On Tuesday, the executive arm of the European Union ordered the Irish government to recoup up to 13 billion euros ($14.5 billion) in back taxes from Apple, plus interest. Apple’s low tax rate in Ireland was based on a tax agreement with the country . This clawback on taxes agreed will have serious implications for EU business. With companies like Tata Steel , Tata Motors , Hindalco , TCS and others having significant business interests in EU , we may have to take a closer look at their contingent liabilities in light on this news.
Yesterday Indian equity had a strong breakout on the upside . We are in a long term bull market . Thus after consolidating for a long time market got ‘tired’ of waiting . However as the prices climb and valuations get stretched we should look beyond the index and be stock specific in our investments .
As we have mentioned in the past US Oil continues to face strong resistance around USD 47 levels . Traders should wait to see whether the breakout from the range of USD 48 to USD 45 before initiating new positions .
On stock specific ideas for the Indian equity market some of the mid / small caps that looks good for accumulation are , Linde India (BOC), IVP and Snowman Logistics . We will discuss these stocks and a few more in our Multibagger stocks section . However always remember mid / small cap stocks have higher risk component . Apart from the risks of market movements these stocks also have high company specific risks .
The markets have reached an inflection point . The next Fed move if it sounds a bit hawkish may turn the tipping point towards a meaningful correction.
Japan consumer prices keep dropping ignoring all the money being pumped in by the central banks . It is clear that like electricity liquidity chooses the path of least resistance .
In simple language :
This vicious cycle continues as the problem is in the sentiments , not in the absence of cash .
Coming back to Indian equity market we may see some more correction in line with the global markets . Investors are advised to stay on the sidelines .
Traders can take short positions for day trading .
We all want to make money from the stock market .
What do we think will make money for us :
However with the analysis and superior knowledge we sometimes fail as traders or investors. So is there something more to it than science ?
Forgive me if it sounds a bit philosophical but the key to being successful in your trading and investments is :
So we see that in the world full of multibagger ideas and make money quick ….we have to step back a little and think !
As we scan the market for the key drivers of this market for the next few days , it becomes evident that the bulk of the news flow will be from Oil and the Fed .
The global equity markets are at all time high , mainly driven by liquidity , higher Oil prices and improving economic news from USA .
However Oil seems to have some strong resistance at USD 47. Also the rally is mainly driven by expectations of some action from the oil producing counties . Thus we have to watch closely for any news flows from this . As on date it looks like we may see some correction in Oil before it stabilizes at around USD 45.
Will the Fed raise interest rates this year ?
The key to this question is another question :
Can the Fed be at odds with all other central banks , while UK and Japan continues to reduce interest rates do the Fed really need to rush through its Interest rate hike ?
However we have to understand that with improving fundamentals and delay in Britexit , Fed may act sooner than expected . In such a scenario the equity market will see some meaningful correction .
India equity markets also took a breather after the run up . With GST being built into the prices of equity , the key drivers of this market will be global liquidity .
Investors and traders may like to wait to see how the situation pans out before jumping in .
The GST bill is one of the biggest positives for the Indian market . This will make India an integrated market across states . In a nutshell GST will pave the way for increased efficiency and remove bottlenecks for conducting trades in India.
The markets has been expecting this good news and have been rallying in anticipation . We are looking at PE which are high by any standards . However we have to keep in mind the forwards PE may not be that high .
The US job numbers that came out on Friday has been better than expected . The US markets moved up after the good news . This in turn may trigger a rally in Asian markets . All eyes will be on the Fed . Strong growth in jobs may support another rate hike in the near future .
Will the Fed raise rates while all other central banks continues to reduce interest rates in hope of better growth ?
Coming back to India , RBI is expected to keep the rates unchanged this week . As GST is inflationary by nature RBI may need to be more cautious before any rate cuts .
NIFTY and the mid cap rally to continue in view of the positive global and domestic sentiments . As value looks a bit stretched we should be prepared for some profit booking at some point.
Dollar should strengthen supported by strong job numbers .
Concern over falling Oil prices , may dampen the Risk On sentiments in the emerging markets . In its exuberance markets seems to have looked over some of the concerns coming up .
India equity markets continues to move higher buoyed by strong liquidity . In a world market which is flush with liquidity and returns keep diminishing , India was the oasis for investors . The government's strong commitment to growth and stability changed the outlook towards India . As China slowed down the World needed some new destination for the funds .
The GST bill is expected to be approved by Wednesday . However it will take some time ( may be a year or more ) before we see the same getting fully reflected in the earnings of the companies . The markets has already factored in the same . Thus in the medium term overall market may be flat .
In the short term , strong sentiments may take it higher from here on . Investors should look at individual stocks instead of the overall market . They have to look deep into the numbers and core strength of the companies . At these high valuations , the margin of safety is low for most of the good stocks .
Traders can and should keep following the trend with trailing stop losses .