Week Ending 24th March 2023

Dear patrons, last week was a rollercoaster ride for the markets. The benchmark indices traded in the positive territory till mid-week but lost all ground on the weekly expiry day and the last trading day, markets opened flat and remained negative throughout the session to close down by around 1%.

As we had mentioned in the previous blog, 17200 acted as hurdle on the Nifty. The Nifty lost ground swiftly as is always the case with fall in the markets. Within a couple of sessions markets lost 2% ending the week below the all-important level of 17000.

The US Federal Reserve increased the interest rate by 25 bps during the week paving way for weak US markets. Contrasting statements by the US secretory of treasury, on bank bailout created confusion in the markets. As far as the US is concerned, we can say "no news is good news". Over the last week one of the biggest banks in the world Credit Suisse also announced concerns but was saved by timely take over by UBS. Failure of another bank is no good news for the global economy and concerns of recession are fast becoming a reality.

Moving back home, we have been consistently mentioning that Nifty is in "Sell on Rise" mode and have been correct in our assessment so far. Over the last month, from our mentioned level of resistance i.e. 17800 Nifty has lost close to 1000 points. The pain may persist for some more time. Let's see what is store for the coming week.

We can see Nifty falling on consecutive sessions and breaching the psychological level of 17000. On the daily timeframe Nifty remains in no support zone, meaning it may further slide down swiftly. The only solace one can find on daily charts is that in all probability Nifty has completed its 3rd wave down and may move upwards from 16800-16900 levels.

On the weekly charts also Nifty looks like it has completed its 3rd wave down and may move up towards 17400. The 17400-17600 zone may act as supply zone and profit booking may be seen around these levels.

BankNifty has been following levels mentioned in previous blogs. 39000 as mentioned previously has acted as strong support and BankNifty has consistently managed to close above this level. Resistance for BankNifty appears to be around 40000-40200 levels. Managing to close above 40200 opens the move towards 40800 on the BankNifty.

The markets still remain "Sell On Rise". Traders need to be cautious and adhere to strict stop losses. The coming week being the expiry week and a truncated one, may see jump in volatility and wild moves either side may be visible in the markets. We do believe that we are yet to see the bottom of this corrective phase.

"Srock market is above individuals. The market is rational. An individual can never be smarter than the market" ~ Rakesh Jhunjhunwala

P.S.: This communication is for educational purpose only and does not recommend buying or selling any stock or index. Trade at your own risk.

Week Ending 17th March 2023

Dear patrons, welcome to yet another edition of weekly update on the stock markets. The markets lost significant ground over the past week. We have been suggesting a fall in the markets since the start of the month and our strategy of sell on rise is proving to be helpful in handling the volatile markets.

As we had mentioned in the last blog the markets have shown weakness and lost ground swiftly. On the last trading day however, the indices rose towards the close and managed close above 17000 on the Nifty. This rise in the indices is on the back of short covering and not long build up. 

Indian WPI (Wholesale Price Index) and CPI (Consumer Price Index) data was released last week. The CPI eased just a tad bit from 6.52 to 6.44 and the WPI saw healthy fall from 4.73 to 3.85, The WPI is at 25 months low. The fall in the WPI suggests that the RBI's decision of raising interest rates is yielding fruits and providing comfort to the economy. Softening of the inflation may also lead to halt in interest rate rise and the RBI may hold status quo.

The main driver behind the fall last week was the failure of banks in the USA. One of the biggest banks in the US, the Sillicon Valley Bank, has collapsed and is taken over by the regulators, sending shockwaves through the US markets. The fall of the Sillicon Valley Bank was followed by fall of two more banks, showing all is not well in the World's largest economy. The interest rate hikes have failed to contain the inflation, on the contrary it has sucked out liquidity leading to failure of banks. Some more disasters might be in the waiting in US. You can read more about the Sillicon Valley Bank failure here Weekly Market Update: SVB, 2007 REDUX OR AN ABERRATION? (amitbajare.blogspot.com)

Coming back to our markets the Nifty is interestingly positioned around 17100 levels closing down around 2% on weekly basis. What lies ahead for Nifty? Let's try to find out

As we can see in the above chart Nifty tried to regain lost ground and closed in the green on Friday. 17200 should act as first hurdle for Nifty sustaining above which, may take Nifty towards 17400.

The BankNifty also closed in the green on Friday and managed to close above the all important levels of 39000, we had mentioned in the last blog post. 39800 should act as the first barrier for the BankNifty above which, it may move towards 40400.

Markets still remain "Sell On Rise". It would be prudent to book profits in every rise and sit on cash. Even booking small losses and keeping cash ready for deployment in case of fall towards 16600 should be the most fruitful strategy in current market conditions. Markets will provide ample opportunity and time for deployment of funds. One should wait for levels to arrive and take action once levels are achieved. Currently the scene does not look very optimistic to be bullish and blind rush in buying may lead to disaster.

In any case traders should be cautious and adhere to strict stop losses to avoid the agony of losing hard earned money.

"Money is the most egalitarian force in the World, it confers it's powers to whoever holds it" ~ Anonymous  

P.S.: This communication is for educational purpose only and does not recommend buying or selling any stock or index. Trade at your own risk.

SVB, 2007 REDUX OR AN ABERRATION?

In a very shocking development in the USA one of the biggest banks, namely the Silicon Valley Bank has collapsed. The US regulators have shut the bank down Friday. The bank was involved in funding a lot of start ups in the California region and had funded many other start ups through funding to VCs. This collapse is reminiscent to what happened in 2007-2008 in the sub prime lending era. What led to this collapse? 

As we all know US is a business-friendly country. Funding is available at very low interest rates which helps businesses grow rapidly and exponentially. Many a times risk is overlooked in pursuit of rapid growth and becomes the undoing for the entire economy.

During the Covid period when entire business activity across the world came to a standstill, many countries took to fiscal stimulus to improve industrial activity as well as provide impetus to growth. The US also provided a fiscal stimulus albeit by providing cash assistance to its citizens. In pursuing growth, the US resorted to printing money and distributing it to all and sundry. The easy availability of money meant people had more expendable surplus, which, went to markets as well as banks, setting investment products like equities, precious metals et all on fire.

Silicon Valley Bank also had big influx of money in the form of deposits. The bank chose to invest in relatively safer bet, that is bonds. The bank estimated that bond yields in the longer run would remain stagnant and this is where the problem started. They say "never put all eggs in one basket", the SVB however. invested around 80% of its deposits in long term bonds expecting yields to remain steady. The yields could have been steady but the Russia-Ukrain war threw the world in a spiral of rising inflation. The US along with the entire west sanctioned Russia endangering their own economies more than Russia. Inflation rose to unprecedented levels in the US prompting the Fed to act tough on the interest rate side. The fastest and easiest way to tackle inflation was undertaken and we saw a series of interest rate hikes. This hike had an impact on the equity markets as well as the bond markets. The equity markets in the US remained range bound in the series of interest rate hikes and bond markets remained volatile while yields for long term bonds went up. As interest rates rose liquidity was sucked out of the system. Banking system also bore the brunt of this liquidity shortage along with start up ecosystem. The Silicon Valley Bank had to cater to rising demand by the depositors, which it tried to cater to by selling its long term investment in bonds. The bond yield, however had shot up due to higher interest rates resulting in losses when the bank sold its portfolio. The bank lost over $1 bn in this transaction and depositors were requested not to withdraw their deposits. The bank is now well and truly under control of the regulator and there may be some more bad news in this context. The financial world needs to brace itself for aftershocks. We may indeed be on the brink of a recession and the Silicon Valley Bank might be the first casualty of the impending doom.

Week Ending 10th March 2023

Dear patrons, the preceding week was a truncated week on account of Holi, the festival of colors. However, markets saw only one color and that was red. As was indicated in the previous blog Nifty faced stiff resistance around 17800 and retreated towards 17400. The path forward for the month looks a bit tricky and it looks like a herculean task for the Nifty to cross 17800.

The main reason for the fall in Indian markets was the economic unrest around the western world. US Fed chief sees more tightening in future with sharper rate hikes. The US economy is grappling with declines in consumer demand and rising inflation. Rise in inflation is being tackled by increase in interest rates which in turn slows economic growth. Since the US is the biggest consumer in the world any slow down there hampers the global economy. 

India on the other hand is doing exceedingly well. IIP data was released Friday and it saw a jump by 5.2% YoY. This augurs well for the Indian economy and in turn the Indian markets. Over the period of next decade or so India is slated to be among the top 3 economies of the world with a GDP exceeding $10 tn. The current scenario, however, is a dampener in the sentiment and may take time to straighten things out.

Let's now shift focus to the Indian indices. Nifty had a fantastic closing last Friday and managed to add some more gains Monday. Midweek session onwards there was rise in volatility and we witnessed selling across the market breadth. Nifty ended the week around 17400 gaining half a percent or so over the week.

As we can see Nifty could not manage to cross its 100 EMA around 17800 and took a sharp U turn. Nifty is currently trading in a zone where we can't see an immediate support on daily charts. The picture becomes a bit grim if we look at the monthly charts below.

On the monthly charts, Nifty has completed its 3rd wave up and is likely to commence its 4th wave down. The first target for Nifty in the event of fall comes around 16600 and further selling may take it down to 15600-15500 band. The markets are looking jittery and may lose ground swiftly. 

Coming to BankNifty, the situation looks dicey for BankNifty. It failed to sustain above 41500 and saw sharp down move. 

BankNifty has completed its 4th up wave and is poised to move down. BankNifty may move towards 39000 and failing to take support around these levels it may slide towards 37500-37200 range.

Falls in the markets are always swift, traders need to be cautious and nimble footed. As long as Nifty remains below 17800 mark traders should follow sell on rise strategy. 

In the meanwhile, as always keep accumulating good quality stocks in every dip. Staying invested is rewarding over long period of time.

"Courage taught me no matter how bad a crisis gets ... any sound investment will eventually pay off." — Carlos Slim Helu

P.S.: This communication is for educational purpose only and does not recommend buying or selling any stock or index. Trade at your own risk.

Week Ending 3rd March 2023

Dear patrons, over the last month or so we have witnessed a roller coaster ride in the Indian markets. The markets have been topsy turvy for close to a year now and there seems to be no reprieve from volatility on account of global economic turmoil.

Indian markets started the week on a somber note. The preceding week had seen a fall of around 2.5%. Opening couple of days saw the Nifty consolidate around the 17200 mark and it remained rangebound in the range of 17450 to 17300. Friday, however, saw a strong bout of buying and Nifty managed to cross the 17500 barrier and closed positive by more than 1.5%, closing above the crucial 200 EMA. There is a tug of war going on among DII and FII. The FIIs have been sellers for most part of the week however, the DIIs have emerged as a force to reckon with, matching FII selling with almost similar amount of buying.

The big buying figure by FIIs is on account of Rs. 15000 crore stake acquisition in 4 Adani group companies. The Indian Rupee has managed to gain some lost ground against the USD over the last week. Though not a substantial gain, INR has shown some strength. 

As we can see in the above chart Nifty has completed its 5th wave correction. It looks poised for an up move towards 17800. Resistance around 17800 may be stiff and hard to overcome. If Nifty manages to close past 17825, move towards 18300 is on the cards and Nifty may sail towards it in a jiffy. 

As far as BankNifty is concerned, it has managed to close above its 100 EMA. BankNifty is in its 4th up wave and is likely to move towards 42500 in this series. If and when BankNifty reaches 42500, it will be time to be cautious on it.

In the meanwhile, accumulate good quality stocks in every dip. The markets are presenting a good opportunity for short term trades to be executed.

Long term Indian markets look to be in a bull phase and investments should be rewarding. Till the time geopolitical event take center stage the markets may remain volatile and present opportunities in both directions. Traders need to be nimble footed and cautious.

Happy Investing!!!

P.S.: This communication is for educational purpose only and does not recommend buying or selling any stock or index. Trade at your own risk.