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Is market bottoming out?


Economy is not struggling…the business models are changing.
Below is a very interesting insight :
Often heard nowadays that “ Indian Economy is struggling “.
Sit back & dispassionately think “is the economy really struggling or are business models struggling ?
Some food for thought :
1) Car sales are going down… but Ola / Uber are rising.
2) Restaurants are going empty… but home delivery is rising.
3) Tuition Classes are not getting students but online studying is rising.
4) Traders are struggling but online market sites are breaking all records in sales.
5) Old commission based businesses are snivelling… but online services, at low cost, are finding takers.
6) Cell Phone Bills have reduced & internet penetration is increasing.
7) Stable (read “Govt Jobs”) are dwindling but “Start up” jobs offering equity & Flexi work time are expanding.
If truth be told what we are experiencing is a transition phase.
& Any transition is painful for the “well set”…… “the masters of the past”.
It’s challenging for those who’s business models are based on ancient data….
It’s a mystery for those who have never looked beyond traditional methods or have assiduously resisted change of any kind.
Economy is not struggling…the business models are changing.

I received this message on my WhatsApp a few days back and it was worth to share.

Due to several reasons, The Domestic equity market plunged more than 10% from since July 4, 2019.

The market also responded negatively in reaction to the poor GDP numbers, but soon recovered by the close of the week. Rightly so, as GDP numbers are historical and are post-mortem data, which the stock market knows and discounts well in advance.

Statistically, such low GDP numbers have been a launching pad for swift recoveries for the market, because when such low numbers are recorded, everyone including the government tries to push the economic engine hard. It is speculated that the government might push the auto sector growth, either through a GST rate cut or through a scrappage policy of some kind. In either case, it is no time to sell the auto stocks, it is too late now.

On Sept 06, China and the United States agreed to hold high-level talks in early October in Washington, cheering investors hoping for a trade war thaw as new US tariffs on Chinese consumer goods chip away at global growth.

Soon, FPI inflows will take the market higher and eventually change the sentiments. It is time to, therefore, accumulate some quality stocks, at least for the short to medium term.

No sooner the market revives, there will be a massive lineup of government and listed companies to raise capital from the secondary market, which although is good for the country, but will keep the secondary market range-bound.


Nifty has been forming Hammer patterns since last two weeks, indicating its refusal to go further down. Given the consolidation stage of the market, Nifty50 is again on the verge of testing the 11,200 level on the higher side and will face resistance around 11,350, being the 50% retracements of the entire fall. Traders should buy on dips for nominal profits as the market will witness profit booking at higher levels.

Where are the signs of recovery?

1) The government has already withdrawn the additional surcharge on capital gains, providing major relief to foreign portfolio investors (FPI). Analysts said it could reverse the outflows seen after the budget and may also aid in the appreciation of the rupee. 2) Finance minister sets up 6 member task force to implement Rs 100 lakh crore infrastructure projects.

As on Sept 09, 2019

1) Ten out of 11 sectoral gauges compiled by NSE ended higher. 2) Equity inflows up 12.8% to Rs 9,152.43 crore.

3) Total MF industry flows up 17.7% to Rs 1.02 lakh crore. 4) Liquid fund flows up 75% to Rs 79,428.2 crore.

The Mega Merger

A $5 trillion economy requires bigger banks and this move will definitely give strength. The government also has announced capital infusion of 70,000 Cr to all the banks.

Brent Crude is at the right place. It will help related companies to cut down the COGS which ultimately boosts the bottom line. Ex-

 — Aviation Industry: Fuel cost of will decrease, Net Profit goes up. — Tyre Industry: Rubber price decreases, Net profit goes up (synthetic rubber in the global market is produced from Brent Crude only).  — Cement Industry: Most of the cement companies are using 80% of petcoke as fuel.  — Paint Industry: Titanium dioxide (TiO2) and crude derivative products forms 50% of the raw material cost of paints.  — Oil Refineries: HPCL, BPCL, RIL

Technical front:

Those who are aware of technical analysis must concentrate on these points:

The Short term moving average is crossing above the long term moving average so it becomes BULLISH on charts.MACD already crossed the signal line and It is a sign that ‘BULLS are back’.ADX is strengthening the trend and within one-two days, it will be in supporting (if everything goes as per current trend). India’s equity benchmark NSE Nifty 50 registered gains for the fourth consecutive trading session, its longest gaining streak since July 4.

Other Indicators like Relative Strength Index, Stochastic %K, Awesome Oscillator, Stochastic RSI Fast (3, 3, 14, 14), Williams Percent Range, Bull Bear Power and Ultimate Oscillator (7, 14, 28) are also showing the curve of recovery.

What Can We Expect Ahead?

Traders are hoping that the government this week may address concerns of the automobile industry by reducing goods and services tax (GST) for the sector. Relief measures are also expected in the real estate space. Any such measures would give a leg-up to stocks of both these sectors.

Stocks of infrastructure and allied sectors may also stay in focus as the government on 7 September announced that it has constituted a high-level task force to identify infrastructure projects for Rs 100 lakh crore investment by 2024–25 as India aims to become a $5 trillion economy. The task force will draw up a ‘National Infrastructure Pipeline’ of Rs 100 lakh crore to step up investment in the sector.

Progress in trade talks between the US and China is expected to boost investor sentiment. Strong inflows of foreign capital may change the direction of the market.

At last, Data released last week showed that US job growth slowed in August, while retail hiring declined for the seventh straight month. Poor sets of macroeconomic data from major economies of the world have fanned hopes of government stimulus and rate cuts by central banks, which may led to a rally in global stocks, thereby pushing up Indian markets as well.

Thanks! Akshay Seth Research Analyst (SEBI Regd.) akshay.equity@gmail.com Linkedin: connect here

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References:

https://www.news18.com/news/business/five-factors-that-may-weigh-on-indian-stock-markets-this-week-2301663.htmlhttps://www.bloombergquint.com/markets/share-markets-today-live-blog-stocks-in-the-news-bse-nse-corporate-announcements-sensex-nifty-opening-closing-bell-commodities-rupee-bonds-futures-options-equitas-holdings-canara-bank-reliance-industries-punjab-national-bank-varun-beverages-coffee-day-shilpa-medicare-rbl-bank-stock-price-updateshttps://economictimes.indiatimes.com/markets/stocks/news/light-at-the-end-of-the-tunnel-dalal-street-showing-signs-of-a-rebound/articleshow/71020391.cms?from=mdr

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