Stay In­vested And Watch Out For Di­rec­tional Cues

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The coun­try has lost its Asia’s best stock mar­ket tag. The bear grip in the In­dian stock mar­kets has be­come ex­ceed­ingly strong, re­frain­ing the bulls from en­ter­ing at least for a bounce, if not for a re­ver­sal, which seems to be un­cer­tain for now. The mar­kets had strived to pull them­selves up af­ter breach­ing the Jan­uary 2018 peak, where bulls climbed with cau­tious baby steps for nearly month-and-half to hit the cur­rent peak. How­ever, the bears en­tered with a bang, which washed off all the gains within a month’s time frame, thereby prov­ing the law of grav­ity which states that any­thing that goes up has to fall down at a faster pace.

This time it was a sharp fall in the NBFC stocks that was caused due to de­fault by a lender to in­fra­struc­ture firms that forced the mar­kets to dip fur­ther. The cri­sis at IL&FS, which is presently owned by LIC, SBI and Cen­tral Bank of In­dia with to­tal 40% stake, has erupted as a Lehman fear for the In­dian mar­kets. The com­pany owes Rs 91,000 crore loan, mak­ing it one of the big­gest fi­nan­cial scams. The same stake­hold­ers are forced to put more money in the com­pany for its bailout. Fur­ther, the sale of com­mer­cial pa­pers of DHFL by DSP MF at a higher yield rate of 11% in the sec­ondary mar­ket added to the panic in the mar­kets. The fi­nan­cials, which hold more that 35% weigh­tage in the ma­jor in­dices, weak­ened the sen­ti­ments and dragged down the mar­kets.

We are ap­proach­ing the last phase of state elec­tions and the mar­kets have started tak­ing note of the po­lit­i­cal turn of events. Maybe be­cause the op­po­si­tion has be­come ac­tive once again or be­cause the ex­ist­ing govern­ment wants a bet­ter pre-elec­tion push. For now, we may see anx­i­ety build­ing up in the NDA govern­ment ahead of the MP and Ra­jasthan elec­tions, with two more elec­tions to come.

In the US, the ever-ris­ing eco­nomic growth with dol­lar peak­ing at his­toric lev­els against other ma­jor cur­ren­cies, con­di­tion of labour mar­ket and in­fla­tion pro­voked the Fed to hike rates. The Fed raised the in­ter­est rates by 25 bps and in­di­cated one more hike in De­cem­ber, fol­lowed by three in 2019. As a re­sult, RBI need not jus­tify the rate hike in In­dia. The dip in ru­pee , rise in crude oil prices and higher in­ter­est rates would re­sult in flight of for­eign cap­i­tal. The FIIs have been the net sellers in the month of Septem­ber with neg­a­tive net eq­uity in­vest­ment of Rs 10,746.71 crore.

Com­ing back to the In­dian mar­kets, the cur­rent price lev­els are quite high and are least likely to sus­tain in the pre­vail­ing real in­ter­est rates and hence a cor­rec­tion is emi­nent. In the medium term, the elec­tions, on­go­ing weak global cues are ex­pected to keep the mar­kets on its toes. In near term, we are near­ing Septem­ber F&O ex­piry and the new month will ar­rive with the re­lease of the usual macro num­bers and Q2 earn­ings in the later part. The con­sis­tent down­turn with in­tra-day volatil­ity has al­ready ban­ished the sleep of short-term traders. Those in­vestors who have not booked prof­its ear­lier might have halved their earn­ings by now. We sug­gest in­vestors to stay put with­out try­ing to av­er­age any of the stocks in their port­fo­lios and re­frain­ing from buy­ing on dips any new ones.

Sub­scribers can send their feed­back and queries on tech­ni­cals port­fo­lio guide to fnied­i­tor@dsij.in

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