New Delhi: Domestic equity markets ended the volatile week with modest gains, but kept the market participants on their toes. Despite the supportive GDP numbers, the new Covid-19 variant spoiled the party for equities.
Benchmark indices – Nifty50 and BSE Sensex – ended the week with gains of a per cent each, whereas the broader markets were in tandem, rising a per cent.
Amidst the wild swings, traders took refuge in the IT stocks, whose index rose about 4 per cent during the week.
“We reiterate our cautious stance given the uncertainty surrounding the new variant. Among the sectors, the IT pack looks firm while others are showing a mixed trend. Traders should continue with hedged trades and maintain positions on both sides,” said Ajit Mishra, VP-Research, Religare Broking.
Below are the factors that may help steer the markets next week: RBI MPC meet The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is scheduled to meet between December 6-8. The committee will meet amidst the rising inflationary pressure and the scare of Omicron. It is expected that RBI will keep the rates on hold and markets would keenly watch the commentary of the RBI governor. Omicron Scare The rise of new coronavirus variants has spooked the traders globally, amidst the rising fear of a halt in economic activities. According to the World Health Organisation, the new variant is less lethal but likely to spread at a higher speed. Any jitter to normalcy or curbs on the movement are likely to dampen the sentiments further. Fed‘s Stance The sudden hawkish stance from Fed’s chair Jerome Powell has sent a clear signal to the market that combating the historic rise in inflation is the prime priority of the central bank. The two-year-long measure to boost demand and employment is likely to be gone and liquidity may be sucked out of the economy.
During two days of testimony in the week gone by, Powell acknowledged the emergence of the Omicron variant, which is a potential risk to economic growth.
Macroeconomic Data: India will release its macro-economic data, including factory manufacturing output and India Industrial Output (IIP) for October and CPI inflation for November on Friday. Buzz in IPO mart It will be raining IPOs next week on Dalal Street as four companies, namely RateGain Travel Technologies, Shriram Properties, CE Info Systems (MapmyIndia) and a Rakesh Jhunjhunwala-backed company Metro Brands will hit the primary markets. Star Health Listing Dalal Street will witness the listing of another Rakesh Jhunjhunwala backed Star Health and Allied Insurance Company, whose issue fell flat on Dalal Street. The issue was subscribed merely 79 per cent, forcing merchant bankers to trim OFS size to get the issue sail through. The company’s issue was open between November 30 and December 2. US Jobless Claims Global economic indicators such as US jobless claims would also be keenly watched after the recent volatility in the global equities this past week. The initial jobless claims would be on the radar of market participants, guiding the future course of action. Technical Outlook After a big bearish candle in the last week, the Nifty 50 index closed positive as compared to the last week, and is trading around the support of 20 EMA on the weekly chart, said Yesha Shah, Head of Equity Research, Samco Securities.
“The correction witnessed has done notable damage to the ongoing momentum, Nifty continues to trade below its rising trend line which had been supporting the uptrend thus far. Traders are advised to maintain a cautious to mildly bullish outlook and to maintain a strict stop loss below the 16,850 level,” she added.
MUMBAI: Equity benchmark Sensex jumped over 214 points in early trade on Thursday, tracking gains in index majors HDFC twins, Reliance Industries and Maruti amid largely positive cues from Asian peers.
The 30-share index was trading 214.43 points or 0.37 per cent higher at 57,899.22 in initial deals. Similarly, the Nifty rose 53.95 points or 0.31 per cent to 17,220.85.
M&M was the top gainer in the Sensex pack, rising 2.38 per cent. HDFC, PowerGrid, Titan, Sun Pharma, Maruti, HCL Tech and Reliance Industries, were among the other gainers.
In the previous session, the 30-share BSE Sensex rallied 619.92 points or 1.09 per cent to close at 57,684.79. Similarly, the NSE Nifty surged 183.70 points or 1.08 per cent to 17,166.90.
Elsewhere in Asia, bourses in Shanghai, Hong Kong and Seoul were trading with gains in mid-session deals, while Tokyo was in the red.
Stock exchanges in the US ended with losses in the overnight session.
International oil benchmark Brent crude rose 1.07 per cent to USD 69.61 per barrel.
Meanwhile, India’s merchandise exports rose 26.49 per cent year-on-year to USD 29.88 billion in November on better performance by key sectors, while the trade deficit hit a record high of USD 23.27 billion as imports of crude oil and gold spiked.
Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 2,765.84 crore on Wednesday, as per exchange data.
Stock markets this week will be driven mostly by updates related to the new coronavirus variant that sent equities tumbling globally on Friday, macroeconomic data announcements and auto sales numbers, analysts said. A World Health Organisation panel has named the new COVID strain ‘Omicron‘ and classified it as a highly transmissible variant of concern, the same category that includes the Delta variant.
The potentially more contagious Omicron was first reported to the WHO from South Africa on November 24, and has also been identified in Botswana, Belgium, Hong Kong and Israel. Many countries have introduced travel bans and restrictions on southern African countries in an effort to contain Omicron’s spread.
“New COVID variant, FIIs’ behaviour along with macro numbers will be key factors to drive the market this week. COVID related developments will remain key triggers for the market where the market will remain keenly interested to know the efficacy ratios of various vaccines against a new variant of COVID whereas restrictions-related news across the globe will also cause volatility,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
The Sensex nosedived 1,688 points on Friday amid concerns over the new coronavirus variant that also led to rout in global markets.
Yesha Shah, Head of Equity Research, Samco Securities, said, “Post Q2 result season, Dalal Street will look towards macros for hints to move the needle in broader markets. Inflation being a key factor will be at the centre of all news in the next two weeks since the RBI MPC meet is scheduled in December. November monthly auto sales number can be a trigger to drive some movement this week.”
Among macroeconomic data, PMI numbers for manufacturing and services sectors would also be tracked.
“Equity markets in the near term will closely follow the impact of new COVID variant, inflation data, and Central Bank policies,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd.
During the last week, the BSE benchmark plunged 2,528.86 points or 4.24 per cent. PTI SUM MR
NEW DELHI: Driven by the new profit cycle, India will continue to outperform other markets but that will come along with higher relative volatility, said Ridham Desai, Morgan Stanley’s equity strategist, in a note authored on Thursday.
“India appears to be in a structural uptrend with a likely new profit cycle, supportive policy, likely rise in fixed income flows, new issuances and falling return correlations with the world,” he said.
“We expect earnings to compound 27 per cent annually over the next couple of years and the Sensex to rise 16 per cent in our base case to 70,000 (Dec 22) – albeit mostly in the back half of 2022. Our FY22 earnings estimate has been lowered by 7 per cent, but FY23 numbers are unchanged. Index returns are likely to trail earnings growth as the market digests trailing returns,” Desai added.
In bull case, Morgan Stanley believes Sensex could hit 80,000 in 2022, but for that some things need to come along India’s way – India gets included in the global bond indices resulting in near $20 billion inflows, there is no COVID wave 3 or any associated lockdowns, dollar and oil prices are range bound and RBI’s exit is delayed.
Desai, in the note co-authored with two others, accepted that the current headline valuations look rich, but argued that they must be seen in the context of depressed long-term earnings. Thanks to the humongous rally, Nifty50’s price-to-earnings multiple has reached all-time high levels of 26 while price-to-book stood on the cusp of kissing 5 level.
Indian equities are running into many challenges, including the US rate cycle, rising oil prices, elections in key states, potential Covid wave 3, upward inflexion in domestic interest rates, rich headline valuations and strong relative trailing performance, noted the analysts.
In the run-up to the all-time high till now, the volatility indicator has largely been subdued, but that may become a thing of the past, said analysts. They added that the risk to the market is also increasing, which will keep traders on their toes. Interestingly, Morgan Stanley had recently downgraded India to equal-weight.
“The index has been remarkably devoid of volatility over the past several months with both implied and realized vols low relative to history. With higher valuations and more event risks on the horizon, volatility is slated to rise, especially in the broad market,” said Desai.
Morgan Stanley’s strategy going forward is to focus on stock picking rather than macro investing, sticking with cyclicals rather than investing in defensive and choosing largecaps over smallcaps.
“Our key macro themes include a strong pick up in consumption, normalization of RBI policy and rising share of manufacturing share in GDP. We are backing financials, cyclical consumption and industrials and are relatively cautious on export sectors,” said Desai.
According to him, the key theme for the upcoming calendar year will be clean energy spend, defence indigenisation, a new residential property, auto and air travel cycle, multiyear credit cycle for financials, life insurance, digital transformation, hyper-local commerce and market share concentration plus horizontal growth for discretionary and staple consumption and electric vehicles.
Time period given by analyst is one year when Ujjivan Small Finance Bank Ltd. price can reach defined target. Ujjivan Small Finance Bank Ltd., incorporated in the year 2016, is a banking company (having a market cap of Rs 3638.10 Crore).
Ujjivan Small Finance Bank Ltd. key Products/Revenue Segments include Interest & Discount on Advances & Bills, Income From Investment, Interest On Balances with RBI and Other Inter-Bank Funds for the year ending 31-Mar-2021.
Financials For the quarter ended 30-09-2021, the company reported a Standalone Total Income of Rs 691.93 Crore, down -3.40 % from last quarter Total Income of Rs 716.29 Crore and down -15.41 % from last year same quarter Total Income of Rs 818.01 Crore. The bank reported net profit after tax of Rs -273.79 Crore in latest quarter.
Investment Rationale Ujjivan SFB reported yet another quarter of loss at INR2.74bn as the stressed pool remained persistently elevated. While the aggregate stress pool (PAR>0) declined sequentially from 31% to 19%, the excessive stress suggests normalisation would be delayed beyond FY22. Restructured book increased from 5.5% to 10.2% sequentially, with loan loss coverage at 75% (including INR0.25bn of COVID provisions), driven by accelerated provisioning at ~10.4% of gross advances. Business momentum was revived with disbursals of INR31.2bn (near pre-COVID levels) and a declining share of MFI loans (70%). With limited visibility of RoA reflation and a stubborn stress pool, it downgrades Ujjivan SFB from ADD to REDUCE with a revised TP of INR20 (earlier INR34) and downgrade Ujjivan Financial Services from BUY to ADD with a revised TP of INR189 (earlier INR322).
Promoter/FII Holdings Promoters held 83.32 per cent stake in the company as of 30-Sep-2021, while FIIs owned 0.56 per cent, DIIs 0.76 per cent.
Nilesh Shah, MD of Kotak Mahindra AMC, explains why he is confident about India being a “long-term growth story” and why markets will “continue to correct”, says he doesn’t believe RBI will increase interest rates to a level where it derails growth, and calls for regulation of cryptocurrencies. This session was moderated by Associate Editor Sandeep Singh.
Sandeep Singh: From a peak of around 62,200 a couple of weeks ago, the Sensex lost around 5% or 3,000 points over the last week. How do you see this and do you expect to see the correction continuing? In the near future, I think the corrections will continue. However, every correction is an opportunity to buy into the market. I believe, in the market, there is a red zone and a green zone. In the red zone are stocks, where floating stock is limited and there is a concentrated holding. That concentrated holding allows people to put any price on those stocks. Now at some point of time, the law of gravity will apply and those stocks have got corrected. Second, in every bull run, we see operators pull up prices of, let’s say, penny stocks. Some of them have gone up as high as 8,000%, some 4,000% and some by 500%. Now all these stocks too have to come to an end. And generally, they make the top of the market. So we are seeing more correction in this red zone than in the green zone. The momentum of the market now is a bit negative. It will take some time to correct and consolidate it.
Sandeep Singh: What makes you confident that markets will rise in the medium-term? Let’s get a slightly long-term view. In the pre-90s, the villain in most of our Hindi films was a black marketeer — Roti Kapda aur Makaan, Kalicharan and so on. We have shifted from double-digit inflation to mid-single-digit inflation. That is a big change in the economic fundamentals of India. Pre-1990, we were always short of foreign exchange reserves. Fast forward to 2021, we have a$636-billion reserve… For most of our 75 years, we were an infrastructure-deficit economy. Now we are becoming an infrastructure-available economy. Our power consumption has gone through the sky, but are also able to produce power. We are also moving from physical to physical-digital infrastructure. Today, in a developed world, if you want to transfer money from one bank to another bank, it is a seven-day job. In India, it is happening instantly, thanks to RTGS and NEFT, among others. Earlier, we were a capital-constrained economy; not any more. Also, public-private partnership is emerging. From the government running all the businesses to the government saying that we have no business to be in business, is a big mindset change. Air India, BPCL, IDBI, LIC, Container Corporation, Shipping Corporation, Neelachal Ispat — if all these things get divested, then imagine the benefit this country and the economy will get.
All this is changing India like never before. Have we achieved everything? No. It is a work in progress. We need to bring rule of law in the country. We pass a law which says that if your cheque bounces three times, you will go behind bars. What have we achieved in reality? Forty lakh cases of cheque bouncing are clogging up the judicial system. This cannot work. An entrepreneur will invest when he is convinced that there is the rule of law. We have to reform our judicial infrastructure. Also, when you are trying for economic growth, you are labelled as suit boot ki sarkar. Our whole focus is on dividing the pie and getting equality rather than expanding the pie even with inequality… You can’t become a prosperous country until you respect business…
We were growing at mid-single digit, now we have laid the foundation for a higher single-digit growth and that is giving investors the confidence that now India is a long-term growth story.
Sandeep Singh: The current stock market rally has continued for 15 months despite issues of job losses, loss of life, impact on businesses. The common refrain is that the stock market is delinked from the economy. Stock market could have been delinked from the economy for a while, not for 18 months. We saw that kind of madness during the Harshad Mehta, Ketan Parekh times… Today, can someone take out money from the banking system and put it in the stock market? No. At that time, the average PE (Price to Earnings) of the market was 40, today we are at 20. At 20 PE, how can one say there is a bubble? In 2008 too, we saw correction but that was driven by sub-prime. But it is unlikely that we are seeing a sub-prime kind of an event. I wouldn’t say markets are delinked from the economy; I would instead say they are optimistically discounting the future and if that future is not delivered, there will be correction. But there will not be any crash in the market because even if the 20 PE comes down to 15 PE, people will go to buy. Unless a sub-prime kind of an event happens, where all FPIs (Foreign Portfolio Investments) decide that they have to move out, I don’t think markets will crash. They will undoubtedly correct. And right now, we are in a negative momentum, but markets most likely will not crash like 2008 or 2020.
George Mathew: Why do we see many more retail investors jumping onto the stock market bandwagon? Does the RBI’s accommodative policy have a part to play in increasing liquidity? Where will the retail investors deploy money? Can they buy real-estate? It is a big-ticket investment. Bank deposits will get them 3-5%. Gold and silver had negative returns last year. So where will you put your money? By definition, it is equity. And they have seen their neighbour making money so they have also jumped onto the bandwagon. Not all retail investors are blind followers. There is a fair amount of mature investors who have been investing in the stock market through its ups and downs and have been building up their positions in equity because interest rates are so low in other places. Is RBI’s accommodative policy fuelling the equity market rally? The credit growth in the economy does not suggest that the liquidity that the RBI has built up has moved to retail investors. I don’t think credit growth is 30-40 per cent, where I need to be concerned. So RBI has excess liquidity in the system but unfortunately, it is only moving from the banks to the RBI and vice-versa. It has not moved from the RBI to banks to the customers. This is mine and your savings getting invested in the market. People have started taking increasing exposure because of low interest rates and the last 18 months’ positive experience of making money.
Sandeep Singh: A lot of FPI money is flowing into the market. How does it translate into change in the real economy for sectors such as healthcare, education? Digitisation of education is our solution to the shortage of quality teaching. There will be stories of children not having electronic instruments or good network coverage. But at least with digitisation I am able to cover 10-50 % of the population. Without that, no one will be covered. So you have to see if the glass is half full or half empty. In healthcare, we have seen top-of-the-line consultancy being provided in whichever part of India you are in… Digitisation is changing the way things are moving and more importantly, for ideas, capital is available… Capital availability is helping them expand at a much faster rate. Byju’s without global capital could not have reached where it is.
George Mathew: There is speculation around the world about interest rates rising again. In India, do you think interest rates have bottomed out? When will they start rising again? In September 2020, we said RBI will raise interest rates by March 2021. In March 2021, we said RBI will raise interest by September 2021. In September 2021, we are saying RBI will raise interests by March 2022. Today, India’s CPI inflation at 5.3 % is the same as the US’s. Our interest rates are at 6.3%, 100 basis points real, their interest rate is 1.7, it is negative. RBI has managed our monetary policy significantly better than other countries. They have ensured that liquidity remains absorbed, interest rates remain under check, the borrowing programme of the government goes through, the financial market remains stable and functioning. At the same time, inflation and growth rate remain supported. I don’t think we could have got a better RBI Governor than Shaktikanta Das. Rates will rise in India and globally, but not as much as the market is fearing. I don’t think central bankers are going to increase interest rates to a level where it derails growth. They will raise so that inflation remains under control but post that, they will again support growth. Today, we have $636 billion of reserves, positive interest rates, our inflation numbers are well under control. Put all this together, rates will rise, but it will not rise to derail growth.
Sunny Verma: The government is pushing ahead with a giant privatisation plan… they plan to privatise two banks. Should we allow industrial houses and corporate houses entry into banks? We, as a democracy, do not have the screening process where only good people get the license… We open the gates for everyone and then keep on tightening the screws…. You need a good screening process to give licenses to good people and have strict boundaries… It is ironic that the ADR shareholders of Satyam have been compensated but the Indian shareholders have got nothing. Isn’t it a shame that for a crime committed in India, the compensation is paid in the US? Our regulators, judicial system should be ashamed of it.
Sandeep Singh: Since you bring market intelligence to the table, has there been any discussion within the government on crypto currency? I believe regulators are working on it. There will be some regulation. Cryptocurrencies are becoming too big to ignore now. It is more of a semi-urban and rural phenomenon. In Tier 2 towns, it’s spreading like wildfire. I am not qualified enough to say if crypto is a fraud or not… who knows, it may be the future and we are early entrants. So why not regulate and make people aware that this is high-risk, high return? So that tomorrow if it goes out of hand, it does not jeopardise many investors.
George Mathew: The RBI Governor recently spoke about the need to tighten the auditing process. His observations came after three major financial groups collapsed in the last 2-3 years. Do you think the auditing process is weak in corporate India, especially the financial sector? This malaise is not only in the auditing profession. For an investor, there are six layers of protection. The first is the management… If you look at the Bernie Madoff scandal — that was a US $60 billion scandal, but the actual money was $18 billion. Out of that, Irving Picard (a court-appointed trustee for the liquidation of Bernard L Madoff Investment Securities) recovered $16 billion. How did he recover? Madoff’s, his wife’s, son’s every piece of property was sold — shares, bonds, investment, personal items, everything… Madoff had to submit any spending above $100 to Picard… Now look at the cases in India. You have to go after the management… that’s not happening here. Then comes the Board of Directors. But how many are discharging their job? Then comes the auditor. Now there are a few very good auditors. In the pre-90s, Y H Malegam refused to sign the balance sheet of a leading textile company. How many such CAs have we seen? Very few. Then comes the rating agencies. The rating agencies which gave AAA rating to Dewan Housing Finance Limited have a lot of introspection to do. Then comes the investors. Our jobs is to keep the management and companies on their toes on good governance. Finally come the regulators and judicial authorities. All of them have to work together to ensure good governance.
Sandeep Singh: While there’s optimism over the future, over the last one and a half years, there have been a lot of job losses. MSMEs lost businesses to listed companies. What’s your prescription for a more inclusive growth? Let me give you the example of when SMEs have worked well. You would have heard of Morbi, a town in Gujarat. There was a dam burst in the 80s and the entire town was flattened. Then Morbi started coming up by making tiles. They initially used coal to make tiles, but the pollution levels rose and the HC ordered that they switch to natural gas. But that switch from coal to natural gas meant that the entire industry became formalised — unlike coal, natural gas couldn’t be bought in the black market. Then, the units there began focusing on improving quality. With LPG or CNG burning, you will know how many tiles you have produced. Then they focused on quality, on economies of scale. Some focused on becoming contractors, some on the export market. Today Morbi exports 7,000 crore worth of tiles. There was a fear that Chinese tiles would invade the market; instead, they compete with China in the Middle East etc. All this happened because you formalised MSMEs. From tiles, Morbi moved to clocks. World’s largest clock manufacturer Ajanta is based in Morbi. Then, calculators… Orpat is a Morbi-based company. This is the model for us. Another such model is Tirupur in Tamil Nadu… How do we ensure formationalisation of MSMEs? When you are evaluating MSMEs, you have to allow market forces to work.
A corollary to that is Amul, which brought millions of farmers on a formal platform. Now that is a cooperative model, while Morbi is a private model. Sitting in Delhi, I can’t decide the model to revive MSMEs. Market forces at the local level will have to do what is right for the industry.
Sunny Verma: We saw the US taper tantrum in 2013 and saw how the jerky policy announcements impacted markets. Now people have been saying the impact of such a tantrum on emerging markets could be 10 times what it was then. People become wiser from experience. What happened in 2013? Ben Bernanke talked about taper tantrum to warn markets. That warning itself created a correction in the markets because some people panicked. All those people who sold in 2013 became wiser because when the taper tantrum actually began, there was no correction. In fact, markets went up. All those people who bought despite Ben Bernanke warning, will buy 10 times what they bought then because they made a lot of money. So will people be as stupid as in 2013? No. Secondly, in 2013, India was dependent on FPI to a much more extent than what it is today. Third, in 2013, China was competing with India to collect FPI inflows. That’s no longer the case. More importantly, if the taper tantrum starts at 21,000 Nifty, of course there will be correction, but what if it begins at 15,000 Nifty? There’ll be no effect then.
Sandeep Singh: You spoke of certain changes in India over the years when it comes to economics, inflation, infrastructure. Have these set off any changes in the political economy? By and large, most parties are focused on economic issues. But unfortunately, Opposition parties and the ruling party may have a stand on a particular issue, but when their roles reverse, they also change their stand. For instance, Air India should have been divested when it had a monopoly over the Indian skies. We would have got some much more money if it had been divested then. Similarly, MTNL-BSNL. How to make decisions that make economic sense? That’s our biggest challenge. This political process has to evolve. We as citizens also have to realise that there will be short-term pain for long-term gain. Mis-allocation of capital is the real challenge.
Sandeep Singh: We hear of a lot of Centre versus state issues. How do you look at this? The states and the Centre have to work together, there is no choice. We are a federal structure. If the Central government opens the door… right now, we have this great opportunity of China Plus One. Because of Wuhan, because of China’s acrimony with others, every country that has a base in China is looking to diversify. All the countries in the world, including India, are chasing that investment. Even if the Centre makes this image of the country, invites manufacturers to be in India, builds highways, builds dedicated freight corridors, at the end of the day, the factory will be run in the state jurisdiction. The local administration will have to support it. Then we will be able to capture this China Plus One. If we don’t work together, the opportunity will be missed like in 1980.
Sandeep Singh: Do you see rising commodity prices as a threat to growth? Commodities are a cycle — they go up and down. I have to create an economy that’s insular to commodity price movement. Today, India has moved in that direction. Our IT exports are more than Saudi Arabia’s oil exports. Our remittances plus software combined gives us an edge to manage rising commodities prices. As oil prices go up, there is an impact on the economy, undoubtedly. But by pushing my IT exports, remittances, I can neutralise it to an extent.
Shubhajit Roy: You spoke about people and economies becoming wiser with experience. With the benefit of hindsight, how would you look at demonetisation? Demonetisation had its positive and negative effects. The negative effects were felt on MSMEs. But the positive effect was on digital adoption as a lot of payment models evolved. Now one intended benefit of demonetisation didn’t come through, not because the government failed, but because citizens failed. When demonetisation happened, we hoped people would not put the black money into their accounts, that they’ll take the hit on their balance sheet.
Unfortunately, people found many ways to convert black money into white and deposited that bank into the banking system.
Mumbai, Stocks of State Bank of India as well as Bharti Airtel have topped the list of scrip that have been recommended as the top Muhurat session picks by leading brokerage houses.
According to Motilal Oswal Financial Services (MOFSL), in terms of technical and derivatives picks for Samvat 2078, the rollover of SBI stock has been intact at 93 per cent from the last 2 months which indicates longs are upright in the scrip with more than 10 per cent price increase in the October series.
“One can look for ‘Bull Call Spread‘ opportunity here by buying at Rs 510 call and selling at Rs 540 call of the November series at a net premium cost of around 10 points.”
Other top stock picks from MOFSL are Larsen & Toubro, Trent, and Bata.
For Samvat 2078, the brokerage house expects a boost coming to sectors such as travel and tourism, real estate, and ancillary industries.
“Equity markets had a historical journey in Samvat 2077, as it touched new life time highs with Nifty and Sensex surpassing 18,000 and 60,000 mark, respectively, for the first time in history.”
“The recent sprint (in Nifty) to 15,000 in Feb ’21 and 18,000 in Oct ’21, from pandemic lows of 7,600 in Mar ’20 – amid lockdowns and other health challenges – has been led by a benign global liquidity, containment of Covid-19 cases, significant pickup in the pace of vaccination, sharp recovery in corporate earnings and a market-friendly budget.”
Besides, HDFC Securities have recommended Bharti Airtel as a top pick this Muhurat trading session.
As per HDFC Securities: “Pricing competition with Reliance Jio, regulatory and technological changes and adverse currency movement are key risks faced by the company. However, strong market position in the domestic mobile and non-mobile segment, diversification across businesses, healthy operations in Africa, high financial flexibility makes Bharti Airtel attractive for investment.”
“We feel Investors can buy the stock at LTP and add on dips to Rs 623 for a target of Rs 810.”
Furthermore, the brokerage house said that last year before Diwali, India was grappling with the aftermath of the first Covid-19 wave.
“There were considerable uncertainties on how the pandemic will impact India and the globe. Stock markets recovered from a steep Covid-19 induced fall and benchmark Nifty was pushing near pre-Covid all-time highs of 12,000 levels. Last year’s Diwali picks were issued in such an uncertain environment.”
“From those turbulent times to this Diwali, the pendulum has swung the other way. Markets have rallied 50 per cent since last Diwali and many stocks have zoomed to new all-time highs.”
The brokerage house also recommended Alembic Pharma, Cadila Healthcare, Credit Access Grameen, Gujarat Gas, ICICI Bank, Infosys, and Mphasis.
The special Muhurat trading session, held every year on Diwali day, is considered to be auspicious for stock market trading.
The trading during the special session will commence from 6.15 p.m. and end at 7.15 p.m. on Thursday.
It is believed that the Muhurat trading on this day brings wealth and prosperity throughout the year.
This ritual has been observed for ages by the trading community.
The Indian equity market will be closed on Friday, November 5, to mark Diwali Balipratipada.
Mumbai, Equity benchmark Sensex advanced over 100 points in early trade on Wednesday tracking gains in index heavyweights like Reliance Industries, ICICI Bank and Asian Paints. The 30-share index was trading 106.71 points or 0.17 per cent higher at 61,456.97 in initial deals. Similarly, the Nifty advanced 26.70 points or 0.15 per cent to 18,295.10.
Asian Paints was the top gainer in the Sensex pack, rallying around 6 per cent, followed by ICICI Bank, Sun Pharma, Nestle India, Dr Reddy’s and TCS.
In the previous session, the 30-share index ended 383.21 points or 0.63 per cent higher at 61,350.26, while Nifty surged 143 points or 0.79 per cent to 18,268.40.
Foreign institutional investors (FIIs) were net sellers in the capital market, as they offloaded shares worth Rs 2,368.66 crore on Tuesday, as per exchange data.
High input costs have adversely impacted margins and profitability of select consumer and manufacturing companies despite steady volume and sales growth, said Binod Modi Head-Strategy at Reliance Securities.
This essentially raises concerns about sustainability of earnings rebound in subsequent quarters, which has weighed on sentiments recently, he noted.
However, “despite that overall performance so far has been good with sharp growth in revenue aiding double digit growth in earnings,” he said, adding “in our view, the market may remain volatile with downward bias in the near term and investors will track the pricing power of industries”.
Elsewhere in Asia, bourses in Shanghai, Hong Kong, Tokyo and Seoul were trading with losses in mid-session deals.
Stock exchanges in the US ended on a positive note in the overnight session.
Meanwhile, international oil benchmark Brent crude fell 0.47 per cent to USD 85.25 per barrel.
NEW DELHI: Foreign brokerages are downgrading Indian markets for being extremely expensive based on traditional valuation metrics, when compared to peers such as China and Japan in Asia.
The NSE Nifty is up 30 per cent in 2021 so far, while the BSE sensex is up 28 per cent, driven by financials, utilities, industrials and consumer discretionary stocks even as the broader MSCI Asia Pacific ex-Japan index has largely remained flat.
On Monday, Nomura downgraded India’s equity markets to neutral from overweight due to expensive equity valuations.
The Japanese brokerage firm prefers allocating to China and other Asean countries that have underperformed India in 2021. The brokerage feels while the upside is already priced in, headwinds could emerge that will prove to be risky in the future.
Nomura said 77 per cent of domestic stocks in the MSCI index are trading higher than pre-pandemic or post 2018 average valuations.
“We now see an unfavourable risk-reward given valuations, as a number of positives appear to be priced in, whilst headwinds are emerging. We, thus, downgrade India to neutral in our regional allocation and will look for better entry points given our still-constructive medium term view. We like China (significant under-performer seeing stabilising sentiment) and Asean (tactically laggard reopening play),” said equity strategists Chetan Seth and Amit Phillips in a note.
Ironically, in February Nomura had upgraded India to overweight, citing fiscal activism and declining Covid-19 cases.
“However, we think these positives are now adequately reflected in current valuations – that appear rich not only on absolute basis but also on relative basis. Even on two-year forward price-to earnings (PE) basis (incorporating India’s strong earnings outlook), India is trading at record high elevated premium relative to regional markets,” the analysts added.
What are the biggest risks for India?Elevated commodity prices, sticky core inflation and tentative signs of slowdown in demand are among the biggest risks for India.
Analysts at Nomura think if the current trend in prices of natural gas, crude, coal and electricity continue till the end of the calendar year, and increase by around 5 per cent till March 2022, then the potential impact on consumer price inflation (CPI) would be around 1 per cent.
Nomura not the only one
Nomura is not the only one advising clients to cut allocations to India. Last week, brokerage UBS echoed similar views and said India has become “unattractive” due to “extremely expensive” valuations when compared to the Asean countries.
The brokerage also said that earnings momentum is fading in India and there is less scope for an economic rebound this year, even as domestic stocks have outperformed markets like Indonesia by 31 per cent year-to-date.
Low real yield and expensive currency suggest some vulnerability for India in the tapering environment.
“India, like Taiwan, looks very poor on our scorecard framework. The relative valuation of India to Asean, two areas with similar growth dynamics and occasional perceived macro vulnerabilities, looks too wide to justify,” it said.
A Bank of America survey that was released last week showed global fund houses are underweight on emerging markets and want to cut exposure in the next 12 months, citing inflationary risks.
Global fund managers’ allocation in October to emerging market equities fell to the lowest level since September 2018, while allocation to US equities increased to the largest since November 2020.
In a newsletter titled Greed & Fear, Christopher Wood, the global head of equity strategy at Jefferies, has said India’s overweight position looks ‘vulnerable’.
What is triggering the market correction?
Rising fuel prices, inflation and high valuations are now triggering a correction in the market after months of record rallying.
While the sensex is down 1 per cent in the last five days, slipping below the 61,000-mark, the Nifty also slipped below 18,000 as experts are starting to caution investors because of stretched valuations and the impact of inflation on corporate earnings.
The BSE sensex last touched an all time high of 62,245 on October 19, but since then it has declined by 2 per cent.
More such calls for reduction of allocation to India is likely to result in further outflow of funds and a deeper correction in the markets.
Foreign portfolio investors (FPIs) have already turned net sellers by pulling out Rs 3,825 crore in October so far. FPIs had been net buyers for two consecutive months and had invested Rs 26,517 crore in September and Rs 16,459 crore in August.
Mumbai, India’s key equity indices – S&P BSESensex and NSE Nifty50 – traded in the green during Monday’s pre-noon trade session.
Initially, the Nifty opened flat and started to fall in the first few minutes of the trade.
However, the key indices pared losses around the pre-noon session.
In terms of sectors, bank index is the largest gainer whereas Realty, Auto, IT and FMCG have lost the most so far.
At 11.30 a.m., the 30-scrip sensitive index traded at 60,959.72 points, up 138.10 points or 0.23 per cent.
The Sensex opened at 61,398.75 points from its previous close of 60,821.62 points.
Besides, the NSE Nifty50 traded at 18,140.45 points, up by only 25.55 points or 0.14 per cent.
It opened at 18,229.50 points from its previous close of 18,114.90 points.
“Nifty has taken support from 17,968 and the 17,948-17,968 band has to be protected for Nifty to bounce meaningfully from here,” said Deepak Jasani, Head of Retail Research, HDFC Securities.
According to Likhita Chepa, Senior Research Analyst at CapitalVia Global Research: “There may be some cautiousness as IMF notes that the pandemic has taken a turn for the worse in Asia.
“Traders may be concerned as foreign portfolio investors (FPIs) have turned net sellers in Indian market by pulling out Rs 3,825 crore in October so far. There may be some buzz in power stocks as the Ministry of Power announced new rules to sustain economic viability of the sector.”
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