Latest Indian Share Market Updates & News in Oct 2016

All eyes on the US Election

The week started with positive bias but turned negative mid week reacting to Axis Bank’s dismal numbers but recovered slightly by the close of the week. FPIs have sold shares of around Rs 1500Crs, making October the first month of negative outflow in the last two quarters. DIIs counter balanced by buying shares worth Rs 6000Crs in the same period. Corporate results have been encouraging but were largely discounted in the market. Maruti registered strong growth of 60% in its Q2 PAT numbers, while ITC 10%, Bajaj Finance 45%, Bajaj Finserve 31%, Dabur 5%, Cairn 117%, Hero Moto 28%, Bajaj Auto 7%, MCX 23% reported rise in their respective Q2 profits numbers whereas companies that have reported decline in their respective Q2 numbers were Axis Bank 83%, Dr Reddy 60%, Syndicate Bank 75%, Idea 88%, Tech Mahindra 18%, Bharti Airtel 5%, all recorded negative Q2 Y-o-Y. Mr Market has strangely behaved in many of the stocks like Maruti, Hero Moto, Bajaj Finance, Biocon etc. which had reported good numbers by pushing down their stock prices post the results giving an indication that market is in no hurry to make a new high quickly. Stocks are rapidly adjusting to actual results vis-a-vis expectations.

Key events of the week:

Govt has finally formulated the policy to grant extension to Pre NELP blocks giving strong revenue visibility to companies like Cairn India and Essar Oil a big policy boost for exploitation of hydro carbons in the country. TATA episode should keep the stocks of the group under pressure till the time clarity emerges for the new successor and how the minority stake of the Sharpoorji Pallonji group is dealt with.

Technical Outlook:

Nifty50 has found a strong support at 8500 but the breaching of which will start a long spell of sideways movement with downward bias. However market is also likely to face strong resistance at 8800 and 8900 on the upper side. Apart from NIFTY 50 other indices are pointing to far more resilience and strength in the general market. The velocity indicators project that the market is just gliding without any strong momentum in either direction. The broad trading range looks the possibility in the immediate term with 8500 and 8800 being the range for the market in the short term. The long term strength of the market is intact. Buy on dips and fresh longs can be entered at current levels with stop below 8500 in the NIFTY 50.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

Corporate results, shorter week and the impending results of US Presidential election will keep the market in a trading range for some time. The downside seems to be capped as the super negative numbers of Axis bank and the melodrama in India’s biggest industrial house TATAs, did not shake the confidence of the bulls but at the same time excellent results have met with profit booking at the higher levels indicating that there seems to be a cap on the upside in the near term.  The government seems to scoop up the liquidity of the capital market by proposing to divest loss making PSUs which looks sound but in a way will take away the necessary fuel from the bulls. Traders should remain on the side lines till US Presidential election results are out as the risks to the market seems real this time similar to the Brexit episode. Investors can selectively buy a set of diversified domestic and consumption related stocks for long term. Nifty50 closed the week down by 0.63% at 8638.

Fireworks have began for the journey to New High

The week started with bearish undertone in continuation of corrective phase of the market but NIFTY50 smartly turned around midweek and closed in positive territory by the close of the week. The first round of numbers was out. Financials have done well but cement and IT have reported muted numbers. Yes Bank reported 31% rise in Q2 PAT numbers, DHFL 29% rise, LICHFL 20% rise, CANFIN Homes 53% rise, Infosys 6% rise, HCL Tech 14% rise, UltraTech 25% rise, Quess Corp 27% rise and Kajaria Ceramics 8.5% rise in their respective Q2 PAT numbers. Reliance reported a fall of 24% in its Q2 PAT numbers. The cement giant UltraTech has reported only 1% rise in volume indicating that the pickup has not gained traction at least in the infra and real estate sector giving an indication that markets have run up ahead of its fundamentals in the brick and motor segment. Infosys has guided for growth in single digit between 7 to 9% which is the lowest in many years. However valuations have adjusted for the same and any positive surprise going forward in the numbers will rerate the stock and the entire sector.

Key events of the week:

Govt has stipulated GST rates progressively at 6%, 12%, 18%, 26% considering the depth of the consumer pockets to pay. Luxury is taxed at highest rates where as necessities in many cases are keep out of the tax net. The most viewed US Presidential debates have polarised the candidates strongly and therefore this time outcome will be watched keenly across the world as both candidates have diametrically opposite views on many of the development issues.

Technical Outlook:

Nifty50 has completed its corrective pattern and has started the upward ascent. Correction of 5 weeks seems to be very healthy, which has now set the base for the market to touch new high before the end of this calendar year. The long term sequence of higher tops and higher bottoms are intact. The level of 8500 in the NIFTY50 indeed is the Laxman Rekha for the bulls to operate. On weekly chart NIFTY 50 has made a real body strong hammer indicating that the momentum rally has started. All short positions if any should be exited. Fresh longs can be entered with stop below 8550 in the NIFTY 50. Investors can start accumulating quality stocks to build long term portfolio.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

The ongoing result season and the festivities will keep the mood of the market buyout in expectation of cash from the Kharif crops and 7th Pay Commission payouts will kick start the consumer spending cycle. Generally Q2 results season do not cause much of price action volatility as majority of the expectations are priced in, only surprises are reacted favourably or unfavourably as the case may be. IPO of PNB HSG Finance seems to have been priced reasonably compared to the peers and can be subscribed for short and medium term gains. The government will continue to suck liquidity from the market by intermittently selling minority stakes in the market in the form of OFS. Richly valued PSU stocks should be avoided. Aggressive Traders can enter long positions now. Investors can aggressively buy a set of diversified domestic and consumption theme stocks for long term. Nifty50 closed the week up by 1.27% at 8693.05.

Market Standing at Inflection Point

NIFTY50 opened the week with a bearish undertone but fell violently in response to global events. US unemployment claims reached at a record low of 46 years, in addition, the US FED meeting notes pointed to imminent rate hike in December led to some profit booking across asset classes. Not too encouraging Chinese trade data also renewed the concerns of looming Yuan devaluation. Set of domestic data releases pointed to some surprises, inflation scored a low of 3.88% from a high of 5.95% registered in the month of August of this year, arousing hopes of faster rate cuts in the economy. Indirect tax collections rose by a staggering 25% for six months indicating solid robustness at the ground level. The macroeconomic numbers are extremely exciting from long term secular bull market's perspective, though in short term markets may keep on responding to global and local issues.

Key events of the week:

Ruia Brothers the promoter's of the Essar group finally are left with less than 5% in Essar Oil after months of protracted deal making. The debts of Essar group will finally reduce by half from Rs 88000/-Crs which is one of the biggest debts in the private sector. The deal has larger repercussions on the PSU bank's balance sheet in the coming quarters once the deal is consummated. Laws of Bankruptcy code and sweeping changes in the ease of doing business can be indirectly credited to such gigantic deal.

Technical Outlook:

Nifty50 continues to test key support area at 8550. The correction of last three weeks has reached at the tipping point which will either make or break the market in the near term. The decisive breach of 8500 levels in Nifty50 will break the sequence of higher tops and higher bottoms which may give an indication of major change in the market trajectory to either a long correction or a beginning of a bear market. However longer corrective pattern seems a more reasonable scenario if the levels are breached. Still the sequence of higher top higher bottom is intact. Medium term positional traders should trail their long positions at 8500 Nifty50 levels and can buy on dips with stop placed at 8500 levels. Investors are advised to again start accumulating quality stocks to build long term portfolio. Existing long positions should be trailed at 8500 Nifty50 level.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

The Q2 results season has just begun with IndusInd Bank posting a startling 26% growth in profits an indication of vibrancy in the lending activities. TCS posted its slowest growth since many years. Profits rose by 8% y-o-y leading to muted full year performance ahead. However its stock price seems to suggest that the worst is priced in and there is limited downside. Cera Ceramics posted a handsome growth of 40% in profits an indication of housing ancillaries are having its best time due to affordable housing mission announced by the government and subsidised loans from the government for purchase and renovation. Jammu & Kashmir Bank reported disappointing results due larger quantum of stressed assets in the region, barring a few exceptions, overall the results are expected in to be in line with the market estimates going forward. Aggressive Traders can enter long positions with proper stop losses in place. Nifty50 closed the week down by 1.3 % at 8583.4.

Market forming a strong Base for Next Rally

NIFTY50 opened strongly on hopes of interest rate cut but later succumbed to profit booking by the close of the week. The MPC of RBI began their innings with a 0.25% rate cut in repo rate thus reducing the cost of capital to six year lows. The near term expectations for the inflation are muted and therefore one more rate cut can be expected before the financial year ends. BP Plc has received nod to set up 3500 petrol pumps in India potentially challenging the monopoly of PSU's. Events from across the border can create short term knee jerk reactions which the market is capable of handling maturely going forward.

Key events of the week:

Govt successfully closed Income Disclosure scheme wherein approx Rs 71000/-Crs have been disclosed thus boosting the liquidity in the main stream financial system, some of which will find its way into the stock market. Government garnered Rs 66000/- Crs in the Spectrum Auction, the lowest since the last two auctions which augurs well for the industry and consumers. The auction heralds the end of mad rush for spectrum as the industry has become mature and positive cash flows should start emerging soon which will rejoice investors after long time.

Technical Outlook:

Nifty50 continues to remain in the last phase of a corrective pattern in the near term. Bull market corrections lasts on an average for 21 days as per Dow Theory. With the close of this week, 21 days will be over which makes a high probability case for the bull market to resume its upward accent. The correction had lost its momentum on the down which earlier was feared to be intense. The sequence of higher top higher bottom is intact. There is a major support at 8550. Medium term positional traders should trail their long positions at 8550 Nifty50 levels and can buy on dips with stop placed at 8550 levels. Investors are advised to again start accumulating quality stocks to build long term portfolio. Existing long positions should be trailed at 8500 Nifty50 level.
Nifty Today
Nifty 50 Daily Chart

Expectations for the week:

NIFTY50 correction pattern is losing momentum which is turning out to be sideways and shallow correction. The results season will begin next week which can coincide with the restart of new rally. Maruti Ltd. reported monthly sales growth of 30% compared to previous year which shows the underlying robustness in the economy. Auto spending is one of the most reliable indicators of the health of the economy. Both private and public sector banks are selling bad and stressed assets to ARCs to clean up their balance sheets in a run up to declare second quarterly results. Crude oil is nearing 50 USD per barrel which is likely to spoil the bull party for aviation and plastics sector. GRM's have increased by 50% in the month of September coming as boon for downstream refinery sector which will post excellent results in coming quarters. Investors should start selective buying in good quality shares. Aggressive Traders can enter long positions with proper stop losses in place. Nifty50 closed the week up by 1 % at 8697.6