European markets moved up on hopes of new stimulus from ECB to revive the EU economies. Also the fear of Russia taking and extreme steps subsided .
In India the derivatives rollover from November to December happened smoothly . Indian Equity market bounced back strongly . Sun Pharma was one of the top performers of the day .
The winter session of parliament has started . The present Government will try its best to get the GST bill passed in parliament . This can have a big impact on the market as and when it happens . However it will not be a smooth sailing with the oppositions trying to put in conditions for passing of the bill.
The NIFTY may face some strong resistance as it tries to cross 8000. On the other hand it will have support at 7700 and then at 7500.
The two major factors that will shape the Global equity markets for this month are Russia and Fed.
The challenge before Russia is to send a strong enough signal without starting World War Three. Showing measured anger is difficult . But showing restraint is frustrating !! So every move on this front will send ripples across markets .
Fed on the other hand is much more predictable . Hopefully they start raising the interest rate in Dec . Once the interest rates goes up , apart from the initial reallocation of resources , markets will price it in and move on . The unending anticipation has been more painful.
Indian equity markets was closed yesterday . Once they open today that will have to factor in a lot of news flows.
However now that the Oil has cooled down and Russia has shown restraint we may expect market to open flat .
Sun Pharma may move up on news flows . The company has put on hold its plans to invest in wind energy ! Investors have already lost money in Suzlon. They do not want another ‘ Gone with the Wind ‘ with Sun Pharma.
The events that will have a bearing on the direction of the Indian equity market and Indian Rupee for the next few weeks are as follows :
Outlook remains negative for short term . Book profits , Buy puts ( to hedge your portfolios ) and stay liquid . If you are leveraged its advisable to reduce the same . Volatility ahead!!!!
Christmas sale is about to start !!
Equity markets closed on the positive note last week . Indian Equity market had a positive breadth on NIFTY stocks . We all say Gail jump up on positive news flow. Today we can expect a positive to flat opening for the market .
However overall we are in a downturn and and sentiments looks bearish . Investors will like we wait and watch till the Fed move in December . That may provide and opportunity window .
For trades the trend remains downwards . They can continue with their short positions with trailing stop loss .
US and European markets drifted lower yesterday . Oil failed to move up even after Saudi authorities tried to talk up the market . Thus we can expect commodity meltdown to continue unabated .
In India Hindalco and Vedanta to moved out from Sensex. These along with other metals stocks continues to fall with no end in sight .
We can expect a weak opening for Nifty . Any up move will be sold into for now.
A quick implementation of GST and /or further rate cut by RBI can only save this market .
Yesterday Indian equity markets came off sharply. Today it will try to recover some of those losses . As we come closer to the Fed decision on Interest rates the news flow and subsequent uncertainty in the markets will increase . We can expect increased volatility as analysts debate the timing and impact of Fed action.
The political scenario is also changing across the Globe. ISIS has done what Hitler did years back . It has brought Russia and US together at least to control a common threat . It always happens like this . When it comes to survival old enemies make best of friends . At least you know them.
But traders have to swim in this market . So be cautious and have your stop losses and profit targets ready .
For those you are new to stock trading : Close your positions or put an automated stop loss before you take a ‘short ‘ break .
As the possibility of a Fed action in Dec becomes more probable , how will this affect the emerging markets in general and Indian equity market in particular.
One thing that looks inevitable is the weakening of the Indian rupee . For rupee the best case scenario is 65 and worst case can be as high as 70 by March 2016. Thus the downside risk is much higher than the upside potential.
But Oil prices will save the day for Indian imports. As the global Oil supply increases and demand stagnates, we may see further fall in Oil prices .
India being a net importer of Oil will benefit in this scenario . The price of other commodities like Coal ( of which Indian is a big importer ) has also come down drastically .
Thus in the long term the soft commodity prices will more than negate the effect of a weak rupee .
However as Dec comes , we can expect hot money to flow out of emerging markets . This will create a life time opportunity for investors in Indian equity .
The psychological problems for investors and traders are many . Its very boring to say that there is nothing to buy or sell today . Its boring to say ‘ The market is expected to correct . So hold your cash and wait for the right opportunity . ‘
But we have to learn from the masters of Investment . We have to understand what makes them great .
The point to ponder on :
Buffett was never averse to putting his eggs in one basket .At one point he had 65 pct of his worth in GEICO and at some other point he had 40 pct of his wealth in Amex.
The markets bounced back after initial fall . It had to do so . The World has come a long way from 9/11. The Paris strikes is a reminder of what India faced at Mumbai . It reminds us that the world is not a safe place . It whispers fear into our ears . It injects distrust in our hearts .
But humanity is a great survivor . Terror thrives on fear. It wants us to be scared. It wants us to think in terms of we vs they. It wants to divide us in groups.
The world markets are now much more mature than that . If financial markets are a barometer of fear, yesterday it showed that we will not be scared.
Indian markets also bounced back in the second half . We can expect sideways movement today . However as already mentioned we are in a market which is in a correction mode. We will see short spikes and share specific actions . But the economic scenario remains cloudy at best . The exports are coming down and the Government has to do something about it.
The good news is that the Indian Government has listened to the wake up call from Bihar . They are pushing through a lot of reforms in earnest . All this should catapult India into a stronger growth trajectory .
With China slowing down the World needs India to grow faster . Run India run! The World is watching you. The stakes are too high.
On specific shares Nestle looks good . With Maggi coming back we can expect a more vibrant Nestle. Also the company has paid a high price for the learning from Maggi fiasco.
This learning should make them stronger and reduce the probability of such events in future .
Global clues are negative today . Indian equity market looks set to open in red . The earnings numbers as released by the Indian companies so far has also been below expectations .
The BJP government needs to push through reforms like GST with greater jeal . All the positive sentiments achieved by the Mody wave will be lost it things don't move on the ground . It's now or never for India and BJP . But the good news is for once the political and country’s interest has been aligned !
We have always been told that everything has a price tag . There is no free lunch . So what is the price of economic growth and prosperity .
Global warming is no more only in the realms of academic discussions , it's real , we all are feeling it . In extreme summers and winters , in lost crops and in smog that drowns our cities .
As we move forward and the pangs of global warming are felt deeper ,the problems of pollution will become more and more central in policy decisions .
Have you taken into consideration this long term mega trend while restructuring your portfolio ? We will look at such mega trends in our future reports . While we get drowned with daily news flows and events , we also need to sit back and analyse the emerging trends .
This will help us to build our long term value based portfolio , while keeping our social responsibilities in perspective.
The Indian markets recovered yesterday . However overall sentiments remains weak .
As for now we remain bullish on Dollar .
The market went down as anticipated . The world markets were down , the sentiments were bad , back home BJP lost Bihar . Thus all culminated into the major fall for the market . In times like this investors and traders both start questioning the rationality of the market .
A very happy Diwali to all our patrons . We thank you for your support and encouragement .
Also a very happy Muhurat Trading
to all of you !
For those of you who are unaware of this Indian tradition , : Muhurat Trading is the one hour trading on the day of Diwali . This is also the day for Lakshmi Puja . Lakshmi is the goddess of wealth .
Coming back to markets , there was a major sell off in US markets . Indian markets opened gap down but recovered some of the losses by the end of the day .As discussed in yesterday's report the forthcoming Fed action on interest rates will keep the market soft .
We can expect some major sell off in risky assets . Risk OFF for now please.
We have been bullish USD for sometime now. Rupee lost more than 1% to 66.44 yesterday. By end of the year we expect it to breach 67 . However it may happen much before that if sentiments deteriorate.
The following news will decide the fate of the Indian Equity market today .
Major defeat of BJP in Bihar pools
BJP has faced one of the most ‘unexpected’ defeat in the hands of its combined opponents . This does not change the majority in the center for BJP. However it casts a doubt of the infallible Modi magic .
However for investors the more pertinent question is will this slow down the pace of reforms ! Will the opposition become active and stall all the progressive reforms . However we should not forget that democracy is about opposition, it's also about consensus and finding common grounds. Indian demographics have now changed . The youth of India wants growth and progress. They will be quick to punish any impediments in the path of progress. Thus the opposition while expressing their views will also not like to be viewed as non progressive .
US jobs data came much better than expected
This is an example where good news is bad news for the market . Good job data will strengthen the resolve of the Fed to raise interest rates in Dec. This in turn will start a domino effect across markets .
We can expect a gap down opening for the market based on the above mentioned news .However a major correction will open up opportunities for Diwali shopping ! So the Diwali discount sales starts today , happy shopping !
You may also like to read ' Money and Happiness ' where we try to find the keys to happiness : (http://www.9rupee.com/personal-finance/money-and-happiness) .
Oil and other commodities came off sharply. Today we will have the big job data from US . This report is extremely important in light of the expected Fed action in December .
Back in India the exit polls for Bihar election shows a non decisive result . India equity markets may use it as an excuse to correct further .
If US job data comes better than expected we may see a sharp correction across emerging markets .
Rupee looks all set to weaken further upto 67 levels over the next two months.
The US markets closed on a strong note . Oil moved up by almost 2 % . This improved the sentiments for the commodity stocks .
Asian Markets looks positive for now. In India we may see some rise in oversold commodity stocks like Vedanta , Hindalco and Tata Steel . However these movements should be used only by the day traders to make trading profits .
For the investors these provide good exit points to move out of commodity stocks . Some of the major banks like Standard Chartered Bank are reducing their exposures to commodities and commodity dependent economies.
We have already seen Deutsche bank take major write off in their books for commodity assets. This only reflects the long term deteriorating outlook for the commodity sector.
As this is good news for countries like India , which are net commodity importers. Lower coal prices have helped NTPC to improve its profits .
Low oil prices are good news for Castrol . With strong brand equity they are able to improve their margins .
Thus we have to be on the look out for companies that have pricing power in this market . What are your thoughts on this ?
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It seems the inevitable will happen ! Recent Fed statements has now started preparing the market for imminent action in Dec . Though market has all along been ‘expecting’ Fed action , the strength of the expectation has been going up and down .
We will analyze the different scenarios of Fed action in our Friday report . However in a nutshell along with slowdown of China it may be the proverbial nail in the coffin for commodities . Also the days of easy liquidity looks numbered .
Expect some sell of in the Asian markets . Indian market has been weak and lacks any conviction to go up. Thus in absence of any positive news market may continue to drift down .
Keep an eye on Bihar poll results . This has the potential to make the sentiments positive in Indian markets.
Rupee will weaken further . These are good levels to go long on Dollar .
US markets closed on a strong note yesterday. We may see a positive opening for the Asian markets. Also for India the market looks a bit oversold in the short term .
The earnings has not been that encouraging. Thus overall we remain in a declining market with short intermittent technical bounce backs.
The key factors for the Indian market remains :
Moody's has upgraded the outlook of the Indian banking sector to stable . However the story is very bank specific .
Some of the private banks like HDFC Bank and Yes bank looks good investment candidates .
Over the weekend, China's official purchasing managers' index (PMI) came in at 49.8 for October, according to data from the National Bureau of Statistics (NBS), contracting for a third straight month. The market expectations was 50 .
Thus it is not only that China is slowing down , but the pace of slowdown is much faster than market expectations . Thus the financial market will have to keep playing catch up with the worsening situation in China.
Caixin final China purchasing managers' index (PMI) for October is expected to come in at 47.50 . This will be keenly watched by the market.
Job date from US is expected this week. This will be one of the key factors for Fed to decide on Dec interest rate decision . This if it comes better than expected market may sell off in anticipation of an interest rate hike in December .
We have seen a 7% drop in the share price of Vedanta on Friday . As we have mentioned in our previous reports metal stocks should be sold on any rise . We will not see any sustainable improvement in these counters till the time the situation on China improves . So far as the general market is concerned markets look weak and may open in the red.
News on Bihar pools will be keenly watched by the Indian market. A BJP victory may help to improve the market sentiments.
For the short term one may look at stocks like NTPC . Low coal prices help NTPC to keep improving its margins .
For the long term investor one can look at Dr Reddys.
We will come out with a portfolio for 2016 by early Jan.
We are also starting out technical analysis report from Jan 2016. The first four reports will be free for all those who sign up for ' Morning Tea' before 15th Nov .
We look forward to your suggestions ? Please let us know any specific stock or event which you want us to analyze in our reports ?