ground level gridlock but is perceived negative for banks and NBFCs operating in the listed space. The extension may lead to higher possibility of delinquency rates - crippling their balance sheets which in turn would impact their profitability. Higher inflation in the short term due to supply side shocks is a big worry and though RBI is expecting this to cool down in second half, this may not happen given that a good part of the supply chain would take a long time to normalize. Therefore, higher inflation and lower interest rates will reduce the purchasing power of consumers/investors further reducing consumption in the economy. At best, it can be hoped that things should normalize by next two quarters. Fingers crossed!

Technical Outlook

Nifty50 is now on a declining streak for the last three weeks, after a brief rally of 30% from the lows, which is now trading 20% off from the lows. However, the banking index remained relatively weaker and is just 8% off the lows. Indian indices have decoupled from global markets and underperformed since last couple of weeks. Support and resistance have now shifted to 8700 and 9200 respectively on Nifty50. In the recent week, the index has formed a hammer-shaped candlestick pattern which will get confirmed on close above 9200 in the following week. However, looking at the weakness in the banking space, which holds a substantial weight in Nifty, it seems both the benchmark indices are going to slide lower. We maintain a mildly bearish outlook going ahead and any weakness in global indices will only add difficulty for the bulls to hold the market.

Expectation for the week

Market is encircled with negative news and the only thing that can really bring back confidence in these dark days is discovery of an anti-drug to fight COVID-19 and a vaccine to keep it away. Quarterly numbers in developed markets such as the US are almost over and the commentary from US CEOs, even the Fed Governor are all pointing towards the worst which may still be ahead of us. Therefore, Indian bourses going ahead will mirror their economic trajectory. Investors are advised to stay away from investing new monies and conserve cash. Nifty50 closed the week at 9039.25, down by 1.1%.

Odds are in favour of Bears

During the week, markets traded in a narrow range but with wide overnight gaps making people wary of keeping open positions. Open Interest in Nifty Futures was the lowest in last 15 years. Weak hearted traders are virtually out of D-Street as markets are heading towards an unchartered highway. On one hand casualties are increasing day by day but on the other, financial markets are being boosted with liquidity every minute, whether it be the US Fed or now the Indian Government which announced stimulus in the form of credit expansion to various stressed parts of the economy. Hon'ble Prime Minister synthesized the mega economic relief package of nearly Rs. 20 lakh Crs. This move was to inject liquidity and keep afloat livelihood through targeted loans to MSMEs, farmers, migrant workers etc. Nonetheless, the crux of the issue such as solvency, viability, visibility of businesses which are temporarily or permanently impaired have not been addressed yet. The fiscal response was poor but monetary response was aggressive which may lead to heightened delinquencies in the financial sector due to ever increasing debt levels and or cause inflationary pressure. The stimulus is expected to bring in short to medium term stability but longer-term viability is still unclear.

Event of the week

Federal Reserve Chair Jerome Powell in his recent comments on where the US economy stands in terms of its reopening warned of an extended period of weak growth and stagnating incomes, pledging to use more of the central bank's power as and when needed, and issued a call for additional fiscal spending. This succinctly points towards the conclusion that various principal stakeholders assume further contraction in economy across the globe. Pain isn't over yet!

Technical Outlook

On the higher side, Nifty50 could not cross 9900 and reversed from the 50% Fibonacci resistance of the recent down move. The rally seems to be coming to an end since Nifty50 formed a three inside down candlestick pattern and closed lower. While broader market's breadth remained weak for the last two weeks, large-caps too started witnessing weakness and hinted towards another round of selling as even the mega stimulus package by the Government was not able to support the markets. We expect the market to likely move in tandem with global indices as the problem is not country-specific and maintain a bearish view. The resistance on the upside is 9600 and the break of 8900 will resume the down trend.

Expectation for the week

Given the pessimism on the street, it would be worthwhile to catch sight of how Reliance's rights offer sails through, measuring the retail investors response would also send a signal of strength or weakness in the market. It could be an apt yardstick to see how investors at the grassroot level are perceiving current state of the markets. Quarterly results will still be a pseudo-event. Additionally, emerging US-Sino relationship along with other global responses will be key clues for markets going ahead. Investors are advised to remain on cash and selectively book profits which would aid to boost liquidity. Nifty50 closed the week at 9136.85, down by 1.2%.

Markets Directionless amidst Rise in Covid Cases

Markets during the week started on a low note but thereafter buying emerged at lower levels. Indian indices are still mirroring international markets and are unlikely to move on their own despite daily rise in the number of Covid-19 casualties. Volatility has significantly reduced with VIX across the world down by around 50% from its highs, thereby indicating slowdown in daily volatility of markets. Secondary market, the stock market being the most liquid, is about to witness another attack from corporate houses and exchequers wanting money to strengthen up their balance sheets. GSK Plc offloaded Rs. 25,480 Crs worth of HUL stock, RIL plans to suck away liquidity of approx. Rs. 25,000 Crs from minority shareholders and government (through SUUTI) too might think of selling stake to the tune of Rs. 22,000 Crs in few of the listed companies. All these actions are likely to further impact liquidity and have a negative impact on the secondary market. Valuations are unlikely to fall further immediately but it may happen slowly over the next 2-3 months. As it is said: Patience is an ultimate requirement if one wants to succeed at just about anything and investing is no exception. These are actually times to be patient and not get carried away by stock specific low valuations.

GST monthly collections are supposedly 60-70% lower since the lockdown began. Both state and central governments are making an all-out effort to shore up their own financial kitty to steer through the pandemic stricken dried up revenues. Central government increased excise duties in various forms on petrol and diesel – despite lower crude prices, which would keep OMCs' margins under pressure. Various state governments too, in order to increase their finances have relied on hiking taxes on alcohol upto 70%. Similar kind of moves are expected in near future to tax the rich and wealthy which the stock market may or may not like.

Event of the week

In the midst of all the chaos, Reliance Industries seems to have created its own bull market territory through a V-Shaped recovery by concerted efforts to bring quality investors, reduce its net debt and streamline its balance sheet. RIL having the highest weight in Nifty50 is also keeping markets on a better footing which in a way is helping to neutralize negative sentiments and is good for the current pandemic-stricken economy.

Technical Outlook

Nifty50 registered a big bullish candle in previous week, this week market opened with a gap down but could not surpass 9900 level of the gap resistance. This entire week market remained in a narrow choppy range with a downward bias and seems to be forming a bearish harami / hanging man candlestick formation. However, on a broader note market breadth remained negative only with the index being managed by some of the heavy-weights. We maintain a bearish outlook on the index with crucial support at 8900 on the downside, a decisive break below that can trigger a fresh round of selling. Traders should maintain sell on rise strategy.

Expectation for the week

Market seems to be going nowhere as volatility is substantially reducing and is also unlikely to react to corporate numbers significantly. How consumers behave and react post the lockdown restrictions are lifted will be the most important data point for markets to decide their way forward. But nonetheless, this will only be visible in next 2-3 months and till that time markets may not be in the mood to move substantially either way but may just gradually decline. Government stimulus seems to be a never-ending wait, but if it comes will be welcomed with open arms which may lead to higher prices. But till then expect a narrow range for the bourses with downward bias. Investors are advised to preserve cash by not investing at current levels. Nifty50 closed the week at 9251.5, down by 6.2%.