Tuesday’s recovery was followed by another major selloff in the domestic markets during yesterday’s session. The index Nifty started the session on a flat to positive note but kept on inching lower as the day progressed. Eventually it lost another 100 points on closing basis. During the process, it sneaked below 10900 mark on closing basis. Meanwhile, NIFTY BANK index too ended with loss of 1.14%. Right from the beginning of the session, market breadth remained in the favor of advancing counters but ended in negative terrain. On the sectoral front, NIFTY PSU BANK (-3.36%) and NIFTY METAL (-2.39%) counters remained under extreme pressure. Form the pack of gainers, NIFTY MEDIA (+1.89%) and NIFTY PHARMA (+0.78%) stocks were the top performers. From the F&O pack, ZEEL (+4.2%), ARVIND (+4.2%) and LUPIN (+4.1%) outperformed others. After crossing the hammers high of 10900 on Tuesday, yesterday once again we witnessed selling in the markets. However, technically the impact of the hammer would be negated only on a breach of 10780. The long recommendation which we initiated in NIFTY fut at 10940 and booked half at 11040 should be exited on a breach of 10790 only. Till then keep holding those partial positions. With regards to coming session, 10810 might act as an immediate support below which 10780 would be under threat. Upside possible only above 10900 now. Thus, wait for confirmation in order to go long. For NIFTY BANK index, the support is at 27500 followed by 27300 whereas import resistance is at 27900.
BATAINDIA: BEARISH
Post its recent correction, BATAINDIA remains in a corrective trend unless it does not clear 1465 level.
Currently, the stock is stuck at the extension of trend line breakdown and RSI too might turn from resistance.
The reward to risk ratio looks lucrative at current levels.
Traders can sell the stock in the range of 1400 - 1420; with a stop of 1465 for the target of 1310 in the coming weeks.
Posted by Mehul Kothari | Published on 07-AUG-2019
MARKET RECAP
Finally some respite for the bulls was observed in yesterday’s session as the market underwent a decent pullback amid the weak global cues. The index Nifty spot started the session with a downside gap indicated by the SGX NIFTY but recovered sharply as the day progressed. At one point of time it went above 11000 mark and gained around 150 points. Eventually, it closed with a gain of around 85 odd points at 10948. Meanwhile, NIFTY BANK index too ended with gains of 1.35%.
Right from the beginning of the session, market breadth remained in the favor of advancing counters. On the sectoral front, apart from NIFTY MEDIA (-1.18%) and NIFTY IT (-0.02%) all the other group indices closed in positive terrain. Form the pack of gainers, NIFTY REALTY (1.76%) and NIFTY PVT BANK (+1.59%) stocks were the top performers. From the F&O pack, DHFL (+35.4%), SRF (+15.9%) and IBULHSGFIN (+8.7%) outperformed others.
OUTLOOK
In our previous report we mentioned about the hammer formation on the daily chart of nifty spot which had a high of around 10900. Yesterday the index started the session near 10820 and recovered sharply to clear the hammer. Post that strong short covering was observed. Nifty registered an intraday high of 11018 and closed well below the same. We initiated a positional buy recommendation in NIFTY FUT around 10940 with a stop of 10790 for the upside target of around 11200. Of this, we have already booked partial profits at 11040.
In today’s session, once the index start with a downside one should wait for some buying traction in order to go long. We would assess the conditions and initiate a trade for short term traders. Aggressive buy can be now be above yesterday high of 11018 in spot. BANKNIFTY spot has a strong resistance at 28150. Fresh buy above the same. On the downside support is at 27750 below which selling could resume.
DERIVATIVE OUTLOOK
In index futures, FIIs remained bearish by adding shorts in index futures.
Prop traders turned bullish by writing PE options.
As per the options data, support has shifted to 10,800 due to PE concentration. On the upside, 11000 could be strong hurdle now since we witnessed huge OI built up of around 2.2 million shares in 11000 CE option.
Securities in BAN: - -.
RESULTS TODAYDisclaimer
)
Posted by Mehul Kothari | Published on 09-AUG-2019
RBI CUTS POLICY RATE BY 35BPS. THE GDP PROJECTION HAS BEEN REVISED DOWNWARDS TO 6.9% OWING TO DEMAND AND INVESMENT SLOWDOWN
In the 3rd bi-monthly monetary policy, the RBI reduced the repo rate by 35bps bringing it down to 5.4%. Consequently, the reverse repo rate stands reduced to 5.15%. The MSF rate stands at 5.65%. The MPC has maintained “accommodative” stance. The decision to reduce the repo rate was unanimous however a 35bps cut was favored by 4 out of 6 members of the monetary policy committee while 2 members favored a 25bps cut. With this reduction the policy rate is at near 9 year lows. The last time the rate was seen at these levels was during 2010, which was the year of extreme slowdown post the financial crises and the policy rates were reduced significantly. Rates were reduced to 4.75% in 2009 to boost economic growth and investment demand.
The key takeaways are as below:
INFLATION OUTLOOKConsumer Price Inflation has been quite muted despite the recent marginal upward movement, mostly on account of deflation in food prices. Food inflation remains low at2.4% causing retail inflation print to be in comfortable zone of 3.18%. Inflation in the fuel and light group moderated in June, with electricity moving into deflation. Fuels such as firewood and chips, and dung cake have been in deflation from April. Core inflation remains in comfortable zone at 4%. Growth in wage cost is muted both in rural and manufacturing sector.
Monsoon so far has been lower with uneven spatial distribution which might put pressure on food prices, but the recent pick up in rainfall may offset the price impact.Crude oil price has fallen significantly over the past one year and has provided a good cushion to the domestic inflation. The crude oil prices though may remain volatile, but the global slowdown narative remain overpowering on the current price movement. CPI inflation is projected at 3.1 per cent for Q2FY20 and 3.5-3.7 per cent for H2FY20, with risks evenly balanced. CPI inflation for Q1FY21 is projected at 3.6 per cent.
LIQUIDITY POSITIONAverage liquidity in the system has risen significantly in the past 3 months. The system which was running in deficit turned positive by end of May and hover at near 2 lakh cores. Some of the reasons pointed out for large surplus are:a) Return of currency to the banking system;b) Drawdown of excess cash reserve ratio (CRR) balances by banks;c) OMO purchase auctions done worth ₹52,500cr since Apr’19d) The Reserve Bank’s foreign exchange market operations.A high liquidity surplus helps in easy transmission of policy rates and hence further aids the cause of the RBI rate dissemination. However, despite the large surplus the transmission is quite low. The capital markets have been more efficient in aligning to the policy rate while the bank have reduced the rates by meagre 29bps as compared to rate cut of 75bps by the RBI since Feb 2019. Moreover, with lack of investment opportunities, banks are benefited by the increase in deposit growth.
ECONOMIC GROWTHIndex of industrial production (IIP), moderated in May 2019, pulled down by manufacturing and mining. The production of capital goods and consumer durables decelerated. The monsoon rainfall so far has been 6% lower than the long period average leading to a 6.6% reduction in kharif crop sowing. Rainfall for the second half is expected to be normal by IMD. High frequency indicators of services sector activity for May-June present a mixed picture. Tractor and motorcycle sales – indicators of rural demand – continued to contract. Amongst 3 indicators of urban demand, passenger vehicle sales contracted for the eighth consecutive month in June; however, domestic air passenger traffic growth turned positive in June. Commercial vehicle sales slowed down even after adjusting for base effects. Various high frequency indicators suggest weakening of both domestic and external demand conditions. With above factors in play the RBI has revised downward its forecast for GDP to 6.9% from 7%. The RBI has taken in to consideration the expected positive impact of reduced interest rates and lower base in arriving at the GDP projection.
VIEWBond markets had already factored in a rate cut before the policy announcement and hence the movement of the yield curve remained restricted. The short end of the sovereign curve saw yields coming down by 6-10bps, however the 10 year yield which has already demonstrated a strong rally saw some profit booking. The forward glide path for the interest rates remains downward sloping and hence investment in short to medium duration instrument is advisable. As the per the policy statement
“Even as past rate cuts are being gradually transmitted to the real economy, the benign inflation outlook provides headroom for policy action to close the negative output gap. Addressing growth concerns by boosting aggregate demand, especially private investment, assumes the highest priority at this juncture while remaining consistent with the inflation mandate.”
Although with the current rate reduction, the policy rates have dropped to nearly a decade low, the current growth situation and the enhanced focus of the central bank towards boosting private investment and aggregate demand, presents a glimmer of hope for further mild rate reduction.
Investor in long and medium duration bonds and funds may continue to hold till the complete cycle of rate reduction is complete. Fresh investment in short to medium term is recommended with a 1 year above investment horizon. We recommend investment in good quality short term Funds and Banking & PSU Debt Funds. Investors are advised to take a cautious stance toward credit risk funds and avoid fresh investment at this juncture. A mix of good quality debt funds, tax free bonds, FMPs, NCDs, etc., would be ideal for a moderate risk investor.
Please see below the recommended schemes:
Disclaimer: This document is STRICTLY for authorised recipients only and is prepared for information purposes only. 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 - 8th August 2019
NIFTY CHART
Tuesday’s recovery was followed by another major selloff in the domestic markets during yesterday’s session. The index Nifty started the session on a flat to positive note but kept on inching lower as the day progressed. Eventually it lost another 100 points on closing basis. During the process, it sneaked below 10900 mark on closing basis. Meanwhile, NIFTY BANK index too ended with loss of 1.14%.
Right from the beginning of the session, market breadth remained in the favor of advancing counters but ended in negative terrain. On the sectoral front, NIFTY PSU BANK (-3.36%) and NIFTY METAL (-2.39%) counters remained under extreme pressure. Form the pack of gainers, NIFTY MEDIA (+1.89%) and NIFTY PHARMA (+0.78%) stocks were the top performers. From the F&O pack, ZEEL (+4.2%), ARVIND (+4.2%) and LUPIN (+4.1%) outperformed others.
After crossing the hammers high of 10900 on Tuesday, yesterday once again we witnessed selling in the markets. However, technically the impact of the hammer would be negated only on a breach of 10780. The long recommendation which we initiated in NIFTY fut at 10940 and booked half at 11040 should be exited on a breach of 10790 only. Till then keep holding those partial positions.
With regards to coming session, 10810 might act as an immediate support below which 10780 would be under threat. Upside possible only above 10900 now. Thus, wait for confirmation in order to go long. For NIFTY BANK index, the support is at 27500 followed by 27300 whereas import resistance is at 27900.
BATAINDIA: BEARISH
Disclaimer
Previous Story
Share Market Today - 7th August 2019
MARKET RECAP Finally some respite for the bulls was observed in yesterday’s session as the market underwent a decent pullback amid the weak global cues. The index Nifty spot started the session with a downside gap indicated by the SGX NIFTY but recovered sharply as the day progressed. At one point of time it went above 11000 mark and gained around 150 points. Eventually, it closed with a gain of around 85 odd points at 10948. Meanwhile, NIFTY BANK index too ended with gains of 1.35%. Right from the beginning of the session, market breadth remained in the favor of advancing counters. On the sectoral front, apart from NIFTY MEDIA (-1.18%) and NIFTY IT (-0.02%) all the other group indices closed in positive terrain. Form the pack of gainers, NIFTY REALTY (1.76%) and NIFTY PVT BANK (+1.59%) stocks were the top performers. From the F&O pack, DHFL (+35.4%), SRF (+15.9%) and IBULHSGFIN (+8.7%) outperformed others. OUTLOOK In our previous report we mentioned about the hammer formation on the daily chart of nifty spot which had a high of around 10900. Yesterday the index started the session near 10820 and recovered sharply to clear the hammer. Post that strong short covering was observed. Nifty registered an intraday high of 11018 and closed well below the same. We initiated a positional buy recommendation in NIFTY FUT around 10940 with a stop of 10790 for the upside target of around 11200. Of this, we have already booked partial profits at 11040. In today’s session, once the index start with a downside one should wait for some buying traction in order to go long. We would assess the conditions and initiate a trade for short term traders. Aggressive buy can be now be above yesterday high of 11018 in spot. BANKNIFTY spot has a strong resistance at 28150. Fresh buy above the same. On the downside support is at 27750 below which selling could resume. DERIVATIVE OUTLOOK In index futures, FIIs remained bearish by adding shorts in index futures. Prop traders turned bullish by writing PE options. As per the options data, support has shifted to 10,800 due to PE concentration. On the upside, 11000 could be strong hurdle now since we witnessed huge OI built up of around 2.2 million shares in 11000 CE option. Securities in BAN: - -. RESULTS TODAYDisclaimer )
Next Story
Monetary Policy: Policy Rates now at 9 year low
RBI CUTS POLICY RATE BY 35BPS. THE GDP PROJECTION HAS BEEN REVISED DOWNWARDS TO 6.9% OWING TO DEMAND AND INVESMENT SLOWDOWN In the 3rd bi-monthly monetary policy, the RBI reduced the repo rate by 35bps bringing it down to 5.4%. Consequently, the reverse repo rate stands reduced to 5.15%. The MSF rate stands at 5.65%. The MPC has maintained “accommodative” stance. The decision to reduce the repo rate was unanimous however a 35bps cut was favored by 4 out of 6 members of the monetary policy committee while 2 members favored a 25bps cut. With this reduction the policy rate is at near 9 year lows. The last time the rate was seen at these levels was during 2010, which was the year of extreme slowdown post the financial crises and the policy rates were reduced significantly. Rates were reduced to 4.75% in 2009 to boost economic growth and investment demand. The key takeaways are as below: INFLATION OUTLOOKConsumer Price Inflation has been quite muted despite the recent marginal upward movement, mostly on account of deflation in food prices. Food inflation remains low at2.4% causing retail inflation print to be in comfortable zone of 3.18%. Inflation in the fuel and light group moderated in June, with electricity moving into deflation. Fuels such as firewood and chips, and dung cake have been in deflation from April. Core inflation remains in comfortable zone at 4%. Growth in wage cost is muted both in rural and manufacturing sector. Monsoon so far has been lower with uneven spatial distribution which might put pressure on food prices, but the recent pick up in rainfall may offset the price impact.Crude oil price has fallen significantly over the past one year and has provided a good cushion to the domestic inflation. The crude oil prices though may remain volatile, but the global slowdown narative remain overpowering on the current price movement. CPI inflation is projected at 3.1 per cent for Q2FY20 and 3.5-3.7 per cent for H2FY20, with risks evenly balanced. CPI inflation for Q1FY21 is projected at 3.6 per cent. LIQUIDITY POSITIONAverage liquidity in the system has risen significantly in the past 3 months. The system which was running in deficit turned positive by end of May and hover at near 2 lakh cores. Some of the reasons pointed out for large surplus are:a) Return of currency to the banking system;b) Drawdown of excess cash reserve ratio (CRR) balances by banks;c) OMO purchase auctions done worth ₹52,500cr since Apr’19d) The Reserve Bank’s foreign exchange market operations.A high liquidity surplus helps in easy transmission of policy rates and hence further aids the cause of the RBI rate dissemination. However, despite the large surplus the transmission is quite low. The capital markets have been more efficient in aligning to the policy rate while the bank have reduced the rates by meagre 29bps as compared to rate cut of 75bps by the RBI since Feb 2019. Moreover, with lack of investment opportunities, banks are benefited by the increase in deposit growth. ECONOMIC GROWTHIndex of industrial production (IIP), moderated in May 2019, pulled down by manufacturing and mining. The production of capital goods and consumer durables decelerated. The monsoon rainfall so far has been 6% lower than the long period average leading to a 6.6% reduction in kharif crop sowing. Rainfall for the second half is expected to be normal by IMD. High frequency indicators of services sector activity for May-June present a mixed picture. Tractor and motorcycle sales – indicators of rural demand – continued to contract. Amongst 3 indicators of urban demand, passenger vehicle sales contracted for the eighth consecutive month in June; however, domestic air passenger traffic growth turned positive in June. Commercial vehicle sales slowed down even after adjusting for base effects. Various high frequency indicators suggest weakening of both domestic and external demand conditions. With above factors in play the RBI has revised downward its forecast for GDP to 6.9% from 7%. The RBI has taken in to consideration the expected positive impact of reduced interest rates and lower base in arriving at the GDP projection. VIEWBond markets had already factored in a rate cut before the policy announcement and hence the movement of the yield curve remained restricted. The short end of the sovereign curve saw yields coming down by 6-10bps, however the 10 year yield which has already demonstrated a strong rally saw some profit booking. The forward glide path for the interest rates remains downward sloping and hence investment in short to medium duration instrument is advisable. As the per the policy statement “Even as past rate cuts are being gradually transmitted to the real economy, the benign inflation outlook provides headroom for policy action to close the negative output gap. Addressing growth concerns by boosting aggregate demand, especially private investment, assumes the highest priority at this juncture while remaining consistent with the inflation mandate.” Although with the current rate reduction, the policy rates have dropped to nearly a decade low, the current growth situation and the enhanced focus of the central bank towards boosting private investment and aggregate demand, presents a glimmer of hope for further mild rate reduction. Investor in long and medium duration bonds and funds may continue to hold till the complete cycle of rate reduction is complete. Fresh investment in short to medium term is recommended with a 1 year above investment horizon. We recommend investment in good quality short term Funds and Banking & PSU Debt Funds. Investors are advised to take a cautious stance toward credit risk funds and avoid fresh investment at this juncture. A mix of good quality debt funds, tax free bonds, FMPs, NCDs, etc., would be ideal for a moderate risk investor. Please see below the recommended schemes: Disclaimer: This document is STRICTLY for authorised recipients only and is prepared for information purposes only. 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.)