Category Equity

Nifty 50 market cap has hit a record high of 137,865,624 million INR on Friday, 3 Sep’21 with Nifty 50 closing at an all-time high of 17323.

Please find Nifty 50 constituents  and their current market cap:

The current level of Nifty 50 is:

This is testimony to our last post on 23’rd Aug’21, wherein we gave the target of 17100-17300 for Nifty 50.

This rally was supported and backed by better than expected Indian economic numbers that came this week :

1. April-June quarter GDP expands 20.1% YoY
2. Nominal GDP growth at 31.7%
3. GVA expands 18.8% YoY
4. Construction sector growth at 68.3%
5. Manufacturing sector growth at 49.6%
6. Mining sector growth at 18.6%
7. April-July fiscal deficit nears Rs 3.21 trillion

India’s Gross Domestic Product (GDP) for the April-June quarter (Q1) of the ongoing financial year 2021-22 expanded 20.1% YoY, as per data released on 31 Aug’21. The sharp rise in Q1 GDP data can be attributed to a low base last year. In the April-June quarter of 2020, the economy contracted 24.4% due to the Covid-19 lockdowns. The economy grew by 1.6% for Q4 of FY21.

The reflection of above was clearly visible on nifty 50 move.

The final push on Friday was given by Reliance as its closer to its all time  high of 2400 with green energy speech and plans by Mr. Mukesh Ambani.

While India has picked up after covid 2’nd wave, there are still following challenges in rest of the world:

1. Crackdown on tech and private sector in China by authorities
2. Delta  and new variants of Covid posing a challenge in developed countries like US, Euro Zone, etc.
3. Global supply chain staying disrupted because of covid 19 bottlenecks.
4. Growth numbers receding in US. On Friday , 3 sep’21, non farm payroll data came in at 235k, much lower than the forecast of 750k. Non-farm Payrolls measures the change in the number of people employed during the prior month, excluding workers in the farming industry. Given that full employment is one of the Federal Reserves mandates, a weaker than forecast reading is generally negative (bearish) for the USD and signals that Fed support is going to continue without taper.

With above background, India has outperformed other benchmark indices across the world and we expect it to continue for remainder of this year.

In short term, Nifty has achieved its target of 17300 and can follow a consolidation.

Now, some pullback and correction can follow which can be in the range of 5-20%.

Our stance in short term is cautious with profit booking and a micro based approach through individual stocks rather than on Index.

Please find our short term calls:

1. Nifty 50- 16600-17600 range.
2. Bullish on RIL, Tech and FMCG.
3. Bullish on Banks and Insurance.
4. Bearish on Auto’s because of less than expected demand and semi-conductor issue.

For more equity updates, please find our link:

Equity Updates

Sensex and nifty today rose by close to half a percentage points to close at :

Sensex – 55,555 up by 226.

Nifty – 16,496 up by 46.

Please find the current price of Nifty :

After the scare of last week and Friday, that US Fed will be going for tapering in 2021 itself, which will eventually tighten the liquidity in market, there was some welcome respite today.

We have a US Fed meeting this week on Thursday and it is expected to be a mix of dovish and hawkish stance.

The scenario currently is kind of goldilocks where in the key data points:

1. GDP growth.
2. Inflation.
3. Consumer sentiment Index.
4. Unemployment and Jobs Data.

all suggest that the best of growth and inflation is behind us.

Inflation getting moderated and not rising further will ensure that monetary and fiscal stance will be accommodative by Fed and RBI.

With tapering growth numbers, there will be a continuous support by central banks to make sure that policy stance is conducive for growth.

Our own markets, Nifty and Sensex, after making a high in Feb’21 went into the consolidation zone because of Covid 2’nd wave in India. With the gradual opening up of economy and number of Covid cases receding with time, they finally broke out in June’21. Now with vaccination at full pace with 58 crore vaccinations given as of today, the severity of 3’rd wave, even if it comes will be significantly less as compared to second wave.

Even Nomura India business resumption index ( NIBRI ) last week clearly highlighted that Indian business activity rebounded far strongly and quickly as compared to first wave.

With above background and breakout from 16000 levels for Nifty and 53000 levels for Sensex will ensure that we will be going for a target of:

Nifty – 17100-17300.

Sensex – 56500-57000.  

With positive stance and steps taken by government in last so many years and major ones like,

1. Corporate Tax cut in 2019.
2. PLI and make in India scheme in 2020
3. Budget session in 2021 indicating stake sale in PSU’s, big infrastructure and investment push, etc.

will drive and has the potential of making India return to its earlier growth percentage of 8-9%.

This will ensure that above targets for Sensex and Nifty are backed by fundamentals too and not just by liquidity.

Any correction will be a buying opportunity as of now and the stars of this rally will be:

1. Financials – Large banks like ICICI, HDFC, Kotak, etc.
2. Metals – Both ferrous and non-ferrous like Tata Steel, Hindalco, Hindustan Copper, etc.
3. PSU’s – We are bullish on the entire PSU basket including banks like SBI, Canara and others like ONGC, BPCL, etc.
4. Auto’s – We are bullish on OEM’s and Auto ancillaries companies like Motherson Sumi, M&M, Maruti, etc.

Do read our other inputs on Indian stock markets at :

Equity Updates

Since our last article on Indian equity markets on 10’th April’21 ,wherein we mentioned about the imminent second wave of Covid 19 and its impacts, it has been few tough weeks. After a tight consolidation in a very strict range, its time for resilience and rise of key Indian Indices.

We suggested that market will be in a range of 14250-15000 and let’s wait to see the direction taken by market amidst this health mayhem.

Well, as our title suggests, it rose and was resilient.

It not only took strong support at lower levels but also tested upper end of the range at 15000. It has been 3 weeks of consolidation and the direction of market now is clearly hinting an upside from current levels.

There was a correction on Friday from highs as we approached the weekend but that should now be seen as a correction of an uptrend.

If we look at the mother market and major US indices:

1. Dow Jones – In the month of April’21, it touched a high of 34k from 33k in March’21.
2. S&P 500 Index – In the same period, it touched a high of 4200 from 4000.
3. Nasdaq – It touched an all-time high of ~ 14200 from ~ 13400.

They all are making new highs even when US is at top of the list when it comes to number of people who have tested Covid 19 positive till date.

I am comparing our performance and mentioning US indices because our nation and Index companies are closely related to it.

Our Key sectors:

1. IT, Information technology – It drives a major revenue from US markets.
2. Pharma – A significant portion of their sales are from America and they also tend to gain in revenue from India amidst Covid.
3. Metals – They are a global play and touching a new high with every passing day. This is on the back of global economic recovery and supply constraints.
4. Financial Institutions – These are cyclicals and will benefit from huge liquidity gush from foreign countries and favorable credit cycle.

Hence the majority of Nifty 50 earnings are resilient and although there will be some earnings revision in short term but in the medium to long term, they will gain.

We are in a structural bull market as is sensed from key indicators like:

1. Accommodative stance by central banks across the world.
2. Low interest rates.
3. Inflationary environment, etc.

 Hence, the upward momentum will continue post this consolidation.

I would also like to highlight that there is a hit which is seen in the informal sector because of Covid and their incomes have been impacted.

If we look at the income of:

1. Small schools and retailers.
2. Restaurants.
3. Wedding and event industry.
4. Small vendors.
5. Consumer discretionary like Malls and cinemas, etc.

is affected but as we tend to grow as a nation and an economy, they will bounce back.

Here is India’s GDP growth in last few years ,

• India GDP growth rate for 2019 was 4.18%, a 1.94% decline from 2018.
• India GDP growth rate for 2018 was 6.12%, a 0.92% decline from 2017.
• India GDP growth rate for 2017 was 7.04%, a 1.21% decline from 2016.
• India GDP growth rate for 2016 was 8.26%, a 0.26% increase from 2015.

 It is declining and can be attributed to an extent to events like:

1. Demonetization in 2016.
2. Insolvency and bankruptcy code, 2016.
3. RERA implementation in 2017, etc.

However, with positive stance and steps taken by government in last so many years and major ones like,

1. Corporate Tax cut in 2019.
2. PLI and make in India scheme in 2020
3. Budget session in 2021 indicating stake sale in PSU’s, big infrastructure and investment push, etc.

will drive and has the potential of making India return to its earlier growth percentage of 8-9%.

This will be on the back of private capex and investment cycle.

Once that happens, we will see many of the professionals, citizens and everyone associated with our country gain a lot.

Markets are already sensing that and have started to price it in. It is reflected in the resilience of our market that inspite of such a health crisis in our country, we are just 4-5% shy from all-time highs.

Hence, we are very bullish in long term. In medium term, we suggest a target of closer to 16000-16500 on Nifty 50.

Indian indices took a nosedive last march in 2020 amidst Covid concerns and nifty touched a low of 7500. Since then, it’s a vertical rally, what we call a V- shaped recovery and Nifty touched a high of ~ 15500 in 2021 overtaking its previous high of ~12400. Almost everyone thought that Covid 19 is over and we are out of the pandemic. Its just at this feeling and moment, the imminent second wave of Covid 19 has begin and is happening.

The sectors which were laggard from last 3-4 years:

-Metals

-Pharma

-PSU, etc.

turn out to be one of the best performers in last one year.

What changed after Mar’20 was the action by central banks to be dovish and coming out with monetary and fiscal support for their respective economies.

This leads to a reflationary scenario and leads to higher GDP and inflation.

In a inflationary scenario, the prices of products, commodities, services, etc go up and mostly its because of higher demand. This also means that margins of companies take a hit as raw materials prices go up and they cant increase the prices of finished products in same proportion, as it risks their volume and revenue.

Still, an overall economy does a lot better when there is inflation as compared to when there is deflation.

The classic case in hindsight for same is the period from 2002-08, when the whole inflation and reflation trade played out so well and it was a boom time for corporates, individuals, professionals, economies.

As we say that history doesn’t repeats itself but it do rhymes, this period from 2020 is believed to be the same case of higher inflation, higher monetary and fiscal support by major central banks across the world, to increase output, demand, sentiment, etc.

Hence, it’s expected that Indian and major developing markets will do well during this phase.

However, in India, from April’21, we have started seeing the second wave of Covid where in fresh daily cases have again spiked to more than 1 lac. The same situation of higher daily cases is also seen in US, Germany, Brazil, etc. This leads to restrictions and lockdowns, thus bringing down the pace of earnings recovery which was anticipated by street in 2021.  

Although a parallel argument of vaccines, available covid treatment, awareness of what needs to be done can be given, but it doesn’t takes away the fact that pace of recovery will be slow and not V shaped, as was in the consensus.

If we take a look at major markets across the world in April’21,

• Dow Jones –  Touched an all time high of 33,800
• Nasdaq – Is at an all time high of 13,845.
• S&P- Made an all time high of 4128.
• Dax- At an all time high of 15235.
• FTSE –  Is closer to 7000.

Its only Indian indices which are under performing and the reason is Covid’s second wave.

As per me, in this quarter, with some help from weakening rupee, sectors which will render support are:

• Metals – The cycle has just begin after a lull of many years and will last for atleast 2-3 more years.
• Information technology – Digitilisation is the the new disaster recovery plan and buzz strategy for every entity. This will ensure good deal wins, consistently high revenue and better margin for these companies.
• PSU
• Pharma
• Capital Goods
• Cement
• Real Estate
• Auto’s –  As the demand for personal mobility would be on rise amidst covid concerns.

The sector which are high beta and could take time to deliver are :

• Banking
• Consumer discretionary like Malls, Cinemas, Cruise, etc.
• Restaurants
• Small retailers
• Small and medium enterprises

as they are affected by lockdowns and sentiment.

But here also looking at the stance of RBI and favorable credit cycle, it’s a matter of time, before they join the list of performers.

Our stance is cautiously positive on Indices with major action happening on individual stocks like Adani group, MF companies, Life insurance plays, JSW steel, Sail, Hindustan copper, Hindalco and the likes.

Be cautious and look at the range of 14250-15000 on Nifty.

The decisive movement on any side will be seen in direction of the point where this range is breached.

It was just on Thursday, 1’st April’21, when everything was looking bullish and happy on indices and here comes the Covid jitters for Indian stock markets. Nifty was down by almost 400 points at one point. It finally closed at 14637, down by 229 points.

Last week, out of three days of trading, Nifty closed above 14850 on two occasions, which is a key resistance level and after the announcement of:

1. US Infrastructure package of $2 trillion last week.
2. Much better than expected employment data on Thursday where in the US economy added close to 9 lakh jobs against the expectation of 6 lakhs.

The expectations were of a higher opening.

I understand that these are US announcements and the usual thought is that how come we will be affected by it.

Well, looking at last 3 decades, barring companies which perform exceptionally well and their growth reflects in their share price, we are influenced by global factors in short term.

Please find the sector wise break up of Nifty:

It is evident from above that sectors like Pharma, IT, Metals which are much more closely related to US and global economy, drives and control a significant portion of nifty earnings and valuations.

Also, the role of FIIs and foreign money plays a major part in driving our stock markets and we can’t be insulated from mother market, which is US.

Over the weekend, India became a no 1 country in terms of daily Covid cases with 1 lakh count and thus it was followed by very strict lockdown guidelines in Maharashtra and Rajasthan. This spoofed the markets and the fear drove them lower.

With earnings that will start coming in from next week and optimistic US economy scenario, we are cautiously positioned on the markets.

As we have highlighted before, please watch out for earnings and from technical stand, keep an eye on sectors and stocks which are correcting less than the market, as they are the ones which will drive the next leg up.

Our bias is also towards PSU basket with latest announcements by Indian government in budget’21 and certain stocks can be looked at like PSU banks, Gail, BPCL, etc.

At an index level, keep an eye on the range of 14250-15000 for Nifty.

In a truncated week from 30’th Mar – 1’st Apr’21, Nifty closed at 14867. It is above the 20 day MA of 14820-14850 zone. It did the same on 30 Mar too but then the selling at higher levels dragged it lower. The important point to note is that bulls are still not giving up and every low has turned out to be a buying opportunity in last one year. The tussle in between bulls and bears of Nifty 50 continues.

With rising dollar index above 93 and US 10-year bond yields at 1.7%, I guess the market still wants to bet on earnings and inch up.

Our all-time highs on Nifty was closer to 15400-15500 levels.

With several attempts that were taken by market to cross all-time highs in last few weeks have failed, we are continuously making lower lows and lower highs.

Let’s wait and see the direction of index next week, when we will have full 5 days available.

Looking at fading momentum on the up side and various indicators like:

1. USDINR testing its resistance of 73.5-73.8 where in the expectation was of lower levels earlier.
2. Rising Covid cases and fresh stricter lockdowns.
3. Slower pace of vaccination.
4. Margins getting impacted because of high inflation.

 It will be a cautious watch and next strategy and action should be taken after watching certain key levels like 15100 on the upside and 14250 on lower side.

On a long-term basis, we are in a bull market in India but looking at the short term, we can be due for some correction.

As it will be a result season and month in April, earnings and valuation based Buy/Sell calls can be taken for long term investment.

After yesterday’s fierce move on Nifty 50 when the benchmark was up by almost 2.4%, its time for some consolidation today. It will be a wait and watch mode for Nifty 50.

Double whammy and twin concern in the form of US 10 year bond yields at 1.75% and Dollar Index at 93.4 is not giving positive signals for developing markets like India.

Also, Nifty took resistance at 20 day MA ( Moving Average ) at 14850 and has retraced from there.

Hence the call would be to wait and watch levels of 14850-15000 on up side and 14250 on downside to call some sense of direction.

On cash side, few of the interesting calls and bets can be taken on:

1. IT- Stocks like TCS, Infosys, HCL tech, etc which will benefit from depreciating INR and higher Dollar index. Also because of the digitalization wave after pandemic, the revenue pipeline and earnings for last quarter of FY 21 would be good.
2. Pharma – Pharma as a sector is in a consolidation zone since 2015-16 and broke out in 2020 because of Covid. This also benefits from higher conversion rate of USDINR. Also, the overhangs in sector because of US FDA has trimmed down because of higher demand for medicines and India is a key exporter. Hence, stocks like Sun, Lupin, Dr Reddy looks good from current levels relative to the overall market.
3. Consumer Staples – Evergreen defensives like HLL, Colgate, Dabur, etc. seems to gain in the current uncertainty and can be looked for accumulation.

The markets will be opening today after a long Holi weekend and the cues look optimistic for a higher start on Nifty. There should be a bounce back in Indian stock markets.

US 10-year Bond yields have surged to 1.73% and dollar index at 92.9 looks very close to 93. As per the technical analysis, it can go into a new bull zone above 93.

Higher US bond yields will mean strong dollar as funds flow into US and thus is quite negative for emerging markets, including India.

However, in the current scenario, higher bond yields mean high growth across major markets and thus Nifty is higher even after a higher dollar index.

After a last week low of around 14250-14300 for Nifty, which is 66% retracement of the entire rally after budget 2021, levels to watch out for are 14800-14950.

As per me, looking at the run up and current macro environment, we are in a consolidation zone with downward bias. This is because we have started making lower lows and lower highs in Nifty in last few weeks.

Hence, lets watch the levels of Nifty today as to where it closes.

Investors and traders can look at their overall positions which they are holding and long-term positions can be lightened up till the time more clarity emerges.

For equity markets cash calls, investors can look at Pharma, cement and IT.

Few stocks which deserve a look at current levels are Sun Pharma, TCS, Ambuja Cements, etc.

The week which ended on 19 March’2021 has increased the confusion amongst traders, invetors and every stakeholder in equity market. There is a clear lack of direction in Indian stock indices.

Nifty 50 opened at 14900 on 15 and closed at 14745 on 19’th Mar’2021. This suggests that on a weekly basis, there was only a dip of close to 125points, but the low point of the week was 14350 breaking the previous low of 14500. There was short covering and buying at lower levels which made nifty climb 400 points from day’s low.

Overall, in my opinion and perspective, the trend from short to medium term is down. This being said, long term trend is still up and i would say that the current bull market in India can rush up to 21k in the coming years. However in the short term, it can correct upto 10-11k too. This is coming from valuations which factor in almost perfect execution by companies and almost no risk at all.

US 10 year bond yields is the X-factor in the short term. They are currently at 1.7 and higher they go, higher is the risk aversion and lower valuations for growth stocks.

Hence for the week starting 22 Mar’21, keep an eye on 14350. If this breaks, there can be further affirmation of the downturn.