In­vestors Can Wait For Some More Dis­counts In The Mar­kets

Flash News Investment - - FRONT PAGE -

The month of Oc­to­ber usu­ally brings some cheer in the In­dian stock mar­kets ahead of the fes­tive sea­sons of Dussehra and Di­wali. Leave apart the cheer or the con­sol­i­da­tion, this time around, the mar­kets have wit­nessed ex­o­dus of the mar­ket par­tic­i­pants, ma­jorly the FIIs. The FIIs have been net sell­ers through­out Oc­to­ber, with net sales of Rs 14097.50 crore, while the DIIs have tried mit­i­gat­ing the sell-off with pur­chases of Rs 12325.98 crore. The ru­pee is mak­ing new lows al­most ev­ery day and head­ing to­wards 75 to a dol­lar, which may be fol­lowed by 77, and the In­dian bond yields may hard­ened fur­ther amid the US rates hit­ting high­est in the last seven years. The crude oil prices too are head­ing to­wards their 2014 lev­els, post the sanc­tions on Iran. In case the sanc­tions are not lifted but if the sup­ply is aug­mented from other sources, we may see some re­lief in the oil prices.

As against Fed's stance, the RBI, which was ex­pected to hike rates, sur­pris­ingly main­tained sta­tus quo this time, but cued one hike be­fore the year-end. All-in-all, the con­cerns about the NBFCs and banks may be short-lived and oil prices too may see some con­sol­i­da­tion to­wards the down­side in the com­ing ses­sions. The big­gest threat for now is the eco­nomic boom in the US, which may last for cou­ple of quar­ters, fol­lowed by our very own bud­get and gen­eral elec­tions.

The elec­tions in the re­main­ing five states of Ch­hat­tis­garh, Ra­jasthan, Te­lan­gana, Mi­zo­ram and MP would be held from No­vem­ber 12 to De­cem­ber 7, fol­lowed by vote count­ing on De­cem­ber 11. The same would di­rect the mar­kets in the re­main­ing months of 2018, these state elec­tions be­ing a run-up to the gen­eral elec­tions. De­spite an ex­pected BJP win, the elec­tions are def­i­nitely not go­ing to be easy for the BJP con­sid­er­ing some pop­ulist as well as harsh de­ci­sions by Modi, clean­ing of NBFCs and banks and the cat­a­strophic events pre­vail­ing in the mar­kets.

But be­fore that, we have earn­ings sea­son start­ing off from the up­com­ing week. Mar­kets have be­come vul­ner­a­ble from both earn­ings and val­u­a­tion terms. First and fore­most, the ru­pee de­pre­ci­a­tion along with ris­ing crude prices have damp­ened the im­port-ori­ented com­pa­nies on ac­count of pres­sure on their bot­tom­line num­bers. Fur­ther, the not-so-im­pres­sive auto sales num­bers due to be­low nor­mal mon­soon, high in­ter­est rates and high fuel costs could lead to earn­ings de-growth in auto and an­cil­lar­ies sec­tors. Fur­ther, the lenders un­der prompt cor­rec­tive ac­tion (PCA) by the RBI and the merg­ers in the off­ing may drag the earn­ings from pub­lic sec­tor banks and NBFCs. The ce­ment mak­ers too have hinted at a lull in sales as the re­vised axle load norms may im­pact freight costs and the or­der in­flow guid­ance amid gen­eral elec­tions would also be looked at. As for FMCG, the poor de­mand from the pre­dom­i­nately ru­ral cus­tomers may im­pact earn­ings. Met­als con­tinue to look pres­surised with on­go­ing trade war be­tween the US and China. Fur­ther, or­gan­ised power play­ers doubt that the rise in spot elec­tric­ity prices would ben­e­fit them. New projects and in­ven­tory lev­els would be keenly watched by the in­vestors.

Con­sid­er­ing all the above fac­tors, ma­jor In­dian in­dices are striv­ing to sus­tain above their de­cid­ing sup­port lev­els and may see some more down­side pres­sure if the lev­els are breached. Hence, any up­side move­ment can be con­sid­ered as short-cov­er­ing and not to be mis­taken as fresh buy­ing (up­side re­ver­sal) for now. Mar­kets are okay for in­tra-day traders con­sid­er­ing con­firmed di­rec­tion of the in­dices. How­ever, po­si­tional traders can avoid en­ter­ing for now as the chances of hit­ting stop losses would be more. In­vestors can ini­ti­ate buy­ing on dips now but hold back the temp­ta­tion of av­er­ag­ing as there are higher chances of get­ting some more dis­counts.

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