Latest Indian Share Market Updates & News in Oct 2018

Bad October woes coming to an end
 
Markets had witnessed one of the worst October month performances on a barrage of negative headwinds both locally and internationally. Historically, the month of October is considered the worst for bulls. Some of the biggest crashes in the past century have occurred in October. October 2008, October 1987 and October 1929 have all seen major crack in prices not only in India but across the world. Hopefully, now the October omen is behind us and November Diwali could bring back some cheer to the market. The precipitous fall in the NBFCs have shaken up even the institutional investors. Major reshuffling has happened in counters such as Repco Home, Shriram Transport, DHFL, Indiabulls Housing and Muthoot Finance wherein FPIs have bought and domestic institutions have sold shares which indicate that although FPIs are in a selling mood at the aggregatelevel, butthey still find value in the beaten down NBFC sector.However, DIIs selling is a matter of concern as they believe that the ground level situation is yet to stabilize. On a holistic view, NBFCs do look like value buys but waiting for confirmations would be sensible.
 
A stalwart from the NBFC sector like Bajaj Finance has reassured the market through its management commentary that structurally this sector is poised for further growth but short-term liquidity woes are only temporary and will normalize soon. Thus, reading from this commentary gives us some confidence that all is not bad for NBFCs.
 
Events of the Week:
 
Yes Bank has surprisingly reported fall in profits at 4% on higher provisioning but NIIs still grew at 28%. However, inspite of all this the stock has made a panic double-bottom and remained stable after making a doji pattern. This indicates that Mr.Market is unwilling to push down the stock further thus creating a short-term buying opportunity. Similarly, Maruti's numbers have deteriorated but the stock price has recovered sharply from the lows which indicate that for the moment downside is capped and the worst is priced inwith the stock ready for a short term bounce.
 
Technical Outlook:
 
Nifty 50 seems to be losing momentum on the downside given the improving breath of the market. Correction by time also looks like nearing an end. In the beginning of 2018, the market witnessed serious correction which wasfor 38 days and thereafter the market reversed; this time also the correction days are 38 and atleast a short-term reversal is expected. Traders are advised to cover all shorts if market strengthens from these levels and long can initiated with tight stop losses.
 
Nifty Today
 
Expectations for the Week:
 
Massive losses in the derivatives segment have reduced the overall open interest to half from the peak that was witnessed few quarters ago. The current negative narratives for the market have increased the bearish bets by traders in the derivatives segment. But markets have severely corrected and are deeply oversold with breadth turning positive for an upside bounce. Stocks making 52-week lows are steadily coming down from 203 in the previous week to 176 in the current week. The bearish strength is therefore getting reduced which will see a sharp short-covering in the market. This should not be mixed up with a sustained rally. Investors should keep liquidity on hand, but traders can take opportunities by taking short term long bets. Nifty50 ended the week at 10030, down by 2.65%.

Earnings Estimates are a mirage
 
The quarterly result season has finally begun in full swing; however, the price behavior of certain companies seemsillogical. The trend of analyst expectations and comparison of results with such expectations post the actual announcement, has fooled the majority.It is presumed that analyst expectations are God sent and if they meet expectations then it means that the Company performed wellin the quarter. But the reality of Mr. Market is totally different. For example, Reliance Industries Q2FY19 numbers were as per analyst expectations and the Company delivered bottom-line growth of 17.4% YoY and topline growth of 54.5% YoY on a consolidated basis. Post the result, majority of the broker houses also raised the price target of this conglomerate by 20-30%. But nonetheless, the stock price substantially cracked 5% immediately after the announcement of results denuding the function of Analyst Estimates.
 
Other companies such as TCS reported a consolidated Q2FY19 net profit of Rs. 7,901 cr, up by 7.6% QoQalong with a healthy EBITDA increase of 13.3% compared to the previous quarter. The numbers were in line as per the terminology of Analysts but despite this, the stock price fell by some 12% in the ensuing period. Mindtree is another such example which fell despite a 30% QoQ profit growth. Hence, from these facts we can infer that investors should read the results unbiasedly by comparing the QoQ and YoY numbers. In addition, if the valuations itself are very high from a historical perspective, then no matter what, the prices will fall irrespective of good numbers. There is no point giving too much attention to the boggy of Estimates or Poll numbers.
 
Events of the Week:
 
Nifty had faceda tumultuous week with number of companies announcing their results. Banking and Housing Finance companies such as DCB Bank reported a 25% rise in PAT whereas Federal Bank clocked NIMs of 3.15% lower than the previous year NIM of 3.31% but profits were slightly better.Indiabulls Housing Finance on the other hand reported a 21% YoY PAT increase, Crisil29% YoY PAT increase and NIIT a whopping 59% YoY PAT increase. Technology companies have posted strong growth this quarter mainly due to the impact of rupee depreciation, but inspite of all these stocks have corrected and will continue to correct as valuations in the IT sector are still high.
 
Technical Outlook:
 
Nifty 50 has turned very volatile with gaps visible in the daily charts. Previous week's hammer formation and this week's shooting star formation indicates confusion for the market. It looks like bullish and bearish tendencies are balancing out. Market is therefore expected to enter into consolidation phase till expiry. Downside is capped at around 10000- 10100 in Nifty50 and upside there is resistance at 10900. Traders are advised not to take any positions till volatility reduces to normal levels as otherwise stops will have to be wider and chances of whipsaw losses are very high.
 
Nifty Today
 
Expectations for the Week:
 
The current phase of range-bound movement is expected to continue the following week for the Indian bourses. With the froth in the companies beginning to fade away, going forward we believe no new low prices will be reached atleast in the short-term till expiry in Nifty. However, volatility will remain heightened due to the uncertainty in the macros because ofrising fear of trade wars and oil impact globally. With the result season gaining momentum, it would be important to keep an eye on Asian Paints, Canfin Homes, Bajaj Finance, Ambuja Cements, Bajaj Auto, Indigo, Kotak Bank, Bharti Airtel, Maruti, Piramal Enterprise, Yes Bank, Dr Reddy's and a few others for directional clues for the market. The short-term mood will be mainly guided by corporate results; therefore, investors are advised to be very selective in their purchases and avoid any leverage at this juncture. Nifty50 ended the week at 10303.55, down by 1.62%.
 

Toxins outsell-off overdone
 
Markets in the past one and a half month have scared away half its participants. Open interest in Bank Nifty and Nifty have reduced by 40% from the peak in July-August this year. Additionally, markets had become super volatile amidst negative sentiments in the media which is evident from headlines such as "Another D-Street Bloodbath sees Sensex erasing 2018 gains", "Markets plunge on global sell-off", "Diwali dhoom may elude markets amid global gloom", "Trump and China headed for a double-barreled war." Such negative rhetorics often form bottoms which keep away investors from buying quality shares. Eventually, bear market bottoms are formed on such negative headlines.And the precise reason why the massesdoesn't indulge in buying shares at this point is because they pay too much attention to such consensus headlines, which should be ignored.
 
Currently, Mr. Market seems to be deeply oversold and is therefore ready for a bounceback. Investors must be watchful as it will be interesting to see if such a bounce will take the market to new highs or will it just be a dead-cat bounce which could take the markets lower. As the market unfolds,it will give evidence whether it will fall further; but currently it seems that until the earnings season lasts, markets will maintain their upward journey and continue to inch upwards with volatile corrections.
 
Events of the Week:
 
Rupee had taken a sudden U-turn and started to appreciate by surprising 99% of the participants. When RBI didn't raise interest rates, entire media and market participants blamed RBI for not supporting the Rupee. But to everyone's surprise, Rupee didn't fall further but infact started to rise. There is an old saying, when majority of the Street expects the Rupee to touch 80/$ it seldom happens. Rupee has indeed taken a turn which will help not only the equity markets but take pressure off current account deficit by stabilizing the macros of the country.
 
Technical Outlook:
 
Nifty 50 just fell short of touching the psychological support levels of 10000 but reversed from 10138 with a sharp bounce back. Volatility is expected to remain high which would make traders' life difficult. The bounce can reasonably retrace 50% of the entire fall which can take back Nifty50 to 10950 in few weeks. Traders should buy on dips for small risk to reward ratios and all short positions should be squared off.
 
Nifty Today
 
Expectations for the Week:
 
Markets have undergone a deep correction and with the onslaught of results, stocks are expected to be very volatile, but nonetheless markets should rise higher during the result season. Macros have been weak but despite US indices experiencing a massive fall in the past 2 sessions, our index ended strong today. This shows that the mayhem and selling has been overdone in our market and in this Q2 earnings season a significant downfall is unlikely.However, the IT sector is expected to fall on the back of higher valuations and an unlikely similar performance by the rupee in the coming quarters. Investors should bet on private sector banks, FMCG, consumer durables and textiles as they are all expected to rise due to good numbers this quarter. Nifty ended the week higher at 10,472.50 up by 1.51%.

Irrational exuberance on the down side
 
This week was a nightmare not only for the bulls but also for the Government and regulators. RBI, SEBI and the Government together tried to curtail the contagion in the market by giving out various initiatives such as allowing OMCs to tap ECB route to the extent of raising upto $10Bn which will take pressure off dollars which might calm the currency market.Also, a quick revamp to the IL&FS board brought in confidence in the debt market which will in a way aid to ease the liquidity concerns. All these initiatives will have tangible effects and markets will soon react rationally to the policy initiatives. These are path breaking moves which will certainly have a long-term impact on the panic-like mood in the market.
 
Additionally, when everyone is talking about crude reaching $100/barrel, people seldom understand crude oil dynamics and they blindly call the shots. However, crude has surprisingly created a false breakout with an engulfing bear pattern amidst $100/barrel calls, which mean that there is a high probability of reversal and prices are likely to cool down soon. If WTI crude futures falls below $74 that would be a confirmation to the end of its rally.
 
Events of the Week:
 
Today’s move by RBI to keep interest rates unchanged and maintain status quo has been shocking as the Street expected a 0.25% rate hikein order to curb rupee depreciation. The Monetary Policy Committee’s stance has moved from dovish to calibrated tightening is dangerous for currency markets. This move had an instant impact on our currency which continued to move lower and crossed Rs. 74/$ levelsfor the first time today.Currencies, Crude and Equities, all markets have become hyperactive, but hopefully crude will calm soon and the rest are expected to follow soon.
 
Technical Outlook:
 
The real chart to watch in order to understand the true state of the market is NiftySmallCap100 Index. The index has fallen sharply to touch the lower end of the channel, indicators are in deeply oversold state which give a ray of hope that bottom is near and any time sharp bounce back is expected. Traders are advised to take selective long positions in the form of Call options to mitigate the risk of further panic selling in the market if any.
 
Nifty Today
 
Expectations for the Week:
 
Markets have witnessed selling across the board. Even the good quality stocks were battered in line with general markets. However, the current fall was in isolation with global developed markets which give a ray of hope that soon a bounce will emerge as valuations have corrected a lot across the board. We think markets will calm down once corporate results start pouring in and given the oversold state of market, sharp rallies can be expected. Investors are advised to hold on to their quality stocks and mutual fund units. SIP investors should double their SIP amounts. Nifty50 closed the week lower at 10,316, down by 5.6%.