The dilemma in the Fed on interest rates , at least in their communication keeps the market guessing . Just when the market celebrated Fed’s dovish stand it turned a bit hawkish the next day .
Managing interest rates is difficult enough , but managing market expectations is well just too much of a job ! You have the bulls and the bears and the investors and the traders !! All these players interprets every golden word spoken by the Fed coloured by their own perception.
The prejudices and wishful thinking by the market participants keeps distorting the carefully crafted signals sent out by the Fed.
What can the Fed do to change things ! To simulate market reaction to its every move .
Simple : Talk about a market rate hike and check the market reaction . Then desist from a rate hike …. It's almost like giving the market a rate cut without doing anything .
So we can expect the financial markets to take some profit off the table in the next few days . Indian equity markets also saw some profit booking yesterday .
Traders on both the buy and sell side can make money depending on when they exit and their holding power ! However the risk return looks favourable for the long positions . Please keep our safety belts on if you want to enjoy the turbulence . ( stop losses with enough room to filter out the market noise )
On rupee it can weaken a bit more . The intermittent strengths we see in rupee are good levels cover forward dollar requirements .
How will the recent Oil strength affect inflation and thus interest rates in India ?
On specific stock Biocon looks good from a three year perspective. It will be a good idea to build your portfolio when there is a bit of overall price correction in the market.
After the recent rally in risk assets triggered by Fed’s accommodative policy , markets may try to consolidate at current levels . Now the focus has again shifted to Oil . US Oil lost some ground after recent news in inventory build up .
As most of the markets goes into the long week end , traders may start taking profit off the table .
A very happy Holi to all of you !
We have to give the credit for the recent rally in world financial markets to the Fed. The Fed succeeded in surprising the market. This time it was a positive surprise. In fact the Fed deviated from its earlier stand of being only data driven . It took a broader view at the Global slowdown.
In India the markets are expecting the RBI ( India's Central Bank ) to announce a rate cut . However the market has already rallied in anticipation . A 25bps rate cut is already in the price . Anything above that can trigger a market rally !
On the long term prospects keep an eye on China and Oil .
Those who are long on NIFTY can continue to remain so . New positions should be initiated after the RBI move . In case the RBI feels that inflation may again shoot up with the recovery of the Oil prices it may act in a conservative way . This in turn can spook the market euphoria.
Investors as always can be a bit more relaxed as compared to traders. The long term trend is up . You may continue adding SBI , ICICI Bank , Maruti , Tata Chemicals and other select bank counters.
However for commodities the long term trend remains downwards , investors should use the recent rally in metals and Oil stocks to exit these counters. Stocks like Hindalco and Vedanta are prime candidates for profit booking.
Fed cleared the air on the uncertainty surrounding US interest rates . This puts all the world central banks in an accommodative stand. With Japan and EU central banks already in the negative rates we can expect the market to open gap up today .
Commodity markets rallies and US dollar weakened on Fed news .
In a nutshell what did the Fed say :
We can expect NIFTY to show a strong upmove today . With RBI forthcoming interest rate cut , the NIFTY may see 7700 .
What will the Fed statement say about future rate hikes ?
Will there be 0, 1, 2 or more rate hikes in this year ?
Will Fed take weak growth in China into consideration ?
Will recent dollar weakness strengthen the resolve of Fed for a rate hike ?
How does the inflation and employment date look in the eyes of Fed ?
All this questions and their answer will determine the next market move ! So as the world awaits more Central Bank actions the markets will vacillate between hope and despair .
In India the central bank , RBI may go ahead with a rate cut . The quantum of rate cut will define the reaction of the market.
Expect increase volatility in the coming days !
What are your thoughts on trading this news ?
Indian Inflation number has been better than market expectation . This has been supported by lower food prices . However the core inflation remains steady . This will support further rate cut from RBI . The rate cut as and when it comes can trigger a short rally in rate sensitive shares.
Global markets mood has turned to cautious optimism . Oil prices seems to has hit a roadblock in their path to recovery . In case Oil turns negative we can see sentiments turning quickly to a gloom and doom situation . US markets were flat and Asian markets looks weak and feeble .
NIFTY trades may take advantage of the range bound market and profit from the impending increase in volatility . A call put spread can be a possible strategy .
On Friday US and EU markets moved up . The rally was fuelled by ECB action . However the point to note is the options available to ECB to further stimulate growth in case required is now very limited . The same can be said for Japan .
Over the weekend India and China data was released . Both in their own way was below market expectations. However China reassured the market to no further devaluation in their currency .
With Oil and Iron Ore prices moving up , commodity lead economies will also find some breathing space .
Indian equity markets are expected to open in the green in line with other Asian markets . This week we have important announcements from Fed expected .
Traders who are long on NIFTY can enjoy the party for now.
ECB went all the way in reducing interest rates and expanding the scope of asset purchase . However they also mentioned that they do not expect any further stimulus will be required in near future . The last statement confused the market.
The European equity markets went up but then it lost ground and ended up in red . We can expect Asian markets to correct today .
As the proposed meeting in Moscow of Oil producing nations failed , Oil prices came off from their recent highs. We may see Oil sliding further as the oversupply situation continues.
The day traders may short NIFTY with a strict stop loss. RBI action on interest rate cut may trigger a short term rally .
After taking a breather , the market continued to move up on Wednesday . However the strength of the rally may fizzle out soon . We have the upcoming central bank meetings and the market is expecting more action to pop up growth .
How far can the central banks go on in terms of negative interest rates and asset purchase ? Sooner than later the market has to accept that beyond a point central banks cannot induce growth . As and when that happens assets prices may see some deep correction . Till then the party continues.
NIFTY traders may cover their shorts if the market moves beyond 5650. On the long side traders have to maintain trailing stops to capture their profits .
The recent rebound in commodity prices lead by Oil may be short lived . We have come to the end of the short covering rally and markets have started to cool off. The oversupply situation in Oil continues and any upmove may be sold into .
Indian Equity markets may weaken today . Traders may square off their long positions and initiate short positions on NIFTY. Investors should use the rally in commodity stocks to exit their positions and churn their portfolios.
Asian markets seems to be consolidating at current levels . Indian Equity markets may open flat with an upward bias. NIFTY traders may remain long . FITCH has lowered India’s growth target for FY 2017 to 7.7 % . However India’s growth remain one of the highest and this should reassure investors .
On Friday US equity markets moved up . The overall sentiments on Oil looks much better than from when everyone expected Oil to fall to USD 15 .
China plans to glow at least 6.5 to 7 pct annualized over the next five years . This shows China’s commitmentment to sustainable growth . It also reassures the market that there will be no hard landing for China . The market seems to have priced too much of negativity on China . The reevaluation of the situation can take the market much higher from current levels.
We may also see some stimulus from EU to stimulate growth coming this week .
Indian Equity markets Index ( NIFTY ) should open higher after Friday's consolidation . Trades should remain long with a target of 7650 and higher on NIFTY .
The Budget along with the improving global sentiments helped the Indian Equity market to move higher . We can expect the momentum to continue today . The next trigger for the market will be any interest rate cut from RBI.
However a part of this rally is also attributed to huge short covering . The March Nifty shorts has been caught on the wrong foot and are getting covered. We expect the market rally to continue for today .
Given the constraints India faces , this year's budget provides the optimum solution .
The key themes for the budget are as follows :
The global markets has also started to recover . The equity markets moved up strongly yesterday . We expect the rally to continue. Investors should invest at these levels for long term gains .
Nifty traders can maintain their longs and initiate new long positions . The momentum is strong and the next few days can take the NIFTY all the way to 7600 . We may see Rupee strengthening for sometime . Long Dollar positions can he squared off or hedged .
On stocks look at ITC , Tata Chemicals , HDFC and SBI .
This year’s budget will decide if investors invest or exit from Indian stock market. Budget is always an important event for the Indian stock market . However this year is of special significance .
India stands at the crossroads of hope vs despair . The world economy looks shaky at best . Oil prices are struggling to find a bottom . China is slowing down faster than anticipated . The MEA nations dependent on earnings from Oil are struggling .
On the domestic front the economy is slowing down . The weak rupee is scaring off foreign investments . We have seen one of the highest exodus of foreign investments in 2016 so far.
Can the budget turn the tide in India’s favour . If the railway budget is seen as a precursor to the Budget it looks optimistic for now .
Some of the positives of the Railway budget are as follows :
The overall global situation is reflecting some early signs of improvement . With Oil prices stabilizing we may see some stability in Risky assets. On NIFTY we may expect some recovery . However whether the market will continue with the rally will depend on the budget .
Hope the Government makes the best of this opportunity. Share your expectations on the Budget . What are your thoughts on the railway budget.