Indian Markets on Steroids!?

The market tide worldwide has been choppy this week as jittery investors navigated through uncertain currents. After a short bout of divergence, Indian bourses returned to echoing global markets and displayed whipsaw movements in tandem with the foreign securities. Amidst fears of a global contagion triggered by a probable default by debt-ridden Chinese behemoth, Evergrande, and the overhang of the Fed’s tapering stance as well as interest rate timelines, investor sentiments swayed by episodes of pessimism and optimism. However, towards the latter half, the pressure on bourses eased as each thread of the story began to unravel. Concerns about China’s Lehman moment and its global linkages were laid to rest as USA junk bonds were observably unbothered by the debacle while the yields on their Chinese counterparts soared. The infusion of liquidity into the banking system worth $18.6 billion by China’s central bank also cooled off some anxiety. Even the Fed’s hawkish stance signaling tapering towards the end of this year, was in line with estimates and already factored in by the markets. In fact, S&P 500 snapped its 4-day losing streak post the FOMC meet. Considering these factors, the rise of Indian equities continued with both the benchmark indices making a record high again this week. Moreover, the comeback of the FIIs after a hiatus of 5 months and the support garnered at every dip also hint at the continuation of this optimism in Indian indices. Thus, every dip presents a good opportunity to deploy funds.

Event of the week

In the past week, realty stocks have defied gravity with Nifty Realty surging by 21.22% this week alone. This optimism is not unfound considering a supplementary drop in home loan rates which have dwindled to as low as 6.5% ahead of this festive season. The existing demand in housing is expected to be boosted further by increased affordability and various new launches by developers adding to the already dwindling inventory. As a matter of fact, despite stamp duty being reinstated in one of the country’s most expensive real estate markets, MMR, registrations in August jumped by ~16% as against August 2019. Moreover, to tackle any further potential COVID-waves, some developers have adopted virtual tools to boost sales. Considering the existing tailwinds, it seems like realty stocks have rightfully made a comeback. However, the stocks have become overheated in the short term and investors should wait for prices to cool down before entering any long positions.

Technical Outlook

Nifty 50 index closed the week again in green, after making a new high of 17947. While Nifty is trading at new highs, the BankNifty ended on a flat closing and continues to struggle around its previous all-time high. To maintain the bullish momentum, BankNifty will need to catch up. The midcap basket is showing signs of underperformance compared to the benchmark. A failure to surpass the previous highs decisively will be a sign of weakness for the broader markets. The immediate support on the downside for Nifty is now placed at 17600. Traders are advised not to create aggressive longs at current levels, rather maintain a bullish bias and initiate longs on dips or around immediate supports.

Nifty50 Update 24 September 2021

Expectations for the week

The volatility seen in the markets this week may seep into the forthcoming week as well given the monthly expiry towards the latter half. Considering the increased concerns around chip shortage and the resultant dampened sales prospects, monthly sales numbers of the automobile sector are sure to grab eyeballs to determine a future trend in auto stocks. With no major domestic economic data expected in the following week, markets may be dominated by global news flows such as another interest payment on Evergrande’s bond due next Wednesday. Thus, in the current volatile markets, investors must carefully invest only in fundamentally sound stocks as markets are fickle and unpredictable. Nifty closed the week at 17853.2, up by 1.52%.


D-Street drums its own beat!

Bulls are in complete control of Indian indices as with every passing week markets continue to climb higher. India added yet another feather to its cap by surpassing France, for the first time, to claim the sixth largest stock market in terms of market capitalization in the world. In only 15 days of September, Nifty50 surged nearly 3% in comparison to world’s dominant markets like S&P 500 and Hang Seng that witnessed a dip of ~1% and 4% respectively. This divergence between India and the globe is to an extent because of several macroeconomic variables working against these well-established markets. And the rise of delta variant in the US is causing months of revival to evaporate swiftly, naturally making investors anxious. Even the buoyancy which stemmed from MoM moderation in consumer inflation is outweighed by fear of probable corporate tax hikes in the US. China, on the other hand, is experiencing a decline in retail sales and industrial production throwing light on concerns about secular economic recovery. Dual pressure in the form of regulatory scrutiny and probable default by its second largest property developer by sales is looming over the republic. Now, India is usually in sync with global bourses but not this time! Confidence in India’s story remains intact because of a regulatory boost by the Centre for enhancing manufacturing capabilities in various sectors. The Make in India initiative is being further enhanced by PLI which is driving stocks to new heights. Aug CPI numbers have also provided the timely relief allowing markets to remain charged. This divergent behaviour might not keep up for long but until then Indian investors can continue to ride their existing positions.

Event of the week

Nifty IT is the flavour of Sep with an over 6% increase vs. a 3% rise by the benchmark. Midcaps raced ahead of their larger peers which helped keep the sector in limelight after a boutade of cloud and digital transformation in sectors and an explosion in job opportunities. IT professional hiring has been going off the charts indicating companies’ growing human capital needs due to robust order books and resilient customer pipelines. Rupee’s depreciation also played its part in keeping the sector adrift, driving up momentum. A SIP approach in fundamentally sound IT stocks is a good investment strategy to normalise the valuations of stronger players.

Technical Outlook

Nifty 50 index ended positive for the week, however, in the last trading session the index posted a reversal bar. Similarly, the BankNifty index also posted a reversal bar after making a new high. In the short term, the market is trading overbought and may witness a small profit booking dip going ahead. The overall positional outlook on the market remains bullish as long as it doesn’t cross 17,500 because a break below the same will put a halt to the ongoing momentum. Immediate support and resistance are now placed at 17400 and 17900 respectively.

Nifty50 Update 17 September 2021

Expectations for the week

Investors across the world will be eyeing the FOMC meeting in the coming week for more clarity on the outlook for both tapering as well as interest rate timelines. While this year, Fed's projected tapering of bond purchases has dominated much of the attention, their take on interest-rate may provide fresh information which may nudge markets across the globe. It is, however, largely expected that policy makers may consider new developments in inflation and the intensity of the delta variant before preponing tapering plans. Therefore, traders are suggested to refrain from taking aggressive bets owing to probability of unanticipated whipsaw movements. Nifty50 closed the week at 17585.15, up by 1.24%.


Is demand driving markets higher?

After a record sprint, markets seem to be catching their breath this week. A miss on the USA jobs data, while a little worrisome, will most likely mellow down any tapering talks for the time being. However, it is the continued policy support which will drive the performance of bourses globally. And this baton of sentiments has been passed on to the Indian indices as well. While there are a number of macros and micros adding tailwinds to the rally, the current investor optimism is not unfounded but is more demand led. Last year markets were driven by savings on the cost side but now the enthusiasm is more demand-pull. With each passing day the narrative around diminishing inventories and higher order wins is building. Across industries be it autos where supply is curbed due to the semiconductor shortage or real estate which is experiencing a significant off-take in inventories due to robust bookings, it is demand which may turn out to be a big aid to the margins. Pent-up or no pent-up demand is demand and macros are playing a big role in driving enquiries. Lower mortgage rates and increased affordability are acting as a catalyst for NBFCs and banks, that are observing one of the highest demand for loans, particularly in housing segment in recent years. Furthermore, renewed focus on infrastructure spending across the globe is assisting to keep metal prices, cement utilizations afloat. If all cards fall in place, it all boils down to a healthy topline for companies going forward. So this demand-led upcycle is one among many points being factored-in by the markets, hence the impetus for the bulls to lead.

Event of the week

Commodities are in a similar situation as prices have continued to rise because of a supply-constrained environment. Within base metals, Aluminium is facing supply shortage due to the recent coup in Guinea and Zinc is witnessing a price hike due to decreased inventory levels. Further, Sugar is experiencing scarcity due to a frost in Brazil. Coffee and Tea are in a similar soup because of rising freight costs and container shortages. While there is stronger-than-expected increase in prices, demand for the commodities has risen or largely remained stable. Investors must keep a close eye on commodities as they play an instrumental role in inflationary tendencies going forward.

Technical Outlook

Nifty 50 index, after the recent sharp rise, has been witnessing bit of a slowdown around the key rising resistance line. Major global indices also seem to be reverting to their short-term mean. So a mild pullback by our index towards short-term averages cannot be ruled out. The BankNifty index again started consolidating around its previous all-time high levels and could not close decisively above the resistance. The trend continues to remain bullish and traders are advised to initiate long positions only around dips to minimize the risk of being capitalized at extreme levels. Immediate support on the downside is now placed at 16,500.

Nifty50 Update 09 September 2021

Expectations for the week

After a rapid rally to 17,400 and above, markets can experience minor roadblocks in the coming week. Bourses might experience whipsaws on the core US inflation data incase it strikes a sensitive chord of taper talks. But largely, the wider bullish theme is expected to remain intact with profit booking in overvalued stocks on specific counters. Investors must therefore continue to remain invested in fundamentally sound stocks for the longer horizon. Nifty50 closed the week at 17,369.25, up by 0.26%.


Another Week, Another Life-Time High!

Markets have been on a roll since the past few weeks with both global and Indian bourses joining in on the sporting season with new record highs. This week was no different with Indian Indices marching upwards with no sign of caution. While a lot of factors contributed to this rally, the existing liquidity in the market seemed to be the driving force. So far in 2021, funds raised via public issues jumped by nearly 2.2 times over CY20 and there are atleast 11 companies with SEBI's approval in pipeline to raise over Rs. 11,600 crores. Another 40+ companies are also looking to raise nearly Rs. 89,000 crores as they await the regulator's nod to jump on the bandwagon to cash in on the extravagant liquidity and enthusiasm among retail investors. There is one other factor adding to this inflow towards India and that is the regulatory storm faced by Chinese businesses which is driving investors to look at other emerging economies. These drivers coupled led Nifty50 to record its fastest sprint of 1000 points in just 19 trading sessions.

It is not just markets that are recovering but other macros such as Q1GDP numbers which rose in terms of personal consumption, exports and capex albeit on a low base, GST collections which also surpassed Rs. 1 lakh crores for the second consecutive month and manufacturing PMI data which has stayed in expansionary territory from July have also demonstrated that the recovery theme is indeed intact. This certainly is bolstering the confidence of market participants which will fuel the rally going ahead. Going with the flow (with caution) seems the most logical choice of action in a market like this as Peter Lynch said: "People who exit the stock market to avoid a decline are odds-on favourites to miss the next rally."

Event of the week

August auto sales numbers didn't surprise D-Street this week. Though numbers seem promising on a YoY basis, on a sequential basis, passenger vehicles and tractors experienced a bumpy ride while commercial vehicles performed well. Two-wheeler sales hit minor speed bumps due to concerns about affordability and increased competition from the EVs. What weighed on the automotive industry the most were supply-side constraints, especially the semi-conductor shortage which has been further aggravated due to fresh lockdowns in East Asia. Nevertheless, the consumer demand remains intact owing to the upcoming festive season and investors may tactically choose to build an exposure to benefit once these supply-side disruptions begin to phase out.

Technical Outlook

Nifty 50 index posted a big bullish candle on a weekly time frame and broader indices too participated in this rally. The BankNifty index is also trading near previous all-time high levels, which may act as a make-or-break situation as its bullish movement in the benchmark index can take Nifty up even higher. But traders should take note that current levels are overbought and mild dips would be smarter entries. The price zone around 16,600 may act as an immediate support on declines.

Nifty50 Update 03 September 2021

Expectations for the week

Domestic economic data such as manufacturing output and industrial production could drive investor sentiment next week. In absence of any other major event, Dalal street is expected to mirror global cues and move in tandem with bourses abroad. With a largely positive outlook, investors may see profit-booking in stocks running ahead of their fundamentals. Investors are advised to ride this bull rally with fundamentally resilient stocks. Nifty50 closed the week at 17,323.6, up by 3.70%.