The escalating problems at Deutsche Bank has send shock waves across markets ! Is it not ‘ too big to fail ‘ ! If this can happen to Deutsche Bank , what's the inside story of other banks . And all along regulators have been promising that the system is much better this time .
Indian equity markets corrected on the news of geopolitical tension. The markets were overbought and richly priced . Thus this news gave an excuse to book profits . We may see increased volatility in the next few days based on the news flow.
Investors should keep a close eye on this market and start buying if the valuations become more attractive .
So far as traders are concerned : We have suggested shorting the market at higher levels . Those can be maintained for now.
We expect increased volatility in the Indian equity market over the next two weeks . The major factors to watch out for are :
In absence of any strong domestic factors , global sentiments will drive the market . The USA elections will be of great significance for the market . This is more so for the diametrically opposite views of the candidates involved .
Opec meeting will determine the next course of movement for Oil. In case the meeting remains inconclusive like the last few meetings , we may see a sharp correction towards USD 45 for US Oil . Any hope of production freeze or greater cooperation on the other hand will take US Oil past USD 47. Oil has been range bound between USD 45 and USD 47 for some time now. We may see a breakout in the next few days .
RBI is expected to hold rates in their October meeting. In case RBI surprises the market with a rate cut , we will expect the rally in rate sensitives to resume.
NIFTY trades should look at taking short positions with strict stop losses .
Investors can wait on the sidelines for the market to correct before taking new positions.
In recent past the spread between the Large caps and Mid caps valuations has narrowed down . We expect this trend to continue . With GST and other structural reforms we expect some of these companies to emerge as large caps in not so distant future .Investors may keep an eye on our Multibagger stock Ideas .
Fed has decided to keep interest rates unchanged for now . However there more and more voices within the Fed that thinks that the time to raise interest rates in near . We can expect a rate hike in December if everything else remains the same !
But there is a lot of things that can rock the boat before that . We have the Presidential elections coming up . As we come closer to the outcome , the market will follow each and every news (rumour ) on the expected outcome .
The Bank of Japan was more directional in their approach . It will be targeting the yield curve , and is expected to continue with negative interest rates .
Overall the above mentioned news is bullish for today's equity market . In line with the global markets Indian Equity markets are expected to open higher .
The two central banks Fed and the Bank of Japan will come out with important announcements today . This is on such rare occasions that two major Central Banks are expected to come out interest rate comments on the same day !
Thus the global currency market may see some added volatility . This volatility will finds its way into equity markets .
The expectation of a rate hike by Fed in December is growing . We have to see how the market reacts once the same looks more probable .
In case the Japanese Central bank does not cut interest rates further into the negative territory we will see JPY strengthen against other currencies . In any case the expectations are too high thus some JPY strength can be expected after the announcement .
The Fed on the other hand will have to take a more definitive stand on rate hike in December . We may see some weakening in INR in the next few days .
Indian equity markets may open soft and trend sideways . The odds of some correction will increase based on the Fed stand on interest rates .
The next few days , we may see some profit taking in the Asian equity markets . With the Fed lead uncertainty increasing the VIX ( volatility index ) has gone up during Friday .
This indicates market expectation of higher volatility ( read higher risk ) for the next few days .
Indian markets are set to correct in line with the global markets.
However these corrections does not change the long term direction of the market . It only provides some churning of equities .
Investors should use any deep correction for building up their portfolio.
Panic is equally bad for driving and stock market investments .
US jobs creation has been slow . Its lower than what the markets expected . We are again in the period where ‘ Bad News on US economy will be good news for the global equity markets ‘
Markets expect the Fed to go slow on US interest rate hike based on the latest job date that has come in . However we have to appreciate that this sentiment can change very quickly .
We have some important data coming in from China this week . As the expectations from China has been very low , even mildly positive date will be good enough for the markets.
One point of concern that may come back to spook the party is falling Oil prices .Also we have to keep a close eye on Fed .
Indian markets will follow the global sentiments and will gyrate based on that .
NIFTY may open strong . However these are all time high and it will be advisable for investors to look for profit taking opportunities .
As they say ‘ You cannot sell at the top and buy at the bottom ‘ . So like systematic investment , a system of regular partial profit booking will help !