Latest Indian Share Market Updates & News in Nov 2018

Current Optimism is Deceptive

Markets during the week steadily gained strength keeping aside electoral fears. Big boost came after the Fed Chairman Jerome Powell's recent speech which hinted that the tightening of interest rates might not happen soon. The indication that US interest rates are 'just below' neutral levels implies that there is no urgency to hike interest rates. This led to across the board buying in global equities with a corresponding fall in precious metals and commodities. There are expectations of aggressive buying by FIIs in India and other emerging markets after the recent market correction of 10-15%, which has made stocks cheaper at current valuations. However, this is sudden euphoric reaction by the market participants and only the actual meeting will reveal the true picture. Stocks and sectors that had witnessed abnormal selling pressure either due to negative sentiments or due to weak quarterly numbers are expected to offer good value proposition from a medium-term perspective.

Events of the Week:

There was lot of fear this week majorly in one stock, Yes Bank, but on deeper analysis there are apparently no transactions which will inflict losses on the bank. Transactions and other events have transpired between Yes' promoters and other institutions in their individual capacity which in no way should impact Yes Bank. Also, the ratings downgrade by 2 notches of Yes' bonds might have caused mark to market losses on mutual fund debt portfolios but this will not affect Yes' current profitability. We believe that markets have overreacted in this stock and there is no cause of panic unless some frauds are revealed in the bank itself.

Technical Outlook:

Nifty50 is facing resistance at 50% retracement levels. Market formed a doji pattern on daily charts after a strong move indicating first weakness in the market. Indicators have turned over bought and divergence is spotted indicating loss of momentum in the up move. The hurdle of 10950 is very strong to penetrate. Traders are advised to book profits on long positions and wait for weakness to short the market.

Nifty Today

Expectations for the Week:

Given the expectations of a dovish stance by the Central bank in its December Fed Meet, RBI too is unlikely to increase cost of funds by raising interest rates. On the contrary, the pick-up in bank credit growth has more than doubled to 15.6% in the 1st week of November which is a sign that the economic actions and capex of corporates are picking up. This is positive for the sustainable economic growth of around 7% and upwards. Even though a few stocks such as Bajaj Auto, Cipla, Bosch and MGL are expected to be good picks at the current levels and offer a good margin of safety for the investors from a long-term horizon, however, broadly the markets are highly volatile and can show weakness at any instance of negativity. Hence, it is best to remain cautious and take measures. Aggressive bets should be avoided in this uncertain environment. Nifty50 ended the week higher at 10876.75, up by 3.32%.



Markets To Remain Jittery Till Year End
 
Mr. Market this week was directionless and indecisive as it whipsawed its way awaiting triggers from local and global bourses.The global macro-economic factors seem to have become stable now and this acts like a ray of hope post the gloomy month of October. The exorbitant oil price concerns have also died down with crude tanking by 30% from its 4 year high in October. Additionally, sliding crude prices have bolstered the rupee which has gained 2.79% against the dollar this month. The Indian Rupee is also amongst the top 3 emerging market currencies in November. Liquidity risks after the RBI - Government bonhomie also seem to be receding, given the reported numbers, almost all the commercial papers have been successfully redeemed and NBFCs are able to raise fresh funds.
 
Despite this, the stock market is still reeling under fear psychosis which is a great opportunity to accumulate NBFCs especially the top housing finance companies which have reported excellent numbers. DHFL reported a PAT growth of 52% this quarter compared to the previous year despite the rise in provisions and liquidity crises. Revenue grew by 33.8% but NIMs contracted to 3.15% against 3.44% which was due to the increased cost of funds mainly due to the liquidity crises. However, DHFL successfully sailed through the tide and investors must see this as a good opportunity to get into leading housing finance companies.
 
Events of the Week:
 
RBI and Government are now aligned to lubricate the economy with liquidity. Setting up a committee to reconsider PCA norms is a big positive for the sector as this would now enable a large chunk of the 11 banks to come to the market and lend which will further ease liquidity concerns. This meeting is also historic as it has given a clear direction and intent that no matter what, India's financial system is robust enough to withstand any crises. Now it is upto the stock markets when and how they will react to such positive ground level realities. It does seem that the worse is behind us on this front.
 
Technical Outlook:
 
Nifty50 has turned lower after retracing about 40% of the entire fall which indicates that the strength of the rally was very weak as Nifty could not even retrace 50% of the entire fall. The price action should oscillate with upper resistance at 10750 and lower supports at 10350 and 10000. The downward drift might continue for some more time till Nifty 50 reaches its first support levels. Traders are advised to stay on the sidelines or at best trade in puts as the market is prone to oscillate giving traders whipsaw losses.
 
Nifty Today
 
Expectations for the Week:
 
The coming week markets are expected to be rangebound, moodless with downward bias wherein the open interest too is low which shows that the market participants are unwilling to commit at this point in time. The next trigger is expected to be in the 2nd week of December with the election outcome which might give some direction to the market. But till that time volatility and whipsaws would persist.Traders ideally should stay away, and investors should also remain on the sidelines and wait for markets to correct. Nifty ended this week lower at 10526.75 down by 0.69%.

Is it the calm before a storm or markets will sustain the rally?
 
Post the result season, markets have calmed down keeping behind fears of liquidity and global sell-off. Macro-economic factors have started to turn in favor of corporates. Massive fall in crude oil and rise in Rupee will have double impact on the cost structures, it will boost companies such as OMCs, aviation and paints. Indian indices have quickly adjusted themselves to such macro dynamics and have been rising since the past three weeks, however, we must still wait for some clarity to determine their trend. Markets are expected to move decisively only post December with the outcome of the Vidhan Sabha elections but till then they are expected to be volatile but rangebound.
 
SEBI's past corporate governance measures have borne fruits. The pillars behind Apollo Tyres, Onkar Kanwar and Neeraj Kanwar have voluntarily reduced their compensation by 30%, earlier they were drawing individually Rs 42 Crs, an obscene amount by any standard, Ashok Chawla from Yes Bank and Vinod Dasari from Ashok Leyland have also resigned for whatever reasons but - all these facts boil down to only one point that corporate governance has indeed taken center stage in the true spirit which will go a long way in creating a healthy capital market.
 
Events of the Week:
 
All aviation stocks had reported losses for the previous quarter, however this is the historical impact which portrays an image from the rear-view mirror, but losses does not mean that the stocks can't be bought, currently, the industry's dynamics is undergoing several changes with oil prices declining, excise reduced by the government and rumors of Tata bailing out Jet Airways have all lead to sudden change in sentiments from fear to hope. Who says people can't double their capital in a span of one month! They can indeed, and Jet is a live example. This stock doubled from dreadful lows of Rs 164 in October to euphoric Rs 342 levels. This was a 360 degree turn in its fortunes on the stockprice but what will happen on the business front eventually is a matter of speculation. Therefore, traders are advised not to preempt the outcome and stay cautious.
 
Technical Outlook:
 
Nifty50 has exactly completed the retracement of 38% of the entire fall. Generally, it is observed that Nifty50 retraces around 50% and hence there is some room left on the upside, nonetheless any weakness from the current levels can take the Nifty50 back to 10000 levels. On observing weakness short positions are advised but longs on breakouts should be avoided as most likely all breakouts might turn out to be false signals.
 
Nifty Today
 
Expectations for the Week:
 
Markets are expected to be directionless but volatile which is a difficult scenario for traders to make profits. Hence, traders must be cautious as the indecisiveness of Mr. Market can result in whipsaw losses. With the results season almost over, markets will keep an eye on the CP rollovers by non-banking finance companies. Although a good part is rolled over or redeemed but a significant part is still remaining which needs to be seen. The current phase of hibernation and consolidation could last for a couple of weeks but hopefully the election results will wake up markets for new a direction. Investors and traders are therefore advised to stay away, investors should hold on to their core investment portfolios, while traders should be light on their trading bets. Nifty50 ended this week at 10,682.20, up by 0.91%.
 

Receding Fears may not spark further rally
The week was submerged in festive mood and so was market. Everyone seems to be suggesting that the worst is over, and this is golden time to invest. Majority are confident that Nifty will not fall below 10000. Such commentary comes from the fact that crude oil is down by 20%, Rupee too is strengthening and corporate numbers are as per expectations. Still Mr. Market is reluctant to move up, especially after a massive pull back of 6% since last two weeks. We indeed saw the bounce coming "now the October omen is behind us and November Diwali could bring back some cheer to the market" - October 26th, 2018 . Now when the street is turning optimistic we are little cautious about the continuation of the rally in the near term.
In our market outlook of October 5 th 2018 we observed "...engulfing bear pattern amidst $100/barrel calls, which mean that there is a high probability of reversal" since that date crude oil prices has relentlessly fallen and currently is down by 20% prompting a consensus call now that crude oil has entered into a bear market. We again disagree, Crude oil has corrected sharply but nonetheless the supply side disruptions caused due to Iran sanction might not take the prices any lower soon and therefore prices are likely to stabilize at these levels, giving the much-needed relief to the Indian economy, especially to industries like aviation, oil marketing companies and ancillary industries.
Events of the Week:
In a dramatic turn of events a surprising defeat in the House of Representatives to the Republican Party, is a sign of big relief for global equities. The defeat is a subtle message to the US President that authoritarian rule will not be tolerated, polarizing politics and protectionist stance will not be welcomed by the Americans. This should mend the ways of the current administration which should bring cheers to the market as the fear of escalated trade wars seems less likely. This is long term positive for global markets.
Technical Outlook:
Nifty 50 had a swift upward rally of 6% after a deep sell. Such rally has taken the market to short term over bough levels necessitating a corrective phase for the market. Market seems to be readying to retest the 10000 levels in Nifty50 as there are ample signs that current rally has run its course and cracks are emerging on the higher side. Traders are advised to book profits on long positions and shorts can be initiated at higher levels, however if Nifty50 moves above 10750 it will signal the resumption of uptrend.
Nifty Today
Expectations for the Week:
The result season has almost come to an end which brought some cheers to the market, but the short lived euphoria seems to be over as now the domestic issues of state elections will shift the focus back to Indian politics. Just like the recent US elections was a referendum on Trump policies, PM Modi too would face such tests this month end when three key states will go for elections. NBFCs CP (Commercial Papers) are up for redemption, the industry's liquidity litmus test results will be out by month end till that time market will stay side ways in profit booking mood. Investors stay away for the time being and fresh funds should be invested in Liquid funds in the mean time. Nifty ended the week at 10585.20 down marginally by 0.12%

Diwali To Add Fireworks to Current Rally
 
The week began with a bang and on a positive notewith Nifty showing signs of hope after the massive carnage in the previous week. Everyone had a consensus view that markets will break 10,000 levels on the back of continued FII selling and short rollovers in new series. But markets are unpredictable and seldom follow consensus. When everything turns negative is exactly when market reverses. The mid-week rift between the RBI and Government had also created extremely bearish narratives but if Mr. Marketwants to rise nothing can stop it. Indian indices were so deeply oversold that it had to rise. The rally should continue for some more time, however, it could prove to be a dead cat bounce, but lets wait for further evidences.
 
One of the barometers to measure the health of an economy is auto sales. Since the past few months, numbers have not been encouraging which shows feeble health of the economy.Such muted growth could have been due to increasing fuel prices, inflationary tendencies or decreasing purchasing power. Whatever may be the reason, this is not good for the stock markets.
 
Events of the Week:
 
With the Q2FY19 result season almost in its last leg, some companies have done extremely well this week- Century Textiles reported a 114% increase in its bottom-line and Tata Power delivered 85% increase in PAT growth whereas certain companies have faced a hard time due to the macros casting a shadow over their margins. BPCL is one of them - it delivered a 48% degrowth in its PAT compared to the previous year. At the same time, Dabur reported flattish growth of only 4% in its PAT. Overall, the results have been quite a mix set this week.
 
Technical Outlook:
 
Market indeed took support at 10000 and swiftly bounced back from deep oversold levels. Such sharp up moves will be followed by intermittent pull backs. Market is reasonably expected to touch around 10650 at 38% retracement levels and 10850 at 50% retracement levels. For Traders buy on dips should be the strategy but at the same time they should avoid stocks that have sharply run up due to quarterly results.
 
Nifty Today
 
Expectations for the Week:
 
The euphoria of the festivity could keep markets elevated but there are fewer confirmations as of now thatmarkets will touch new highs before the end of the calendar year. Nonetheless, there is good correction among the indices and many stocks are available at cheaper valuations. It seems to be the right time to cherry-pick the market leaders across various sectors as they will glide through the political tide with fewer headwinds. HDFC Bank, Bajaj Finance and HDFC Life are 3 names in the financial services space whereas momentum bets would be TCS and Biocon. A boost in infrastructure by the Government will bode well for Asian Paints. Moreover, consumer durables and FMCG players such as Hindustan Unilever and Avenue Supermarts would be safer bets to maintain sufficient diversification in the portfolio. Auto and chemical leaders - Maruti and Pidilite are also good picks from a 1-year perspective. We recommend a part of liquid assets should be invested in these 10 stocks atleast with one-year perspective till next Diwali. Nifty50 ended this week at 10,553, up by 5.21%. Wishing everyone Happy Diwali and a Prosperous New Year.