Market View – Dec 19 (The Charging Bull)

“Most of us are “too small” to impose our will on the market. As they evolve, we must as well. Always adapting to the ever-changing market”

In spite of all Odds in domestic economy, Nifty 50 had been able to cross the previous highs and holding very strongly. In the last 1-month market had digested two domestic negative news, lowest GDP growth of 4.5% and no rate cut surprise by Central Bank, but at the same time there were two positive events that happened in Global markets as well, trade deal between US & China and consensus on Brexit.

At the end of last month Nifty 50 made second attempt to cross psychological figure of 12000 which it managed to cross but was unable to trade above the resistance of 12200 and correct from those levels, although correction was due from long time as market was just moving in one direction, corrections are always good for healthy trend.

After Nov 2019 month article, 2 major events happened in our domestic economy, market did digest lowest GDP growth of 4.5% as it was expected but was not able to accept NO rate cut in RBI monetary policy. 25bps Repo rate cut was priced in by market in-fact closer to policy few were expecting even 50bps but monetary policy committee surprised by considering Inflation over and above growth. RBI monetary policy committee has guided to hold policy at status quo till next year Fiscal policy in budget announcement.

Once again Nifty 50 took a support at 11800 and re-confirmed it to be the strongest support level for this uptrend. Liquidity is chasing market on expectations, at domestic level there are expectations that the reforms announced by the government and more to be announced in coming days till budget will slowly but gradually support the growth, although the positive impact of these reforms IF ANY will be visible in next few quarters only but market is discounting them right away. At Global front few negative events are subsiding, in last 18 months the tug of war between US and China had impacted global growth, now they are coming to some agreement making traders cheer up.

In last 2 weeks, we have seen monster rally in Nifty 50 from 11800 to 12300 odd levels, market needs to consolidate at these levels before heading towards 12500. 12020-12100 will act as a near-term support and uptrend is intact till market is trading above strong support of 11800.

Midcaps are still underperforming the larger caps. Looking at Nifty Midcap 50, it is still consolidating but the good part is that the trend is still up. Once the consolidation is complete and it starts trading above 4750 levels, we might see long awaited rally in midcaps.

Nifty Next 50 is consolidating in a range, likely to catch momentum once it breaks above 29000 levels.

Nifty Bank is outperforming the Index lead by ICICIBANK and KOTAKBANK. PSU banks and NBFC are likely to get support from the Christmas gift given by RBI, those PSU banks and NBFC holding 10-yr G-sec in their portfolio are likely to benefit as RBI has announced to buy back rupee 10,000 cr of 10-yr G-sec under Open market operations to correct the 10-yr benchmark rate down.

Nifty Auto have resumed its uptrend after a meaning full correction and forming the medium-term base at 7780 levels.

Nifty Realty is the strongest among all sectorial Indices. Even in this correction it had not lost its momentum in fact it has bounced before Nifty 50 witness buying.

After digesting all negative news w.r.t to Infosys and TCS, Nifty IT has moved up sharply. Going forward, weaker rupee is likely to add momentum in IT stocks.

Nifty Metal stocks were consolidating since long time but positive environment on global front has kicked the momentum in metal stocks.

Every time Nifty Pharma starts moving up, it looks like it had made its bottom but some negative news distorts the charts. Will it happen again? I believe this time they might outperform.

Among the sectorial Indices FMCG sector is underperforming, although so far it has performed better than Pharma. I believe Nifty FMCG has completed its consolidation and is ready to resume its uptrend.

So far BSE Oil & Gas have outperformed the overall market lead by Reliance and BPCL, I believe in short run it might consolidate before it resumes its uptrend.

Dow Jones Industrial Average uptrend is intact, in fact it got stronger post US-China trade deal confirmation.

Dollar Index is consolidating in a broad range of $97-98.5.

Gold/Silver in International market is hovering around $1480/Ounce levels, if it holds these levels it might enter into new higher range of 1480-1520. Below 1480 it will trade in a range towards 1450 levels. Silver, if traded above $17.20 can move up to 17.60.

Crude is moving up slowly and steadily as price are supported by OPEC production cut and lower inventories in US market.

Indian market is rising on expectations that the reforms made by government will help in reviving the growth. Across globe Traders which were sitting on sidelines due to lack of clarity on US-China trade deal and Brexit, now after the announcement they have reentered in risky asset classes. Liquidity is chasing the same selective stocks not only in India but across Globe as expectations are that at least these companies will carry on their outperformance over other companies.

As correctly quoted by Mark Minervini, “If you act in sync with the market, trading can make you rich. If you choose to argue with the market, it will surely make you poor”. This is not fundamental rally but a liquidity driven rally on assumptions that fundamental might turn in coming quarters in Indian economy, now if you believe in long term fundamental to get turn from these levels, you should identify the undervalued stocks and stick to them although they might not perform immediately and make you frustrated. But if you want to enjoy the current rally you have to be in the same stock which have been performing as money is flowing in the same stocks irrespective of sky valuations. Else don’t look into this market which I believe you won’t be able to do as if you are reading to this article you are searching for opportunities in this market.

“People tend to overreact to bad news and react slowly to good news”. Indian markets are currently rising even after bad news, think what will happen once we start receiving good news. As I mentioned in my Nov2019 article, that in short run (at least next 3months) I see strong uptrend with high return to risk ratio. Yes, it’s not going to be easy so, “It’s time to create a portfolio, have a good trading plan, time your entries, ride the winners, cut the losers and go ahead with trend”. – Steve Burns

You can follow me below on twitter as well

https://twitter.com/Analyst_Puneet