As most of the traders and FII takes goes into the new year holidays the volumes is the financial markets have come down. Indian equity market outperformed its Asian peers .
As Chinese equity markets keeps drifting down can India provide the much needed alternative for Risk seekers ?
However we have to take the recent rise in the context of low volumes and holidays . We will need to reconfirm come January if this recent out performance can be sustained .
For today keep an eye on Lupin and Dr Reddy .
The recent rally in metals stocks like Tata Steel , Vedana , Hindalco should be used to move out of existing positions . With no good news from China , metals and commodities will continue to unperformed the broader market in 2016 .
One stock that we feel will outperform the market in the next few years is Tata Chemicals . Long term investors may add this company to their portfolio in small lots . While there is no immediate trigger for the company we will see the positive outcome of recent changes trickling in the next 2 to 3 years.
As Oil recovered from its lows , equity markets moved up in US and EU. Asian markets also joined the rally . However we should remember that low Oil has actually helped economies like India to control inflation and improve economic growth .
Also as expected GST for India will remain a dream for now. However equity markets for now have decided is in a festive mood and will tend to overlook any negative information.
For traders they may initiate new long positions if the market can sustain over 7900. However these are very close ranged movements , and it will not be a smooth ride .
US equity markets recovered buoyed by positive economic numbers . Also for now Oil seems to have stabilized . With US allowing the export of Oil the spread between Brent and US Oil have almost vanished .
We expect Indian equity markets to open in the Green. However the forthcoming holidays traders may like to book profits and thus any up move will get capped.
There is negative news from the economic front : India’s current account deficit (CAD), or the difference in the value of goods and services exported and imported, widened from USD 6.2 billion in the first quarter (1.2 percent of gross domestic product) of the fiscal year to USD 8.2 billion (1.6 percent of GDP) in the second.
With no major news flows for the Indian Equity market we expect side ways movement . With FIIs covering their shorts before the forthcoming holidays , markets bounced back successfully .
However we can close to some strong market resistance jones for the Indian Equity market .
Also we have seen commodity stocks rally which is more of short covering than investment buying. New long positions may be initiated if the market penetrates the resistance convincingly .
On Friday all the major markets saw selloffs . We have been pointing out that that the rally we say after the rise is Fed interest rates had more to do with year end short covering than fresh investments flowing in .
An opportunity lost : In India now it's clear the GST bill will not get passes in this session .This is a major setback for the Indian economy .
In line with the global markets we expect to see Indian equity markets open weak . The important support levels of 7550 will be important to watch . If the support holds we will see a bounce back in this market .
The equity markets performed extremely well in the past few days . More so if we consider in the context of the negative news flows.
Interest rates : We had Fed raise interest rates by 25 bps , also it made it clear that there will be further rate hikes going forward . However it assured the financial markets that any rate hike will be data dependent . Thus there is pre programmed rate hike time schedule .
Oil : Oil is in a very oversupply situation . US has allowed the export of oil . While this will only have marginal effect on the global markets it will be a sentiment negative for this market. A low Oil price is good news for net importers of Oil like India, however only upto a certain point .
GST and other important reforms in India : The consensus amongst political opponents in India looks more elusive than ever before . Thus the possibility of speedy reforms to kick start the growth will be difficult .
Today can expect the euphoria in the equity market to subside as reality sinks in . Expect a low opening for Indian Equity markets .
Rupee with the RBI support may remain stable for now .
The question is for how long can Rupee avoid some serious softening ?
What will be your Rupee target by March 2016 ? A) 65 B) 68 C) Above 70 d) None of the above .
The the markets has already factored in a rate increase of 25 bps there was no surprise element in the Fed move. Also the Fed made it very clear that further rate increase will take into consideration the performance of the US economy in particular and global economy in general.
The US equity markets moved up on this news . One it felt reassured that the US economy is doing well. Secondly it was relieved by the Fed assurance on slow rate increase in the future.
We can also expect the Indian equity markets to open in the green in line with other Asian markets. However this upmove may be short lived . It will take a few days for the market to fully factor in the Fed news . Going forward US data will be more keenly watched than ever before . As this rate hike comes almost after a decade . many of the investors have never experienced a rising US interest rate scenario.
The focus will now shift back to news on GST , China and Commodities. In the long term we may see the risk premiums going up across the asset classes.
In another few hours the decision of Fed will be know. The market has factored in a rake increase of 25 bps. In case the rate hike is lower than that that will be good news for equity . Also the tone of the Fed on future rate hikes will be of importance.
Indian equity markets moved us ignoring a lot of negatives .
This shows the highly oversold nature of this market. Before the Fed announcement lots of shorts are getting covered across markets. In case the Fed comes with some positive surprises we see the resumption of the bull market .
However for now it will be better for wait for the Fed announcement before joining the party !
This week promises to very eventful .
Fed rate hike
We have been talking about this for ages now. The Fed is expected to raise interest rates by 25 bps this week. Hopefully Fed will try to assure the market further rate hike, as and when it happens will only be after substantial improvement in global economy .
The end of Oil ?
Are we at the inflection point without realizing the same ? Is this the end of all fossil fuels ? Two apparently disconnected things happened in last week .
Oil settled at USD 35.62 about 10 % fall over the week !
Paris climate agreement , where a consensus was achieved .
Back home Delhi has woken up to the menace of pollution.
The world is in broad agreement on the need to move towards alternative energy and cleaner technology .
It also means that a large part of the coal assets of the world will have to be left underground and cannot be utilized . Time to take a relook at the valuations of Glencore , Ango American and BHPs of the world ?
India economy continues to do well :The industrial growth on the back of an impressive double digit expansion in manufacturing are signs of the robustness of the economy.
Indian equity market along with other with other equity markets will continue to be in doldrums for now. We will prefer to wait till more clarity comes from the Fed.
For traders initiating new short positions on the NIfty and maintaining previous short positions can be initiated .
Long term investors can use the market correction to start building their portfolio . These are the times to look for bargains in evergreen stocks like HLL, Colgate and HDFC .
Indian Equity markets are close to some strong support levels . As the markets opened in green and looks strong for today. For traders it will be prudent to cover short positions . However we will like to look for confirmation of the recovery before initiating long positions.
On the global front financial markets continue to bleed . The Fed announcement and the direction about future rate hike will be an important trigger . We may see markets rally once the uncertainty is reduced on future rake hikes .
Commodity continues to be weak with Oil in a oversupply position for the long term . The market prices need to remain low to clear the oversupply . However we may expect some short covering rally in Oil along with other financial markets after the Fed announcement.
Havells looks good for buying for the long term. Their focus on the domestic market will add value for minority shareholders.
All the major equity markets continued to correct yesterday . The continued weakness in Oil prices will have far reaching consequences for the Global economy .
The exports from China declined more than expected , however the imports grew more than expected. The revival of imports signifies the early signs of growth in domestic consumption. However if this will snowball into an economic revival in by H2 of 2016 , only time will tell.
Indian equity markets looks weak for now . The markets are expected to open in the red. However we may see some support coming in in the second half .
The traders can continue holding their short positions on NIFTY. In case the support breaks we may see the market move down to 7500 levels .
US markets came off from their recent highs . The commodity slump has dampened sentiments for the overall market. Crude Oil made new lows . Banks with huge exposure to commodity assets , needs to take a look at their exposures to these sectors. This in turn may result in a sell off for banking shares.
Indian markets continues to drift down in absence of any new triggers .
The two important triggers for the market will be GST and Fed interest rate hike as and when they happen .
On particular stocks Castrol , Century Enka looks good for long term investors .
Traders can maintain their short positions on Nifty .
Indian markets are expected to open higher in line with other Asian Markets . US markets moved up on Friday supported by excellent job numbers . However this also means that Fed will raise interest rates in Dec .
Once the US interest rates goes up , we will see funds outflow from the emerging markets . This will also put pressure on INR . Companies that are naturally long on dollar ( IT , Pharma ) and have major exposure to US markets , to benefit .
There is also data from China to be released this week .
On F&O : Short Hindalco , Vedanta and NIFTY
Objective : To develop a portfolio of assets that can not only withstand but can benefit from market corrections .
Market corrections / downturns when wealth is destroyed ... market values gets eroded, companies get bankrupt , job market worsens . Non of these on the face of it look like great money making opportunities !!
So how to go about making money when volatility increases . Some of the investments I can think of are :
1) Buy a lot of put options on all those assets that are expected to collapse.
2) Sell in the money call options and collect the premium , that will anyway expire worthless as the market falls.
3) Hold a lot of cash/ liquid assets to buy assets when everyone sells.
However some of these are high risk / high return strategies . Derivative positions has be always monitored and stop loss maintained .
However the point is we should not always invest and then hope that the market keeps going up !
We cant keep blaming our bad luck when we loose money and pat our own back when we make money ! We all ask Why Me!
We need to build some robustness in our investments .
Indian markets is set to fall along with other asian markets .INR looks weak and all set for 68 levels.
Unless something unforeseen happens on the economic front for US in the next twelve days there will be a interest rate hike in mid Dec by Fed. This in turn will be the long anticipated rate hike .
We may see major sell off in emerging markets once the rate hike is declared. Oil dropped below USD 40 and may see further decline in the coming days.
Indian markets came off and looks very weak . We may see further sell off in Dec . The holiday sentiments may not be strong enough to lift the market.
When investors are in a good mood they feel positive. Positivity is viral . It spreads to their expectations about the economy , the world and their future. Their in comes the emotional part of Investing . If we exclude the emotions of investors from the scope of our consideration , we will miss out on the key driver of all financial makes.
Indian central bank (RBI) kept interest rates constant . With GST expected to trigger inflation RBI will not have much room to reduce interest rates going forward. All Fed action may trigger depreciation of Rupee. The Auto sales number for India has come below market expectations . Thus overall there is no trigger for markets to move up .
But its festive seasons and if the positive sentiments spread Investors may buy shares along with Christmas presents !!
The next few weeks will be very critical for the financial markets . It will set the tone for 2016 . The major events that we have to keep a look out for in Dec are as follows :