It was high volatile session yesterday on the D – Street since the benchmark indices registered their historical high and closed near day’s low. The index Nifty made a new life high of 11761 but closed well below 11700 mark with a loss of 70 odd points. On the other hand, Nifty Bank index corrected almost 600 points from the day’s high to close with significant loss.
The positive market breadth turned in the favour of declining counters as the day progressed. On the sectoral front, the selloff was so intense that none of the group indices ended in green. From the losers, NIFTY PSU BANK (-2.72%) and NIFTY MEDIA (-2.34%) stocks remained under pressure. From the F&O space, AMARAJABAT (-7.10%), SUZLON (+5.07%), and RELCAPITAL (-5.02%) were the biggest dampeners.
MARKET OUTLOOK
In line with our view, the index Nifty registered a new high of 11761 but failed to capitalize on the same. Very soon after posting the new peak, we witnessed sharp selling in the second half. This too was very much in line with our expectations. At this juncture, we are observing a bearish reversal candle on the daily chart. A sustainable move below the low of 11629 might drag the index towards 11550 mark and this could start the profit booking selling.
On the other hand, a move above 11761 will bring the markets in uncharted territory where another 200 – 300 points upside in Nifty cannot be ruled out. However, the selling in broader markets during the last couple of sessions hints towards some kind of distribution in the market. Thus, it’s better to stay light during the coming upside since that could possibly be the last leg of rally. Traders are advised to avoid over leveraged positions and maintain strict stop loss on positional trades since the markets are now entering the month of general election wherein we might witness surge in volatility.
Posted by Mehul Kothari | Published on 04-APR-2019
MARKET RECAP KEY MARKET DATA POINTS
For the second consecutive session, the domestic markets remained flat where in the benchmark indices remained stuck in a trading range. The index Nifty ended the session above 11700 but we observed some profit booking in the broader markets. On the other hand, Nifty Bank index too remained flat and ended with marginal gains.
Right from the start, market breadth remained in the favour of advancing counters. On the sectoral front, we observed a mixed picture wherein NIFTY REALTY (+2.32%) and NIFTY PSU BANK (+1.19%) stocks were the top performers. On the other hand, NIFTY MEDIA (-0.87%) and NIFTY PHARMA (-0.84%) stocks remained under pressure. From the F&O space, SUZLON (+9.6%), TATAMOTORS (+8.6%), and BEL (+6.01%) were the biggest gainers.
MARKET OUTLOOK
Since there is hardly any change in the price structure of Nifty spot, we reiterate our view that the index is poised to retest all time high of 11760. A move above the same will bring the markets in uncharted territory where another 200 – 300 points upside in Nifty cannot be ruled out. However, at the same time the selling in broader markets during the last couple of sessions hints towards some kind of distribution in the market. Thus, it’s better to stay light during the coming upside since that could possibly be the last leg of rally.
On the downside, 11630 would now act as an intermediate support for the markets. A breach of the same might halt the upside momentum which can drag the index towards 11450 mark. Traders are advised to avoid over leveraged positions and maintain strict stop loss on positional trades since the markets are now entering the month of general election wherein we might witness surge in volatility.
Disclaimer)
Posted by Mehul Kothari | Published on 08-APR-2019
Monetary Policy : One more rate cut, but stance still NeutralAs widely expected the RBI, in its first bi-monthly monetary policy reduced the repo rate by 25bps. The revised repo rate now stands at 6% from earlier 6.25% and consecutively the reverse repo rate stands reduced to 5.75%. The MSF rate stands at 6.25%. The MPC has however maintained a “Neutral” stance as against the market expectations of an accommodative stance. The decision to reduce the repo rate was favored by 4 out of 6 members of the monetary policy committee. However, the members were more inclined to keep a policy stance as “Neutral” with a ratio of 5:1. The key takeaways are as below:INFLATION OUTLOOKConsumer Price Inflation commonly referred to as retail inflation has been quite muted for the past few quarters, mostly on account of deflation in food prices. The CFPI has declined significantly causing retail inflation prints to collapse. Although the pace of deflation in food prices has comedown, the broad trajectory remains in negative as of now. However, the committee feels that there is risk of an abrupt reversal in vegetable prices, especially during the summer months due to possible “El Nino” effects in 2019.
The committee also feels that the short term outlook for food inflation remains benign, but there are several uncertainties that cloud the inflation outlook such as the trend in fuel prices globally, trade tensions and its impact on global demand, OPECs position on production cuts, core inflation remaining at elevated levels, fiscal position, etc. Keeping in view the comfortable position at the current juncture, the path of CPI inflation is revised downwards to 2.4 per cent in Q4:2018-19, 2.9-3.0 per cent in H1:2019-20 and 3.5-3.8 per cent in H2:2019-20, with risks broadly balanced.LIQUIDITY POSITIONAverage liquidity in the system has remained in deficit for most part of the second half of the financial year. In order to infuse liquidity in the system the RBI conducted several OMOs (Open Market Operations -Purchases). RBI infused liquidity to the tune of nearly 3lakh crores through OMO purchases. The liquidity crunch accentuated in the market post the NBFC crises apart from the usual reasons such as the high currency in demand and impact of interventions in the forex market. The RBI employed a new tool of forex swap to infuse more liquidity in the banking system. The Reserve Bank conducted long-term foreign exchange buy/sell swaps of US$ 5 billion for a tenor of 3 years on March 26, 2019, thereby injecting durable liquidity of ₹34,561 crore (₹346 billion) into the system.
The MPC remains determined to manage liquidity in the banking system through different tools. The RBI in its Statement on Developmental and Regulatory Policies made changes in the LCR. The MPC decided to permit banks to reckon an additional 2.0 percent of Government securities within the mandatory SLR requirement, as FALLCR for the purpose of computing LCR, in a phased manner, i.e 0.5% addition each quarter till Apr 2020. This regulatory change will free more liquidity for the banking system on a gradually basis but would also reduce the demand for government securities, considering its will be carved out from the SLR requirements.
ECONOMIC GROWTHThe monetary policy committee feels that there are signs of domestic investment activity weakening as reflected in a slowdown in production and imports of capital goods. The moderation of growth in the global economy might impact India’s exports. With high public spending in rural areas and an increase in disposable incomes of households due to tax benefits, the rural consumption is expected to help the rural part of the growth. Certain high frequency indicators of industry, such as IIP, core industries growth, etc., points to tepid growth. High frequency indicators of the services sector also suggest significant moderation in activity. Taking into consideration the above factors, the GDP growth for 2019-20 is revised downwards to 7.2 per cent from an earlier projection of 7.4%, i.e. 6.8-7.1 per cent in H1:2019-20 and 7.3-7.4 per cent in H2 – with risks evenly balanced.
VIEWAs the street expectations were already running high for a rate cut, the bond markets was already pricing it in the curve. But the relief to the banks on the LCR front seems to have played a spoil sport, which apparently reduces the demand for government securities by the banks. The 10 year benchmark government security yield rose by 8bps post the policy. Moreover an already high government borrowing programme continues to instill concerns for the bond investors. However, the gradual positioning of policy stance towards growth, amidst ample leg from inflation front provides a positive setup for the debt markets. The longer end of the yield curve may continue to bear the pain of fiscal pressures and heightened borrowing, but the shot to medium end of the curve provides good opportunity of investment. The right funds in this section would be good quality short term and medium term funds. Exposure can also be considered in Banking & PSU Debt Funds from a quality and duration perspective. Investors are advised to take a cautious stance toward credit risk funds and invest only as per risk appetite. Investments in high yield good quality bonds and NCDs can also be considered to enhance the overall yield of the portfolio. A mix of good quality debt funds, credit risk funds, tax free bonds, FMPs, NCDs, etc., would be ideal for a moderate risk investor.
Disclaimer: The information provided herein, we believe, is from reliable sources. IndiaNivesh is not liable for the accuracy of the source data as well as the results of the calculations based on the same. We do not claim that the data provided herein is accurate and complete in all respects. This is not an offer or solicitation of any offer to buy or sell securities. No action is intended to be taken by the recipients based on this document. The recipients may take their decisions based on their own judgement and independent advice that they may receive before making any investment or disinvestment decisions. The recipients are advised not to take any decision only on the basis of this document. No portion of this document should be printed, reprinted, redistributed, reproduced, duplicated or sold.)
Share Market Today - 4th April 2019
MARKET RECAP
KEY MARKET DATA POINTS
It was high volatile session yesterday on the D – Street since the benchmark indices registered their historical high and closed near day’s low. The index Nifty made a new life high of 11761 but closed well below 11700 mark with a loss of 70 odd points. On the other hand, Nifty Bank index corrected almost 600 points from the day’s high to close with significant loss.
The positive market breadth turned in the favour of declining counters as the day progressed. On the sectoral front, the selloff was so intense that none of the group indices ended in green. From the losers, NIFTY PSU BANK (-2.72%) and NIFTY MEDIA (-2.34%) stocks remained under pressure. From the F&O space, AMARAJABAT (-7.10%), SUZLON (+5.07%), and RELCAPITAL (-5.02%) were the biggest dampeners.
MARKET OUTLOOK
In line with our view, the index Nifty registered a new high of 11761 but failed to capitalize on the same. Very soon after posting the new peak, we witnessed sharp selling in the second half. This too was very much in line with our expectations. At this juncture, we are observing a bearish reversal candle on the daily chart. A sustainable move below the low of 11629 might drag the index towards 11550 mark and this could start the profit booking selling.
On the other hand, a move above 11761 will bring the markets in uncharted territory where another 200 – 300 points upside in Nifty cannot be ruled out. However, the selling in broader markets during the last couple of sessions hints towards some kind of distribution in the market. Thus, it’s better to stay light during the coming upside since that could possibly be the last leg of rally. Traders are advised to avoid over leveraged positions and maintain strict stop loss on positional trades since the markets are now entering the month of general election wherein we might witness surge in volatility.
Disclaimer
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Share Market Today - 3rd April 2019
MARKET RECAP KEY MARKET DATA POINTS For the second consecutive session, the domestic markets remained flat where in the benchmark indices remained stuck in a trading range. The index Nifty ended the session above 11700 but we observed some profit booking in the broader markets. On the other hand, Nifty Bank index too remained flat and ended with marginal gains. Right from the start, market breadth remained in the favour of advancing counters. On the sectoral front, we observed a mixed picture wherein NIFTY REALTY (+2.32%) and NIFTY PSU BANK (+1.19%) stocks were the top performers. On the other hand, NIFTY MEDIA (-0.87%) and NIFTY PHARMA (-0.84%) stocks remained under pressure. From the F&O space, SUZLON (+9.6%), TATAMOTORS (+8.6%), and BEL (+6.01%) were the biggest gainers. MARKET OUTLOOK Since there is hardly any change in the price structure of Nifty spot, we reiterate our view that the index is poised to retest all time high of 11760. A move above the same will bring the markets in uncharted territory where another 200 – 300 points upside in Nifty cannot be ruled out. However, at the same time the selling in broader markets during the last couple of sessions hints towards some kind of distribution in the market. Thus, it’s better to stay light during the coming upside since that could possibly be the last leg of rally. On the downside, 11630 would now act as an intermediate support for the markets. A breach of the same might halt the upside momentum which can drag the index towards 11450 mark. Traders are advised to avoid over leveraged positions and maintain strict stop loss on positional trades since the markets are now entering the month of general election wherein we might witness surge in volatility. Disclaimer)
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RBI Bi-Monthly Monetary Policy Highlights: Repo Rate Cut but stance still Neutral
Monetary Policy : One more rate cut, but stance still NeutralAs widely expected the RBI, in its first bi-monthly monetary policy reduced the repo rate by 25bps. The revised repo rate now stands at 6% from earlier 6.25% and consecutively the reverse repo rate stands reduced to 5.75%. The MSF rate stands at 6.25%. The MPC has however maintained a “Neutral” stance as against the market expectations of an accommodative stance. The decision to reduce the repo rate was favored by 4 out of 6 members of the monetary policy committee. However, the members were more inclined to keep a policy stance as “Neutral” with a ratio of 5:1. The key takeaways are as below:INFLATION OUTLOOKConsumer Price Inflation commonly referred to as retail inflation has been quite muted for the past few quarters, mostly on account of deflation in food prices. The CFPI has declined significantly causing retail inflation prints to collapse. Although the pace of deflation in food prices has comedown, the broad trajectory remains in negative as of now. However, the committee feels that there is risk of an abrupt reversal in vegetable prices, especially during the summer months due to possible “El Nino” effects in 2019. The committee also feels that the short term outlook for food inflation remains benign, but there are several uncertainties that cloud the inflation outlook such as the trend in fuel prices globally, trade tensions and its impact on global demand, OPECs position on production cuts, core inflation remaining at elevated levels, fiscal position, etc. Keeping in view the comfortable position at the current juncture, the path of CPI inflation is revised downwards to 2.4 per cent in Q4:2018-19, 2.9-3.0 per cent in H1:2019-20 and 3.5-3.8 per cent in H2:2019-20, with risks broadly balanced.LIQUIDITY POSITIONAverage liquidity in the system has remained in deficit for most part of the second half of the financial year. In order to infuse liquidity in the system the RBI conducted several OMOs (Open Market Operations -Purchases). RBI infused liquidity to the tune of nearly 3lakh crores through OMO purchases. The liquidity crunch accentuated in the market post the NBFC crises apart from the usual reasons such as the high currency in demand and impact of interventions in the forex market. The RBI employed a new tool of forex swap to infuse more liquidity in the banking system. The Reserve Bank conducted long-term foreign exchange buy/sell swaps of US$ 5 billion for a tenor of 3 years on March 26, 2019, thereby injecting durable liquidity of ₹34,561 crore (₹346 billion) into the system. The MPC remains determined to manage liquidity in the banking system through different tools. The RBI in its Statement on Developmental and Regulatory Policies made changes in the LCR. The MPC decided to permit banks to reckon an additional 2.0 percent of Government securities within the mandatory SLR requirement, as FALLCR for the purpose of computing LCR, in a phased manner, i.e 0.5% addition each quarter till Apr 2020. This regulatory change will free more liquidity for the banking system on a gradually basis but would also reduce the demand for government securities, considering its will be carved out from the SLR requirements. ECONOMIC GROWTHThe monetary policy committee feels that there are signs of domestic investment activity weakening as reflected in a slowdown in production and imports of capital goods. The moderation of growth in the global economy might impact India’s exports. With high public spending in rural areas and an increase in disposable incomes of households due to tax benefits, the rural consumption is expected to help the rural part of the growth. Certain high frequency indicators of industry, such as IIP, core industries growth, etc., points to tepid growth. High frequency indicators of the services sector also suggest significant moderation in activity. Taking into consideration the above factors, the GDP growth for 2019-20 is revised downwards to 7.2 per cent from an earlier projection of 7.4%, i.e. 6.8-7.1 per cent in H1:2019-20 and 7.3-7.4 per cent in H2 – with risks evenly balanced. VIEWAs the street expectations were already running high for a rate cut, the bond markets was already pricing it in the curve. But the relief to the banks on the LCR front seems to have played a spoil sport, which apparently reduces the demand for government securities by the banks. The 10 year benchmark government security yield rose by 8bps post the policy. Moreover an already high government borrowing programme continues to instill concerns for the bond investors. However, the gradual positioning of policy stance towards growth, amidst ample leg from inflation front provides a positive setup for the debt markets. The longer end of the yield curve may continue to bear the pain of fiscal pressures and heightened borrowing, but the shot to medium end of the curve provides good opportunity of investment. The right funds in this section would be good quality short term and medium term funds. Exposure can also be considered in Banking & PSU Debt Funds from a quality and duration perspective. Investors are advised to take a cautious stance toward credit risk funds and invest only as per risk appetite. Investments in high yield good quality bonds and NCDs can also be considered to enhance the overall yield of the portfolio. A mix of good quality debt funds, credit risk funds, tax free bonds, FMPs, NCDs, etc., would be ideal for a moderate risk investor. Disclaimer: The information provided herein, we believe, is from reliable sources. IndiaNivesh is not liable for the accuracy of the source data as well as the results of the calculations based on the same. We do not claim that the data provided herein is accurate and complete in all respects. This is not an offer or solicitation of any offer to buy or sell securities. No action is intended to be taken by the recipients based on this document. The recipients may take their decisions based on their own judgement and independent advice that they may receive before making any investment or disinvestment decisions. The recipients are advised not to take any decision only on the basis of this document. No portion of this document should be printed, reprinted, redistributed, reproduced, duplicated or sold.)