SAMCO Securities weekly round up ending on 23rd Sept 2016
Market to light up after a bout of correction
NIFTY 50 opened the week with a narrow range but opened gap up mid week as US FED kept the interest rate unchanged. Though the indices are inching ahead slowly, there seems to be lot of vibrancy in the mid and small caps space. The market indeed reacted maturely to the Kashmir issue signalling the underlying strength and faith of the investors in the Indian markets. With markets nearing the high, government seems to be completing its target of divestments either through cash rich companies’ buying back program or through sale of SUTTI stakes in the listed companies. The buyback in NMDC and MOIL shares are in progress. GST rates are being nudged around 16% to 18% eluding a consensus for now. Media headlines are once again turning super bullish ‘…India sole bright spot, India in expensive club..’ etc all point to bullish consensus which should lead to some caution to the traders in the short term. The 10x response to ICICI Life Insurance IPO also points to huge liquidity sitting on the side lines. The success to the ICICI Life IPO will throw open the flood gates of IPOs leading to larger participation of the retail investors in the capital markets thereby increasing the depth and liquidity in the markets.
Key Events of the Week: Vodafone to bring in Rs 47000/- Crs as FDI, the second largest in the history to restructure the debts and prepared a war chest to bid for the spectrum auction beginning from 1st October. Entire telecom is on the shakeout post the Jio launch. Government appoints nominees for the Monetary Policy Committee (MPC) under the revised system for fixing the interest rate in the economy. The nominees are truly independent and persons of great calibre to steer the monetary policies in the best interest of the country & under no political influences. MPC will instil lot of faith in the banking and financial system of the country.
Technical Outlook: Nifty50 continues to remain in a sideways consolidation zone with immediate resistance at 8950 on the upper side and support at 8650 on the lower side. Market had made a Doji pattern while rejoicing the US FED move however at the same time displaying lack of strength in going up further. This signalled a beginning of a correction in the medium term. On a larger time frame NIFTY50 has also made a double top suggesting that the market will not run away towards north in a hurry. The upper trend channel is acting as a very strong resistance where as lower channel is acting as a strong support for the market. Market is likely to face resistance around 8950 levels on the upper side. Medium term positional traders should trail their long positions at 8500 Nifty50 levels and should do not commit fresh unless the highs are taken away decisively whereas Investors are advised to stay on the sidelines at the current juncture. Existing long positions should be trailed at 8500 Nifty50 level.
Expectations for the week:
NIFTY50 has entered into a state where corrections are just sideway moves of few days and then the upward move starts again. But the street is use to deep price corrections which however are elusive during mature bull markets. The volatility will reduce as there is no big event that the market is factoring into. The market will remain range bound awaiting the Kharif crops and the second quarterly results. However some of sectors are being rerated which is what the bull market does and identifying those trends can lead to decent capital appreciation in those stocks. India is the largest producer of Milk and 80% of which is unorganised, this throws open lot of potential for the large listed players in the dairy segment having strong brand appeal. They may be re rated near to the category of consumer staples which are commanding double the valuation compared with the dairy segment.Investors should allocate a basket of five stocks in dairy segment for above average returns in the medium to long term. Nifty50 closed the week up by 0.59 % at 8831.55