Markets Weekly Sentiment_29072017

Markets had a decent week and expiry. Nifty not only defended 9900 but also managed historical closing above the 5 digit mark. Markets were up about a 1% point this week with Nifty above the 10k mark. The sentiment is bullish. Is it euphoric yet? Well difficult to say or judge but to our best understanding not yet. Lack of clear negative triggers and ample liquidity are keeping the markets afloat for now.

Results continued with positive surprises in Yes Bank – the stock rallied 10%! The seasons bulk of the news flow is behind us, however some crucial pockets still to come out. Mid caps will continue to be in action and it will be worth to see how some of them react to individual results. The valuation in the mid cap and small cap space seems to tell you a different story.

Technically speaking, Nifty should be in the process of shifting the base to 9900. Till that is defended, bulls need not worry. At the same time 10100+ was the high it hit on its way up. Automatically that becomes the level to cross. Since these are historical highs, it is difficult to claim resistance. No calculations would work.

Having said that – we continue to believe that nothing has changed fundamentally for the market. Nifty still trades at a historically high P/E multiple. Liquidity and lack of negative triggers are keeping the bears at bay. It may be wise to exercise extreme caution when you are investing. One cannot expect to make huge money in the short to medium term by investing at these levels. Stock picking should be the focus.

As mentioned in the last week Pharma was on caution and results of Dr Reddy proved to be the trigger. The index corrected 600 points and now is dangerously poised to go lower. Watch out of Nifty pharma 9400 levels as bears will be active to break those. Caution is also advised in metals space as Nifty metal hit a weekly resistance and failed to keep up. Rally seems to be losing steam. The Nifty bank is nothing less than euphoric and overbought. However further upside cannot be ruled out as it is in one of the best bull runs in recent times. This space should continue to see some action coming week. Other sector that should see some funds chase stocks is Infra. Watch out for the Nifty Infra index as it sustains above 3300 – there should steam left in this rally.

Markets Weekly Sentiment_15072017

Markets closed up about more than 2% for the week. Nifty ended at striking distance from 9900. As you read this SGX has already breached that level. Large caps showed a lot of action with Reliance hitting highs again. The sentiment is upbeat albeit a bit of froth was seen in some IPO counters. Volatility ruled names like CDSL, AU Finance, ERIS and HUDCO. These stocks saw huge price action.

Technically speaking the markets finally broke out and are at all time highs. 9900 puts have seen some shorting and call writing has been subdued. 9720 (last high) is now a base level and key to Nifty’s immediate trend. On the upside 10k is doing the rounds – and may be a reality soon. 9450 seems to be the new intermediate bottom.

Fundamentals will start to show soon as results season has kicked off. Inflation came in at an all time low in years prompting an increased expectation of rate cuts. Multiples are inflated and at historical highs. Nifty continues its 24x P/E. With a lot to reach in terms of individual results one has to play the ride cautiously. A small reason – be it geopolitical or random news flow, can create havoc due to historically stretched levels.

Globally DOW and S&P found their own reasons to close at all time highs. The “reduced” fear of a rate hike from not-so-encouraging economic data  prompted a positive close to major US indices. What is surprising to see – the CBOE VIX – volatility index has hit an all time low since 1993. For a contrarian trader this is complacency at its best or worse.

Sectors to watch out for next week are Infra and Banks. Stocks in these indices may stage an extended rally if market sentiment supports them. PSU banks were showing some action and select are likely to do so going forward. Pharma companies have given a very strong show over the past few weeks. The rally should consolidate before scaling old highs. One has to be stock specific as result season will continuously re rate a lot of these issues.

Markets Weekly Sentiment_080717

Markets inched higher for the week with Nifty ending firmly above 9650. It was an important week as the GST roll-out got absorbed. For the week the markets closed higher by 1.5%. Reliance Industry nears 1500 and is on a spree to continue its 9 year high move.  Individual stocks continue their rallies as many hit 52 week highs. The over all movement for the market was sluggish as there are no fresh triggers to decide either side momentum. Stellar listing of CDSL  has masked the subdued debuts of many of the recent IPO’s including that of ERIS all of whom saw lack lustre participation.

Technically speaking the markets had fallen for 3 consecutive weeks after touching all time highs. Nifty scaled 9700 and retraced back to 9450 over the last 3 weeks giving a decent 250 point soft landing. It is now under 1% away from testing fresh highs. Bears are clearing struggling to get the markets down below key levels. 9700 is the key level to watch as any fresh momentum will only come above those levels. Maximum call OI is in 9700 strike and a sustained close above the said level should bring short covering. At the same time 9500 seems to a firm base as we move into the mid of July expiry.

Fundamentally speaking the markets are stretched. Nifty is at 24x PE with a lot of individual stocks at valuations last seen pre 2008 crisis. India VIX, the sentiment indicator is at all time lows and signals complacency. Although over confidence is not sensed as of yet on a large-scale basis one has to keep in mind that risk reward is skewed at this level. Undertone must be caution.

Global markets ended the week on a high note as job data supported a strengthening US economy. The DOW ended at 21414 and S&P struck 2425. The data does suggest that FED will raise interest rates towards its target of 2% and the fear of sucking the economy for liquidity is suddenly getting over. Tech stocks continue to do well as Amazon and Alphabet (Google) continue their race to $1000.

Sectors to look out for the next week at Metals & Real Estate. Unitech was buzzing as 6.5cr shares were cornered over the week by a family. The stock was up 20%. The Nifty Realty index is on the verge of a break  out. In the metal space Jindal Steel & JSW Steel show a break out. Vedanta is already above its long-standing high of 250. The Nifty Metal index has too shown a break out of its long-standing consolidation.

Five factors that could dampen the market sentiment !!

Five factors that could dampen the market sentiment

When the year 2014 came to a close, the general consensus among all market experts was that the Indian markets were in a “sweet spot” as compared to their global peers, and that Indian markets would be gaining rather than falling over the medium to long term. However, despite the interest rate cuts that have been coming in and low commodity prices, performance by Indian industries has not been up to the mark as is evident from the poor earnings numbers where there have been more disappointments than cheer.

With the near term picture looking bleak, investors seem to be losing patience as they find that the impact of much touted economic recovery has not been that great. It is however fair to state at this point that the real recovery would pan out only over the next year and a half, given the fact that the consumption theme is still playing out and the green shoots are visible even amid disappointing numbers. The Government too has increased expenditure in a number of sectors,  that bodes well for investments. However, it is being widely acknowledged that there are certain risk factors that could spoil the party for the Indian markets. Here is a list of five things that we believe could dampen the market sentiment.

Loss of the BJP in the Bihar elections

Bihar is a large and politically sensitive battleground that may make or break the aura that has been built around the BJP led NDA Government. A loss for the BJP in Bihar would be a disappointment because the market has believed that a victory for the BJP means a reinforcement of the popularity of policies of the Central Government. If the results favour the Lalu- Nitish grand alliance, the opposition would get a shot in the arm and launch a series of fresh attacks on the Government, thus derailing its reform procedures.

Further delay in the implementation of GST

The Goods and Services Tax (GST) reform is something that the markets have been waiting for the longest time. GST is expected to rationalize the tax structure for Indian companies by subsuming all indirect taxes such as the value added tax, octroi, entry and the luxury tax. But there is still no definite timeline for the passage of this bill. While the NDA Government has been issuing statements saying that the passage of the GST Bill is only a matter of time, The Congress party is opposed to it, as it does not want the Governemnt to impose the additional 1% tax over the above the prescribed rate for the pan India levy of the GST. While the NDA believes that the additional 1% is essential for certain states to be able to move to a pan-India tax regime, the Congress party remains unwilling to resolve the differences and even talk about the conceptual differences in the Bill at this point of time.

Slump in the IPO marketipo

Over the past few months, there has been some action in the primary markets, with companies firming up their expansion plan. As encouraging as this sounds, a sharp downturn of the secondary markets could discourage this trend, as companies would want to shelve their plans till market sentiments improve. This would of course spell bad news for them as they would be unable to reduce their debt through equity offerings.

The Chinese economy

The slowdown in China has been thought of as an opportunity by some for Indian exporters to expand their reach offshore. The softening of commodity prices has also benifitted India as it is largely an importer of commodities. The flipside of this however, is the increase in exchange rate volatility if China continues to devalue its currency in a bid to boost its exports. This could  hurt the India- China trade balance that is already adverse and will also increase stock market volatility for India.

The debate over intolerance

The market does not usually talk about social factors that have political repurcursions. But in recent times, there has been a growing debate about inequality and religious intolerance that has now taken centrestage with the intellectuals returning national awards over the same. Over the past two months more than 40 literary luminaries have returned their awards and strongly opposed religious attacks, and more importantly the BJP led NDA Government’s mild reaction to such atrocities in the name of religion. Some market experts believe that this social movement is fanning an undercurrent of discontent among investors, who may begin to doubt the prospects of economic development in a nation where the country is divided over religious issues.

These are the factors that may derail the progress of the economy and thus ruin market sentiment in India.