Mr. Market cools down before result season!

Markets continued to remain buoyant throughout the week albeit with a knee jerk reaction to Trump's impeachment news.Monthly expiry has also taken all the weak shots out of the market which has played its way to cap the upside volatility for the time being. Given the gigantic rally, Mr. Market is expected to cool down till the beginning of the result season.On one hand, FPIs have turned neutral given the sporadic buying of quality nameswhile on the other,the Government has started hustling after taking a huge hit on theiryearly revenue of Rs 1,45,000 lakh Crs. The hunt for getting back the money from other sources have heightened,proof being therevival ofpast divestment programs. This act would bring vibrancy in capital marketsand at the same time, suck away liquidity from the bourseswhich is a negative for thestock market.

The race for IPOs has already begun.The urgency to raise capital, not only by the Government but also by private players, is by far more intense than at any time in the past. IRCTC is a classic example of the capital hunger of Government's machinery. Soon, private sector companies will also come forthfor a piece of retail investors'money. In any case, one should subscribe to IRCTC's IPO given the reasonable valuationsat 19 times earnings,an asset light model and high earnings visibility. Therefore, one can subscribe for good listing gains.

Events of the Week:

Debt capitulation is still under way, although many measures are announced to ease the crisis but the poison of huge debt is still oozing. ZEE's debt paper could not be resolved in spite of earlier requests for deadlines. HDIL capitulated and took PMC Bank along with it. ADAG Group stocksare still struggling with deadlines coming close and the stock prices of Reliance Power, Reliance Infra, Reliance Capital show thatthe pain still lies ahead which will impact sentiments on the stock market.

Technical Outlook:

Nifty50 has begun the consolidation phase after a massive rally. All short-term indicators have moved to overbought levels which caps the upside for the time being. Short interests have reduced with the month end expiry and therefore significant upside is not expected in the near term. A 50% retracement is expected before any up-moves can begin. Traders can go long around 11000-11100 levels.

Nifty50 Update 27 September 2019

Expectations for the Week:

Mr. Market quickly adjusted itself to the tax cut gains by rising 7-10% sectorally thus discounting the tax cut factor. Hereinafter the journey forward would largely happen if actual growth returns, onetime tax gains will not bring in sustained buying in the market. The result season would bring ebullience but that could be short-lived unless ground level consumption pattern improves. Thus, the tax effect should be ignored while assessing the results of corporates.Globally, metal prices are correcting sharplybut the Indianlisted businessesare rising,creating a negative divergence and hence investorsshould avoid metal stocksfor the moment buy traders may short for quick gains.Financial and private sector banks should also be avoided as valuations have reached historic levels.Paper and breweriesare already seen going north. A similar thing is envisaged in the fertilizer sector as well. All in all, investors should wait for a correction in the market before investing. Nifty50 closed the week at 11,512.40, up by 2.1%.

Government has ignited the bull market well in time

This week, negative rhetoric's had surrounded every part of the economy "Death cross formation hints at more short-term pain", "Worst FMCG show likely in 15 years", "Correction in auto stocks not enough" "Iran rules out talk on Saudi attack". When such gloom doom scenario surfaces across all communication mediums means that capitulation is over and any good news will kick start the bull market. Government indeed conducted a surgical strike on bears on Friday taking the markets higher by massive 5.3%. With one stroke Government has made companies richer by 1,45,000Crs p.a. by reducing the effective tax rate for corporates to 25% from 33% annually. Salute to the bold move by the government in the form of ordinance.

June-September quarter numbers will see massive upgrades in the earnings with a minimum of 10-15% increase in profits due to the tax cut reform. Valuations of all companies have now therefore become far more reasonable and competitive with rest of the world when compared to other emerging markets, this will hopefully bring the much needed FPIs back to India. Modi Government 2.0 indeed has made retail investors laugh as they continued to pour Rs 8000 Crs in the form of SIPs but FPIs did the opposite.

Events of the Week:

Attack on Oil producing facilities in Saudi Arabia although had rattled the world had eventually fizzled out, but most important indicator was the flash by gold. Gold did not move up and sustain the price increase, showing that world is not risk averse which means that investments will not flow in gold but will readily come into equity markets. This global risk seeking sentiment will help India quickly recover losses and reach new highs before Christmas.

Technical Outlook:

Nifty 50 has made a "Wide Ranging Day" bullish pattern a powerful indicator of trend reversal. Market has also reversed from its previous support levels of 10650 completing an important down cycle. Market will continue to move higher with intermittent deep corrections which should not shake the confidence of long traders. 11000 -11100 are good levels to go long. Buy on decline should be a strategy for traders and short selling should be avoided.

Nifty50 Update 20 September 2019

Expectations for the Week:

Market will take a breather after a massive run up on Friday by witnessing some correction, it is important to see when FPIs will resume their buying spree and how they are taking the tax rate cut. Buy on dips should be a strategy for all investors and quality stocks should be bought now. Sectors to allocate money aggressively should be private sector banks, consumer durables and FMCG while at the same time money should also be allocated in small and mid-cap mutual funds to generate risk adjusted higher returns. Do not delay but invest before 30th September in order to ride the ensuing bull wave by entering at the nascent stage. Nifty 50 closed the week at 11274, up by 5.3%.

A Short-Term Bull Trap in the Making

Markets this week had experienced a sentimental U-turn. Global and domestic macros are witnessing stability from all corners - Be it crude prices or the US-Sino trade war tensions or low interest rates, good news coming from all corners. However, despite Government's efforts to boost the economy, Mr. Market seems rather unhappy and is unwilling to move significantly higher. Ground level weakness has still not translated to the corporate earnings which is deterring the Street from taking any aggressive bullish stance. Actually, markets are waiting for the festive season to gauge how the consumer spend pans out and whether there is a change in sentiments at the bottom of the pyramid. Till then the bourses are expected to be largely sideways in a broad trading band.

The run-rate in mutual fund SIPs seems to be intact which is a good helping hand to save markets from a nerve-wracking fall. Moreover, the global scenario is turning favorable towards equity (risky) which is visible from Gold's correction by 6% from the top and Rupee's appreciation from highs of sub Rs.73/$ levels. Hence, the IT sector in particular has become vulnerable and is expected to start a larger downtrend given the high valuations.

Events of the Week:

"Tata Motors global sales decline by 32% in August", "Auto sales in India see worst ever fall in 2 decades" and "Cars getting expensive... unaffordable - Maruti Chairman" - These headlines are doing the rounds but despite the gloom by industry leaders, the stock prices are not going down which shows that this sector is deeply oversold. Traders should avoid auto stocks for now but investors can get in when numbers actually start showing improvement.

Technical Outlook:

Nifty50 has jumped from its oversold levels nearing its resistance levels at 11150 - 11200 which will act as strong hurdle to cross for the bulls. Velocity of the rise is slightly slower than the previous months rally, which gives a cause of concern in the short term but a decisive break above 11200 will signal the resumption of bull market rally. Sell on rise should be adopted by traders with appropriate stops when Nifty reaches the resistance levels.

Nifty50 Update 13 September 2019

Expectations for the Week:

Next week, markets are expected to undergo profit booking from the current levels and any upmove could be a bull trap as it is unlikely that bourses will move substantially higher in the short term. Even though there has been incremental fresh long open interest build up, the velocity is still subdued in the stock movement which means that at higher levels bears are selling in the markets. But when the tide in the markets turn the fall will be with greater force. Financial services, private and public banks, infrastructure, commodities are all sectors to be avoided for longs for now as they may face selling pressure at higher levels. Nifty50 closed the week at 11075.90, up by 1.18%.

Light at the end of the tunnel finally for Indian markets

The week gone by:

The markets opened the week negatively to the poor GDP numbers but soon recovered by the close of the week, rightly so, as GDP numbers are historical and are post mortem data which the stock market knows and discounts well in advance. Statistically, such low GDP numbers have been a launching pad for swift recoveries in the market because when such low numbers are recorded, everyone including the government tries to push hard the economic engine. It is speculated that the government might push the auto sector growth either through GST rate cuts or through a scrap page policy of any kind. But in either case, it is no time to sell the auto stocks, it is too late now.

At last, the good news on trade war front should bring respite to global and local equity carnage. Across the World, stocks are rebounding but India somehow seems to be intoxicated with domestic blues. But soon, FPIs propelled inflows will take the market higher and eventually change the sentiments. It is time to therefore accumulate some good quality stocks at least for the short to medium term.

Events of the Week:

The scarcity of growth capital has reached such an extent that even at these low valuations and weak sentiments, companies are trying to raise risk capital through QIPs/Private placement. Aditya Birla Capital and Bajaj Finance have already swung into action to raise capital at these lower valuations. No sooner the market revives, there will be a massive lineup of government and listed companies to raise capital from the secondary market which although is good for the country, but it will keep the secondary markets range-bound.

Technical Outlook:

Nifty has a made a hammer since last two weeks indicating refusal to go down further. Given the consolidation stage of the market, Nifty50 is again on the verge of testing 11200 on the higher side and will face resistance at around 11350 levels being 50% retracements of the entire fall. Traders should buy on dips for nominal profits as market will witness profit booking at higher levels.

Nifty50 Update 30 August 2019

Expectations for the Week:

Market is likely to cheer the truce on the trade war front and an improved geo-political situation. Markets should steadily crawl up from this deeply oversold zone. The new found love of the government to address concerns of the economy through its weekly press conferences should also lead to some confidence building in the sentiments. This press conference will be closely watched by market participants as they expect economic boosters. Therefore, we recommend investors to accumulate quality stocks in metals, Private and PSU banks for a medium-term perspective as they are highly oversold. Nifty50 closed the week at 10946.20down by 0.70%.