Latest Indian Share Market Updates & News in Oct 2020

Markets To Remain Range Bound With Lower Bias

Mr. Market reacted negatively on news of a second lockdown in Germany and France, a second wave of virus in European countries and US election uncertainties which led the bulls to liquidate their long positions. In the near term, sentiments have turned neutral to negative given the non-stop rally that we have seen in domestic markets. Next week will be crucial as markets are expected to witness increase in volatility due to the US Presidential elections. Back home, the Indian Government is trying to revive the economy in bits and pieces, however, the bigger goals of strategic disinvestment to fund a pandemic orchestrated deficit seems to have gone haywire. PSU companies are, therefore, now deploying the age-old tool of share buybacks to return some money back to shareholders including their major beneficiary the government. This move would strike well with the domestic investors which may give them a chance to exit and preferably raise their current liquidity buffers. In a way, the buyback trend is likely to support markets especially the PSUs which may find buyers at lower levels.

The current quarter would be the last quarter to reflect the buoyant profit after tax growth which accrued due to corporate tax reductions announced on September 20, 2019 with effect from FY2019-20. Although optically, performance of a large number of corporates this quarter looked rosy, it is actually the lower tax which improved profitability. And therefore, this acceleration in PAT growth should normalize from next quarter onwards. Markets have a habit of overreacting to short-term events and therefore there is every likelihood that an intermediate peak will be formed post Q2FY21 performances are digested.

Event of the week

Major economies such as France and Germany have declared a second lockdown given the resurgence in Covid cases. Global stock markets plummeted in response to this news as there are chances that the lockdowns could be as severe as the earlier ones, which can drive the global economies deeper into recessions. Market players should be wary and keep an eye on such possible severe outbreaks of the virus especially because India could very well imitate global indices if the situation worsens. Investors are therefore advised to remain cautious in the current uncertain environment.

Technical Outlook

Nifty50 closed the week on a negative note posting a bearish candle on account of negative cues from global indices as well as being overbought in the short term. Almost all major sectoral indices closed negative led by Nifty metal and auto on the downside with Nifty VIX registering a breakout from the consolidation zone of three months. We believe a retest of support of rising channel on the weekly chart is quite probable in the upcoming week and break down below the support will damage the bullish structure of the uptrend and may trigger a fall up to the next major support of 11,350. Immediate support and resistance in the short term are now placed at 11,350 and 11,750 respectively.

Expectations for the Week

Indian bourses are expected to sentimentally mirror global trends especially the outcome of US presidential candidacy. But currently markets are listless and no substantial delivery-based buying or selling is emerging at current levels which suggests they are likely to remain range bound. This will create an opportunity for entry points for buyers at lower levels if knee jerk reactions come next week. Private sector banks seem to be better poised to ride the next leg of the rally given that they have managed to trim their deposit rates at a much faster pace than their lending rates when compared to PSU peers. Investors should keep their shopping list ready for the next week and should initiate buy on dips in frontline quality stocks. Nifty50 closed the week at 11,642.4, down by 2.4%.

Sectoral Rotation Likely In The Near Term

Markets during the week took a breather after a steep one day decline the previous week. FPIs and DIIs have also balanced out their buying and selling respectively this week. Infact, global nerves are running high on the outcome of US elections. Markets appear to have entered a phase of status quo atleast until November3 when every decline should be bought into and until then markets might also resist moving to new highs, broadly markets are entering a sideways zone. Contrary to expectations, India's power consumption has witnessed a double digit 11.4% jump YoY in the first half of this month. This implies India's buoyancy in industrial and commercial activities after months of subdued activity and indicates that India as an economy is in a superior position compared to other developed countries. And this could be one of the salient rationales for massive amounts of FPI inflows lately in the markets. On the contrary, heightened selling which DIIs have embarked upon can largely be attributed to redemptions by frugal Indians, now encashing to overcome liquidity issues forced upon by stringent lockdowns. All in all, it appears that the worst seems to be behind us and the situation seems to be steadily improving.

Echoing on the current resilient state of our economy, according to data by the Reserve Bank of India, India's foreign exchange reserves have surged to $551.505Bn and an unusual current account surplus and a steady flow of portfolio inflows. It is quite astonishing that the current forex figure has nearly doubled itself from $275Bn back in 2013, which by most standards is considered adequate. All this adds up to depict a state of a solid underlying economy vis-a-vis the uncertainty reflected in developed countries due to slow demand revival without even considering Covid disruptions.

Event of the week

India Inc's second quarter performance displayed a pickup in economy and sectors such as cement thoroughly surprised D-Street with their robust volume and margin growth reinforcing the fact that the ground level economy has indeed fared better. Further, early indication from Pharma and FMCG numbers suggest speedy uptake in demand revival. IT players too performed as expected and clogged healthy topline as well as bottom-line growth in the second quarter. Moreover, banks reported stable asset quality figures, however, this stability was mainly on account of the Supreme Court's decision to not let accounts slip into NPA even after moratorium period abated.

Technical Outlook

Nifty50 after a swift rally from the channel support, has become overbought and is facing a brief resistance at 12000. The index traded in a narrow range throughout the week. On a global picture, Nifty has been hovering around the recent resistance range but global indices such as S&P500, DAX and CAC have been underperforming. A sustained weakness in global indices can lead to short term pressure in equity indices globally. Short term immediate support and resistances for Nifty50 are now placed at 11600 and 12050. Going ahead markets are likely to take cues from the consensus of US election results which may have a significant impact in the short term, till then avoid short term swings and stay on the sidelines.

Expectation for the week

Mr. Market's mood is expected to remain positive given that major indices are hovering around their all time highs. Corporate scorecard is ticking all the boxes and on lack of any negative news, bourses are likely to crawl higher. However, in the near-term we may witness some amount of sectoral rotations with profit booking in Cement, FMCG, Pharma as well as IT sectors replaced by buying in Infrastructure, Refinery, Oil & Gas, Hotel and Tourism. Broadly, markets should keep an upbeat mood atleast till the first week of November. Investors are advised to wait and watch and buy only on healthy declines. However, well capitalized private sector banks can be accumulated at lower levels. Nifty50 closed the week at 11930.35, up by 1.4%.

Markets Likely to Linger till Year End

Markets corrected sharply mid-week on renewed fear of rising COVID-19 cases and a bout of higher restrictions in advanced countries. US Election Day just being three weeks away, global markets have slipped into a wait and watch mode. Both political parties in US have substantive but diametrically opposite ideologies and policies to run economic affairs which the markets are waiting to discount. However, in any case, it seems that this time around, the elections may bring with itself a prolonged litigation on the balloting system. And this will eventually delay the second round of stimulus, further postponing the next wave of liquidity which may negatively impact global markets. In India, local markets too might witness profit booking in the near term and choose to move sideways. Therefore, it turns out that by this year-end, bourses are unlikely to witness fresh highs; instead a strong bout of profit booking may emerge. If this line of events turn out to be true, it will bring about a good buying opportunity for investors who are patiently waiting to accumulate quality stocks after a healthy correction.

More so, the buzz around IPOs now seems to be fizzling out since the listing of two hyped IPOs UTI AMC and Mazagon Dock witnessed a tepid response than expected post listing. This surreally portrays the market sentiment which recently turned neutral from bullish. Given any further deterioration in global macros and micros, the sentiment can turn bearish lasting till the beginning of New Year. In addition to this, there seems to be lack of support from domestic biggies (DIIs) which have rolled over their selling spree in the month of October. All these factors do not bode well for domestic markets.

Event of the week

The Government tried incentivizing consumer spending to prop lackluster economic conditions through a slew of measures before the festive season. LTC Concession Scheme and other special spending schemes were announced for a large army of government employees to stimulate consumer spending. Whether this petty booster will move the consumerism needle or not will have to be seen but unfortunately the booster does reckon to be quite small and negligible compared to the mammoth size of our Indian economy. And this too may not strike the right chord in the markets as a sentiment booster.

Technical Outlook

Nifty50 posted another big bearish candle during the week, which indicates bulls have become tired and are unable to lift the index further. The recent sharp nonstop rally of more than ten days can be attributed to the highly optimistic herd behavior of the market, as majority of the participants were on the long side and hardly anyone was left to be long. So, there was only one direction for the market when there is no buyer left which is down. An additional boost from global indices of fears of a second wave of lockdowns posed as a negative trigger. However, we are still trading within the rising channel on a weekly chart and need to close below the channel support to confirm the end of the bullish trend. Traders are suggested to maintain a cautious outlook going ahead and be watchful of the market's reaction to the channel support. Support and resistance in the short term are placed at 11300 and 11900.

Expectation for the week

Markets will await important results in the coming week from bellwethers such as HDFC Life, Avenue Supermarts, Britannia, and HUL to name a few. Their outcome along with the management's commentary will guide market participants about the pace of recovery in the formal economy post ease in restrictions. Select pockets especially hotels, travel and tourism are yet to recover because of their inherent disadvantage to operate in lockdowns and hence their results are expected to be muted. But given that stock prices have already rallied in the recent past, selling pressure is likely to emerge in these sectors. Markets may witness a sectoral rotation and are likely to remain range bound. Profit booking may emerge at higher levels. Overbought stocks should be completely avoided and oversold stocks can be considered for a medium term upside. Investors are advised to remain patient and wait for a serious correction before investing. Nifty50 closed the week at 11762.5, down by 1.3%.

Nifty50 on FPI's life support

Nifty50 during the week had a fantastic rally wherein majority of the days markets opened with a gap up and closed higher. But the week's rally was one of the shallowest in terms of stock participation from index composition which was less than half. Small & midcaps too did not participate in this uptrend. Infact, FPIs have been the sole supporters in October till date. They have pumped in monies to the tune of Rs. 5,000 Crs while at the same time DIIs have continued their selling spree by offloading equity to the extent of approximately Rs. 2,200 Crs in the market. Thus, it seems that the rally is ageing and on life support of FPIs due to lack of domestic buyers. One needs to be cautiously optimistic given that internal strength in the market is weakening although there seems to be all round optimism.

In US, negotiations on fresh stimulus for the US economy has come to a grinding halt and has been pushed back till the month of January or February 2021. But this halt may not bode well for households with rising number of missed mortgage payments, unpaid utility bills and falling income. According to the National Energy Assistance Directors' Association, up to 20% of residential customers are at least 60 days behind on their electric and natural gas bills. US being the largest and most powerful economy in the world, one has to be wary of such internal micros in the economy which seem to be in such a dire state. Therefore, by reading into such reality numbers of the largest economy, one can draw probable analogies for India and conclude that the economy won't be better off instantly anytime soon. Given the plethora of uncertainties hovering around different economies, investors are advised to undertake a cautiously optimistic approach going ahead.

Event of the week

With an attempt to mend the fractured economy, the RBI MPC continued its accommodative stance and maintained status quo on repo rates. D-Street kept its upbeat mood on good commentary on GDP outlook and the liquidity measures. Real estate, the largest share in terms of gross domestic wealth is expected to benefit the most from RBI's flexible rules, which will reduce rates for home buyers. MPC's decision on on-tap' TLTRO will nudge credit pickup as raising money will become easier for smaller players. All these proactive measures to revive growth and stimulate the economy may go down well with the capital market and economy as a whole.

Technical Outlook

Nifty 50 has been rallying sharply after bouncing from the rising channel support on the weekly chart. Market breadth remained positive throughout the week while IT and financials remained major contributors to the benchmark index. Now, after a swift rally of more the 1000 points, a mild pullback upto 11500 cannot be ruled out. However, the outlook on the market is bullish and traders are suggested to keep a buy on dips approach as long as the index is trading within the rising channel. Immediate support and resistances are now placed at 11700 and 12020 respectively.

Expectation for the week

Next week too, the IPO frenzy might continue with the listing of India's second largest AMC, UTI AMC and government owned, Mazagon Dock. This along with the quarterly results will throw some important light and set the tone for retail investors going ahead. So far, TCS kicked-off the result season on a great start and an upbeat commentary but it would be prudent to wait and watch to reckon how other sectors performed during the staggered unlock period by giving special importance to management commentary and demand outlook. Going ahead, markets may witness sectoral churning and Nifty50 may remain subdued with stock specific significant movements. Investors are advised to wait and watch and initiate buy positions only on dips. Nifty50 closed the week at 11914.2, up by 4.4%.

Second Stimulus, keeping D-Street Afloat

Indian bourses during the short week witnessed a surge in broad based buying after a 4% decline a week ago. This behaviour by local indices is mirroring the upbeat global sentiment especially in the US on hopes of a new fiscal stimulus. Back home too, investors are hoping for some stimulus to aid the weaker sectors who have been gravely impacted by the lockdowns. A part by part opening of the economy so that capacities and production move back to pre-Covid levels is the Centre's plan and this itself is keeping the Street in a good mood. Various indicators are also singing the same tune. VIX, which happens to be the fear barometer of markets, continued its downward journey the entire month of September which rightly justifies the positive sentiment, since volatility and equities are negatively correlated to each other. Moreover, India witnessed a record high current account surplus - a rarity for the nation - in the April-June quarter. This is the second consecutive quarter India has seen a surplus which is the highest on record. All these factors point to the growing hopes of market participants that India will emerge as a stronger country post the pandemic. However, investors shouldn't be aggressive and get along the buying wagon since US elections would be a key event to watch out for which can swing the tide in any direction.

Event of the week

Investors might think it's raining good news with bumper IPO listings and encouraging monthly auto sales numbers. For instance, India's largest four-wheeler passenger vehicle manufacturer, Maruti Suzuki registered total sales of 160,442 units, a growth of 30.8% over the same period previous year; this kind of growth was long forgotten by auto players. On a similar front, Bajaj Auto clocked 10% YoY growth in sales. These growth figures might seem positive but some of them can be attributed to pent up demand and the various discounts offered by dealers to get rid of the piling inventory. Companies had slowed down production too to prevent inventory drain. Therefore, investors should still continue to be cautious while picking up auto stocks atleast until there is some update on the scrappage policy, relief in terms of GST, renewed lending by financial institutions and the newly expected stimulus is able to address auto woes.

Technical Outlook

Nifty 50 closed on a positive note after a big bearish candle last week as the index found support at 25% retracement of the entire rally since March. The bounce from these levels hint at further room for an upside in this rally. Market's move this week can be attributed to aggressive longs in the metal, auto and banking sectors. BankNifty, which remained on the sidelines or underperformed till now, is now taking the lead and indicating a fresh upmove. After a sizable fall last week in the benchmark index, we maintain a bullish outlook on the index as long as it does not fall below the 25% retracement support. The immediate support and resistance are now placed at 11180 and 11540 respectively. Traders should wait for a decline before building long positions.

Expectation for the week

Postponement of important events such as RBI's MPC meet, Supreme court's outcome on waiver of interest on interests is expected to keep the upcoming week eventful for Nifty and BankNifty alike. Any signs of a relief package along with Q2 numbers by India Inc will also keep bourses buzzing. All in all October could keep markets in a range before the Bihar elections and US elections determine a decisive course for the indices. Stock specific movement will be witnessed and investors can adopt a buy on dips strategy in quality stocks. Nifty50 closed the week at 11417.0, up by 3.3%.