The aftershock of Brexit continues to torment the market . The sell off across the financial markets continued into Monday . As the markets finds it more and more difficult to fathom the depth of the disaster sentiments move towards risk off for all assets .
We will be watching out for the answers clues from the market in the next few weeks . Yes we have to reassess the risk like any other risk based on the linkages and how it spreads out .
Markets will continue to remain volatile ahead of the Brexit . Trades may like to close their shorts before the weekend . Monday in case will be a gap up or gap down based on the outcome .
The Government in India is pushing ahead with the banking reforms . The need to prove the Government's commitment towards banking reforms , tackling with NPA problem , and overall cleaning up of balance sheet has all the more increased with the exit of Rajan .
Once the Brexit storm settles down Indian equity market will continue to move up in the medium term . With Fed stepping back for interest rate increase in the next few months , Oil prices being stable above USD 50 the global factors looks stable for now .
So the only major risk remains is Brexit , and growth in China .
In all the discussion about Fed , Brixit and Oil , the markets seems to have forgotten China .
However in the long term China is a much bigger risk than all the exits put together !
The surveys shows that the competition will be very close between the two camps. In between as news flows comes on opinions on the possible outcomes markets will show extreme volatility. However till date market has not factored in an exit . It seems most of the players have assumed that status quo will be maintained.
In general markets are bad at factoring in such binary events . Which also implies the market will gap up or gap down based in the outcome .
In case of an exit we will see dollar strengthening and sell off in risky assets. Indian equity has been consolidating and the next major move will be determined by the outcome of Brexit.
In case the exit does not happen we expect NIFTY to show strength in the coming days. Along with good monsoons and GST bill the market make new highs.
Investors should hedge their positions by buying put options. Trades on the other hand can remain short on NIFTY with strict stop losses .
Raghuram Rajan's exit : How will Indian market react ?
The present RBI Governor Rajan’s exit has lead to negative sentiments for Indian rupee . This in turn will see some sell off in the Indian equity market . Till the time government comes up with the successor and market gets some clarity on the policy direction of the RBI , we will see this uncertainty persist .
Investors and trades alike will like to wait and watch on this . Also with the Brexit round the corner markets will see massive volatility . The intraday volatility will increase.
However the Government and RBI will be in full action to tame down volatility , we may also see some policy announcements by the Government to improve the market sentiments .
Traders can play the volatility with options . This will restrict the risk while participating in the opportunity.
The markets are trying to figure out the possible impact of Brexit . As we near the referendum date we may see some increase in volatility . The Fed meeting and the next interest rate will also keep the markets on their toes.
NIFTY may correct further in line with the global sentiments . However for India the long term trend remains towards the upside.
Traders can play the volatility with shorts with a strict stop loss . Investors may weight for the market to correct further and start buying is NIFTY breaches 8000 mark .
Logistics companies with strong fundamentals like Concor , Gati and Snowman will gain once the GST is implemented .Investors should accumulate these stocks as the markets corrects.
After the recent run up some profit taking is long overdue. Add to this the uncertainties on Brexit and Fed interest rates . Now we have all the ingredients for some correction.
Equity markets may see some correction in the coming days. However it cannot be considered a trend reversal so far as the overall bullish trend is concerned .
We have to keep a close eye on the global factors on Brexit and Fed .
In India good monsoons and GST is all we need for another strong upsurge in the NIFTY .
Traders may short NIFTY with strict stop loss. It be better to close such short positions by the end of the day .
Reserve Bank of India kept rates unchanged which was in line with market expectations . With inflation inching up and growth numbers being strong the central bank will be on a wait and watch mode .
Equity markets moved higher in line with the overall global sentiments. Indian Rupee has been range bound between 66 and 67 for some time now. Expectations are it will break this range . Rupee may see some weakness in the coming days as dollar gains back some momentum .
Oil has now comfortable breached USD 50 and may consolidate in the range between 49 and 52.
Will the indian equity markets take a breather , or continue its march ahead . The next move will be decided by the what RBI does and says today ….and then the Fed .
Will liquidity drive the market much higher from here . Today the market will be mainly driven by RBI interest rate guidance . Any positive news can give the market much higher today !
The US jobs data has come below expectations . As a result the US dollar weakened . On the other hand as the Japanese government plans for more stimulus to support the economy , Yen strengthens against dollar.
A weak dollar / strong Yen and Euro is good news for commodity producing companies . In the short term we can expect the rally in commodity prices to sustain . On this note equity like BHP , Coal India look good .
On advantage that some of the strong commodity companies like Coal India has over others is its low debt . Thus any improvement in prices will directly affect the bottom line . However being a PSU the burden of wage inflation is more on such companies.
Overall NIFTY looks strong but not cheap . Thus beyond a point it will be more momentum driven . The margin of safety is very less for most of the NIFTY companies .
Investors will now need to look at select mid caps , small caps for value buying .
Two stocks that looks interesting at current levels are Coal India , and GMDC .
Investors who has very high risk appetite can also look at turnaround stories like MMTC and Suzlon . However one should be clear in their mind that buying such shares is like buying options. Much if not all of the value / investment may lost it the turnaround fails to take off . But in case it does they can give very high returns .
India at the inflection point of growth
When we try to analyse the day to day trends of the of the equity market , we sometimes lose sight of the bigger long term picture . As the equity markets makes new highs we wonder where we should book profits and stay in cash or keep investing . Unfortunately there is no write and wrong answer to this .
However for investors the long term trends should be more important than the daily market movements .
Where do you see India 10 years from now ?
This the question that we need to understand to pick and choose our next set of multibaggers . No investment is risk free , and equity investments are for the brave hearted . We will come out with our next set of multibaggers on every Saturday starting this week .
So far as traders are concerned all long positions on NIFTY should have a strict stop loss to protect the profits . After the recent run up some intermittent correction / consolidation is probable . However the primary trend remains upwards .
Oil moved up as US stock positions shrink . Some of the commodity stocks with low debt looks attractively priced . Have a look at Coal India and GMDC. They have very good dividend yield and may give some decent returns in the medium term .
After the recent run up , the Indian equity markets looks all set to consolidate. However while NIFTY may take a breather , there is a lot of stock specific action .
One interesting point about the Q4 results is that it is a balancing number for the audited annual report . Apart from the financial health of the company the same is also an indication of the reliability of the quarterly report from the management for the other quarters . Thus if suddenly we see a huge drop in sales and increase in costs in the last quarter it may indicate management has been overstating the profits in the last three quarters . This is mainly applicable for small companies.
However the need to scrutinize the accounting figures given by the management is all the more important these days . With diverse streams of income and huge debts the incentives for the management to provide ‘ cooked up ‘ numbers has increased . In many a cases the promoters has a huge part of their equity pledged , thus for all practical purposes the so called promoters have no stake in the company !!
Coming back to stocks the latest wave is for ‘ good monsoons’. We are seeing lot of these share prices moving up with this wave . However buyers beware . Many of these stocks have no direct correlation with monsoon . Nither they have the scale and management brand with to take advantage of any demand surge .
The equity markets have rallied . The bears in Oil has been caged and Oil continues to push higher . Indian equity markets keeps going up . NIFTY has pushed above 8000 and is looks all set for greater glory !
Did you make money in this rally ?
Some of the stocks have rallied over 100 pct !
Has the fundamentals changed ?
What about Fed interest rate hike ? Will the hike affect the equity markets ? Has the market priced in the hike ?
Monsoons are expected to be good this year . But is the good monsoons already in the price !
This is the type of market where operators will push up companies with no actual business . Greed will have investors buy this company . After all it has been going up 15 % every day !
The need to take a portfolio approach to investment has never been more than today . In a nutshell portfolio approach does not believe in one size fits all .
It assesses the risk appetite and risk taking ability of the Investors .
Then after discussion the long term investment goals of the investors , suggests different portfolios to suit the investor's needs .
It looks at different investments like shares , insurance , real estate etc and considers the correlation in the asset returns.
We can help you to take a relook at your portfolio . Contact us with your portfolio details for a one to one discussion . Your informations will be kept confidential