Indian Equity markets may open higher , supported by better than expected US jobs data. After recent consolidation markets looks prepared to move upwards supported by favourable global and local clues.
US jobs data on Friday has come much better than expected . This confirms the improvement in US economic situation . On the domestic front we have the GST and other reforms coming up for approval of the parliament .
As long term Investors we should take note India has reached an inflection point and can see huge wealth creation in the next 20 years . Now is the time to look for companies that can become the flag bearers of this growth .
However a word of caution for short term outlook of this market : markets are already trading at expensive valuations . Thus any small disappointment in terms of earnings , policy approval can spoil the party! And do not forget Oil , China and Britxit they will come back again to haunt the market .
The market just ignored all of these predictions :
After the initial sell off markets across the globe rebounded with confidence .
India market too seems to have reconciled with the consequences of Brexit! We have seen a sharp recovery across markets last week . In India we may see more upside form GST news .
So all in all as the impact of Brexit is yet to be felt in the economies , markets in its own prudence has decided to concentrate on more immediate news . Also Brexit reduces the probability of any F
Interest rate increase by Fed for this year !
So more liquidity … more asset bubbles … and the party continues !
We may expect some consolidation coming this week . Trades will continue to remain long on NIFTY with stop losses in place .
Investors may now start looking at small / mid caps in the Indian equity market . There are a lot of companies in this space that can see an inflection point once the overall economy improves . With GST and a good monsoon there are exciting times ahead for the Indian market .
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
The financial markets has been on a sideways consolidation mode for a long time . The major macro factors influencing the markets are :
The factors specific to India that will influence the markets are :
All these put together is the ideal recipe for increased volatility .
The terms volatility is mostly associated with Risk . However in case we are able to predict the direction of volatility it can provide trading opportunities .
Also for long term investors it provides the opportunity to buy their desired portfolio at discounted prices !
With stable Oil prices and a dovish Fed , markets seems to have formed a base for further rally . However we will continue to see intermittent corrections and profit taking .
In absence of any major domestic triggers Indian equity markets will follow global triggers. We will see more stock specific action going forward , as there we are already having some portfolio churning in light of the quarterly results .
Stocks like Tata Chemicals , Rallis India looks strong in view of the good monsoons anticipated .
Equity markets are going through a phase of consolidation . However the overall trend remains positive . As market awaits new triggers US job data will be keenly watched .
In case of better than expected job data US dollar may regain some of its lost ground . However the overall bullishness will see markets rally .
The passing of the bankruptcy bill is a great positive for the Indian economy. This will increase the business convenience for doing business in India. The policy actions will help the economy to reach its true potential .
US equity markets recovered after Friday’s fall , supported by weak dollar . Asian markets looks stable tobay .
The correction in Indian equity market continues. However in view of the good monsoons , this is buying opportunity for the investors.
Stocks dependent on rural growth are already on the upmove . One may look at stocks like Tata Chemicals which is yet to join the rally .
May has started with major weakness across Asian markets. Markets assumes that Japanese Central bank will come with more stimulus. As we have mentioned in the past the room for further stimulus was limited for Japan . And the central bank wanted to hold on to it till it can !!
However market positions had to unwind and thus Yen strengthened against USD. This caused major sell off in the Japanese equity market as most of the companies depends on exports for their earnings .
We will also have Australian central bank policy decision today , which will be keenly watched by the market .
India equity markets may soften in line with other Asian markets.
The immediate triggers that can support the Indian market are :
Nifty traders should cut their long positions and wait for the market to stabilize.
Commodity stocks may cool off after the recent rally .
The two key drivers of the recent market rally has been :
Central banks : With the Fed and BOJ expected to cheer up the markets this week , risk assets rallied in anticipation . Fed is expected to maintain a dovish stance , this in turn is good for Indian equity market.
Oil : The recent rise in Oil prices continues. With the improvement in Oil prices the imminent fear of a global financial problem in commodity assets seems to have subsided. This has also supported rally in other commodities .
Indian equity markets moved up yesterday supported by strong results from Maruti . In the days to come we can expect some more stock specific rally in the market .
NIFTY looks to be set to take on 8000 by early May . Trades should remain long with a trailing stop loss.
In absence of any fresh triggers , markets are looking at Oil for direction . We will also have the Japanese central bank and US Fed come out with policy directions this week .
Japanese central banks will keep trying to weaken Yen . However there is not much they can do it seems . With every action their room for taking any further action gets reduced .
US Fed is in a much better position , with dollar continue to weaken against all global currencies . They will in all probability maintain their dovish stand .
In India news on monsoons will be keenly watched . The NIFTY is facing some resistance , but may bounce back soon . There will be more Stock specific opportunities with better risk return as compared to the index .
Oil could have corrected a bit more , but for the labour strike at Kuwait. Now with that we have all those who were short Oil running for cover .
Once the short covering gets over we will be back to fundamentals . The oversupply situation will put a ceiling on the long term oil price . Oil is going through some serious structural adjustments . Lesses investments in new Oil resources , drop in Oil production from the marginal produces will slowly bring balance back to the market .
Thus for low cost producers like Saudi it makes perfect sense to maintain prices at current levels with a slight upward bias.
Interest Rates : With the Fed deferring interest rate hike , the dollar seems to have oversold. Weak dollar has triggered a risk on sentiment . But we are left to wonder whether fundamentals can support current valuations for risk assets .
Indian monsoons are expected to be above average . The recent results for Infosys and TCS are also encouraging . All this put together has helped the market to inch higher .
All hopes of an output freeze by Oil producers were dashed as Doha talks failed. The markets was expecting at least some broad understanding on output freeze. As expected Asian markets opened lower .
We can expect some correction in Indian equity market in line with the global markets . However this correction will be short lived .
The markets will also react to strong Infosys results that was declared during the weekend. We will also see TCS coming with their results . ( Trading strategy Long Infosys Short TCS ).
The two factors that will determine the strength of this rally in the coming few days are :
Indian markets rallied in synch with the global financial markets . We may see more buying in the coming days . Nifty traders can hold their long positions with a target of 8000 . However as the markets has moved up very fast there will be periods of profit taking .
We have to look at stock specific action as the market stabilizes at higher levels .
Two stocks that looks reasonable priced and can gain from good monsoons and improving fundamentals are :
With the buyback coming up Wipro will also be an interesting long term play . Wipro has one of the highest promoter holdings in the IT sector . It share price has been underperforming as compared to Infosys. Thus an attractive buy back may trigger market interest in this stock .
Will this buy back by Wipro be the precursor for a subsequent delisting of the stock ?
China export numbers have come with better than expected . As we mentioned in the past the doomsday predictions about China was overdone. Though it may be bit early to predict a China lead rally , we may see major short covering in assets linked to China .
Oil has proved all skeptics wrong . It has crawled higher against all negative predictions supported by improving fundamentals and short covering .
Indian Monsoon is expected to be normal . This will be very good news for the fastest growing economy . Good growth from India and revival of growth in China can unleash the bulls in the global market .
Traders should go long on NIFTY with deep stop losses . Just one caveat : This will not be a one way up move … be prepared for volatility !