Week Ending November 29th 2024

Dear patrons, in the week gone by, we saw some very volatile moves in the markets owing to monthly expiry of the November derivatives contracts. Benchmark Nifty managed to gain almost 1% over the week. There was a steady news flow in the week, which made the markets oscillate between 24350 and 23900. We will look at the news one by one.

Firstly, there was a ceasefire declaration between the warring sides i.e. Israel and the Hezbullah. Any ceasefire across the globe is always a good omen for the markets. Immediate impact of this ceasefire was seen in crude oil price softening.

Another war, between Russia and Ukraine is also on the cusp of ending. The Ukrainian president has shown eagerness towards ending the war. Change in US presidency is definitely taking effect around the World.

Domestically, GDP growth for Q2 FY25 reduced to 5.4% from 6.7% for Q1 FY25. One of the reasons for this slowdown, is the code of conduct for the general elections in Summer. Government spending came to a standstill during the code of conduct, which played a major role in this slowdown. The numbers tend to have a laggard effect, that is the reason for a slowdown in Q2 whereas the code of conduct was in place for most of Q1. We believe stage is set for the RBI to act on the interest rate side and reduce rates as soon as possible to provide impetus to industrial growth. We have been in a high-interest rate regime for too long and now is the time to push for growth.

Globally, the US markets have been making new lifetime highs every alternate day. With the new president taking office in January, we believe the US markets will remain quite buoyant for some more time. There may be some dampeners like tightening of government spending, increase in tariffs, which, may act negatively for emerging markets.

Back home the Maharashtra elections outcome should have some more positive impact on the markets as we expect a surge in capex by the state government. Implementation of various infrastructure project looks on the cards, boosting the state economy as well as the markets.

Technically Nifty is in the process of bottom formation. We had mentioned in the previous blog that a close above 24350 will be the first indicator of getting out of the woods, you may read it here (https://amitbajare.blogspot.com/2024/11/week-ending-november-22nd-2024.html). Nifty crossed 24350 on a couple of occasions during the week, but could not close above and retracted towards 23800 on expiry day. On the last session of the week, we did see some buying and Nifty managed to close with almost 1% gain. For the coming week, we expect 24300 to act as a major hurdle and a close above this level is warranted for further up move. If Nifty manages to move above 24300 then 24750-24800 should act as resistance. 24000 should be the first support followed by 23600.

Coming to BankNifty, we had stated that it is likely to show some fireworks on the upside. BankNifty managed to gain almost 2% for the week. With immediate support around 51700, BankNifty is likely to move upwards with positive momentum largely in PSBs. 52700 should act as resistance. Close above 52700 will propel the BankNifty towards new lifetime highs.

Some of the sectoral indices were badly hit during the week, like the NiftyIT. We believe it provides a great opportunity to look for attractive investments in this sector. The Auto sector has been the major drag for some time now. Looking for some attractive opportunities in this sector can prove very fruitful in time to come. The broader markets outperformed the indices to a larger extent in both directions. Ample opportunity is available in the mid and small cap space.

Mantra, as always remains "accumulate good quality stocks in every fall" and "STAY INVESTED"

“The key to making money in stocks is not to get scared out of them” ~ Peter Lynch

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 November 22nd 2024

Dear patrons, in a truncated week, bulls finally came into their own and handed over a thumping to the bears. Nifty gained over 2% on Friday to close a timid week in the green. Other indices followed suit with the IT index gaining handsomely.

Global markets were mostly positive, with the US markets leading the way. Election rally is still ON in the US and may well last a bit longer. The US markets seem to be ignoring the rising bond yields and strengthening $. 

Domestically there was stock specific action in Adani group of companies, which resulted in some negative move on Tuesday. Some New York court has indicted the group for alleged corruption in India. In our view the US court has no locus standi in Indian affairs and the US court ruling deserves to go to only one place and that is the DUSTBIN. The markets also shrugged off the negative news and zoomed towards 24000 on the Nifty towards end of the week.

As per Dow theory "market discounts any information" was on the fore Friday. Election results in Maharashtra were expected to be favorable to the ruling parties, which bolstered the investor confidence resulting in a handsome gain. There may still be some more legs to the rally as results have come out better than expected.

Let's try and figure out what lies in store for the coming week.

As we can see in the above chart, Nifty after breaking 23800 had a sharp fall as suggested in the previous blogs. We had also mentioned that 23200 should act as a support (you may read about it here Weekly Market Update: Week Ending November 15th 2024). After breaching 23800 Nifty fell sharply and made a low around 23250. After Friday's pull back 24050-24100 should act as resistance. A close above 24350 will be the first sign that we are out of the woods and a fresh rally can be seen. 23500 should act as support followed by 23200 as strong support in the short term.

BankNifty also registered some gain on Friday but lagged far behind the Nifty. It has closed above the crucial 51000 level. Immediate support for BankNifty lies around 50800 and strong support lies around 49900. On the upside BankNifty looks set for some fireworks. Resistance for BankNifty is placed around 51500-51600 levels followed by 52100-52200 for the coming week.

Action is expected to be stock specific for some more time. Accumulating good quality stocks should reap handsome rewards in coming time.

Stay Invested!!!

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 November 15th 2024

Dear patrons, the Indian markets faced yet another week of sell off and lost more than 2% in a truncated week. So far the benchmark Nifty has lost close to 10% from its all-time highs. Dampener for last week was the CPI (Consumer Price Index) data. Inflation is seen inching upwards, delaying any interest rate cuts by the RBI.

Globally, the US markets were a mixed bag for the week. Rising for the first half and falling on account of profit booking in second half. Most of the markets around the globe were also following the US markets. Bond yields in the US are rising along with a rise in the dollar index. Rising bond yields is a worrying sign for the markets.

Domestically, IIP (index of Industrial Production) data was seen positive with a rise of 3.1% compared to contraction of 0.1% the previous month. Although the IIP is positive the markets failed to be enthused by this. Some of the reasons for consistent fall in the Indian markets may be enumerated as follows.

1. 75% of small caps and midcaps remain expensive despite corrections. 

2. IPO market absorbed Rs. 48,000 cr., impacting liquidity. 

3. FIIs sold Rs. 1,43,888 cr. between 1st October and 14th November. 

4. Post-tax returns declined due to higher STT and taxes. 

5. Rising US bond yields and dollar index spikes. 

6. Inflation hindered RBI’s ability to cut rates in 2024. 

7. FIIs shifted to cheaper markets like China and Japan. 

8. Rupee at all-time low and economic slowdown persists. 

9. Recession fears and market dynamics led to delivery selling. 

10. Lack of government action or positive statements despite hefty corrections alongside weak PSU Q2 and H1 results.

Let's take a look at what transpired over the week gone by and what lies in store for the coming week.

As we can see in the above pic. Nifty closed in the red on all sessions for the week, losing more than 600 points in 4 days. We had mentioned in the previous blog that a move below 23800 should open more downside for the Nifty (you may read it here Weekly Market Update: Week Ending 08th November 2024). It has taken support around its 200 EMA which, we are afraid may not hold for long. Nifty has an uphill task for the coming week. Technical indicators are showing some more downside. Fibonacci suggests that there should be support around 23200. A close below 23200 will be more worrisome for the bulls, leading to a heavy decline towards June 2024 levels. On the upside 23900 should act as first hurdle followed by 24200.

BankNifty, like Nifty has taken support around its 200 EMA. 49900 should act as a support followed by Fibonacci support of around 49300. A silver lining in BankNifty charts is the RSI is showing some divergence. 51000-51200 range should act as resistance for BankNifty for the coming week. Close below 49300 may lead BankNifty down towards June 2024 levels.

FIIs have been sellers over the last two months, shifting focus to China from India. However, towards the end of the week CLSA has come out with a communique indicating change in stance and refocusing on India. We would like to believe that this is the light at the end of the tunnel, and we may soon see reversal in Indian markets.

In the mean, accumulating good quality stocks may be continued. We believe, in the long run Indian markets should outperform its peers by a considerable margin.

Stay Invested!!!

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 08th November 2024

Dear patrons, in a news heavy week Indian markets failed to be enthused by good news and saw heavy selling amidst high octane rally in global markets. Benchmark Nifty squandered all gains made at the start of the week to close mildly in the red for the week. BankNifty also lost its momentum even after good set of numbers posted by banking behemoth SBI.

Globally, the US markets were exuberant after the US presidential election results and a subsequent rate cut by the Federal Reserve. Election of Donald Trump is expected to bring peace in the World and focus on growth in World'd biggest economy. All markets barring India reacted positively to his election.

Some of the reasons for Indian markets going down can be enumerated as follows.

1.The main reasons for the market decline include continuous aggressive selling by foreign investors, who sold Rs. 1,34,203 cr. from 1st Oct to 8th Nov. FII's have reduced 2.5% of their holdings since September, consuming nearly 50% of the liquidity. 

2. Corporate earnings have decreased for two consecutive quarters. 

3. Maharashtra's election as the business capital state in India adds further uncertainty. 

4. The PE of most sectors, except banking, is expensive, and most PSU companies have reported weak results. 

5. A large number of new IPOs and SMEs have been filed, reducing liquidity. 

6. The RBI has maintained a neutral stance on interest rates and tightened liquidity amid rising inflation. 

7. Slowdown in both urban and rural growth. 

8. Many stocks remain overpriced. 

9. Disruptions in the export-import supply chain. 

As we had mentioned in previous couple of blogs, 24500 remains unsurmountable for the Nifty. 24500 still remains a very stiff resistance for Nifty and going forward it looks unlikely that this resistance will be broken in a hurry. Also as discussed previously, 23800 is acting as strong support. A break below 23800 may open the flood gates for Nifty and a sharp fall looms large. On the upside, a break above 24500 (preferably a close above 24500) is expected to lead the Nifty towards 24900-25000 range.

BankNifty has remained subdued in all the carnage Nifty has seen over last 5 weeks. 52400-52500 is acting as resistance for BankNifty, while 51000 still remains very strong support. Banking giant SBI has delivered a good set of numbers and is likely to lend support to BankNifty going forward.

We expect the markets to remain in a broad range of 23800-24500 for some more time. Only a break above or below this range will lend any movement in Nifty. Our focus for last couple of months has been on stock specific move and we maintain this stand. Stocks are likely to perform better than the indices on either side. Wild swings in stocks depending on numbers can't be ruled out. The result season is however over, and we are likely to witness follow on action in many stocks.

What to do? While a slight decline in share prices is possible, a time correction is expected. The market may remain sideways for the next 2-3 months, making this a golden opportunity to invest systematically in fundamentally strong companies with promising H1 and H2 results.

Stay Invested!!!

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 November 1st 2024

Dear patrons, the festive mood across the country failed to enthuse Indian markets. The markets spent last week consolidating in a tight range of 24100-24500. Nifty failed to conquer 24500 in multiple attempts as predicted in the previous blog (you may read it here Weekly Market Update: Week Ending October 25th 2024) and closed the week around 24300.

World over markets have been quite buoyant, with the US markets scaling new heights on multiple occasions. European markets also edged higher over the week. Indian markets have on the other hand been consistently underperforming global peers for almost couple of months due onslaught of selling by the FIIs.

Outcome of US elections is likely to drive markets in coming weeks with no major economic activity by central banks. Geopolitical situation remains volatile and major impact on crude oil prices is visible.

Automotive companies declared auto sell numbers on the 1st and most of them were pretty encouraging. Rise in auto sells can be attributed to the festive season. GST collection for the month of October increased by 8.9% Y-O-Y indicating much better economic performance than anticipated. 

The recent decline in the small and mid-cap segment of the Indian stock market results from several key factors

1) Weak earnings: Many results announced until 31st October were flat or negative affecting investor sentiment compounded by aggressive FII selling throughout October 2024. 

2) SEBI's new collateral regulations: New rules have drastically reduced the stocks eligible for collateral, limiting leverage for traders and investors. 

3) Margin calls and forced liquidations: The lower leverage led to margin calls, forcing investors to liquidate positions and intensifying the sell-off. 

4) Impact on HNIs: High-Net-Worth Individuals, often leveraging their investments, faced challenges as many holdings became ineligible as collateral. 

5) Potential implications: Short-term volatility is likely as investors adjust to new regulations and process earnings impacts while corporate governance practices among small and mid-cap companies may come under scrutiny. 

6) Long-term opportunities: Despite short-term uncertainties, the Indian economy's long-term prospects remain positive with potential buying opportunities arising from the recent correction.

Let's take a look at charts and try to figure out future trend in the benchmark indices.

As we can see Nifty spend time consolidating above 24000 levels. Resistance for Nifty is placed around 24500. 24000-23800 should act as support for the coming week. Break below 24000 may lead to further downside towards 23200. Break above 24900 should propel the Nifty towards new highs in a jiffy. FIIs pulled out more than Rs. 1 lac crore from Indian markets resulting to almost 10% fall from recent highs. Retail Indian investors along with DIIs managed to counter this selling with almost equal buying. 

BankNifty remained more resilient for the past week. Move above 52400 may lead the BankNifty towards recent highs and further. 51000 remains very strong support for BankNifty whereas 52000-52100 should act as resistance. BankNifty may lead the next rally in the markets, taking Nifty in tandem. Some of the PSU banks are looking very attractive in the near term.

We are still bullish on the markets and anticipate reversal in the tide in favor of bulls sooner than later. Making money in the markets will become a tad difficult compared to last year. Rigorous study and adhering to a strict trading framework is the only counter to rising volatility in the markets.

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.