Bears Grilled, Nifty On Course For 12,000 Mark!
The talks of a slowing economy appear to be on the back-burner for now on the D-Street as Mr. Market has returned in its swagger. With Sensex hitting a fresh record high, surpassing 40,312 mark - its previous peak, which it touched on June 4, 2019 - and Nifty 50 being shy of just 226 points from its all-time high of 12,103, the market took a 180-degree turn. Following this, the headlines in the mainstream media have also taken a U-turn from 'the slowdown in the economy' to 'we are heading for mother of All Bull Run'.
Has Diwali, the biggest Indian festival, done the trick? Well, it was a collection of factors, with the festive season being an important one of them. Apart from this, reports, suggesting the existing structure of Long Term Capital Gains (LTCG) tax, the Securities Transaction Tax (STT), and Dividend Distribution Tax (DDT) being looked over by PMO in consultation with the Finance Ministry’s Revenue Department and NITI Aayog, also helped the market, considerably. Further, the earnings of some companies coming in much better-than-expected and the FPIs returning with a bang in the Indian markets - they purchased stocks worth around Rs 7192.42 crore in a single trading session on October 30, a record for 2019 - have added to the markets' benefits as well.
If one recalls our editorial a couple of months back, we have been giving loud and clear indications that the festive season would be a big trigger for the turnaround in the markets and one should continue to accumulate quality stocks to reap the benefit, when the market turns its course. I am sure investors, who followed our guidance, would have a big smile on their face at the moment. For those, who were fence-sitters and were gripped by flames of doubt and worry, we would again state that we are gung-ho on the markets and are of opinion that there is more risk in being out of the markets than in. Hence, fence-sitters should turn buyers as there is an excellent opportunity to increase your stake in the new age businesses, such as AMCs, Insurance, and selective PSUs, which are the right candidates for strategic disinvestment.
Meanwhile, in the west, the S&P 500 closed at a new record high after the Federal Reserve announced another rate cut by 25 basis points, the third cut this year. However, the bank hinted that further easing may not be so forthcoming. For the moment, the news on the economic front, which took second fiddle to the Fed decision, was the better-thanexpected Q3 GDP growth, together with a positive ADP employment report. The Dow is just short of its record high of 27,359 while the NASDAQ remains within a striking distance from its record high level. The Fed rate cut should work in favour of our markets as it paves the way for another rate cut by the RBI, supposedly to be announced in December, when it meets next.
Overall, the bulls are in the driver seat and we believe that there is still some steam left on the upside until the music stops and actually breaks the key support. We would advise traders not to argue against what the market is telling you through the price action. Just hop on and ride till the wheels fall off, then rotate in opposite direction, when bears get resurrected again by decisively breaking the immediate support levels. At the same time, we would advise our readers that when things look this good, complacency is sure to creep in, forcing you to start committing mistakes that may burn a big hole in your portfolio, once the market cycle reverses. It’s better to stick with quality and do not let the fear of missing out (FOMO) come into play.
Very soon auto sales figures for October would trickle in and market participants would keenly watch these numbers to gauge the sentiments for this sector as this sector has been in deep pain for long. However, if we look at the recent performance of the Nifty Auto Index, it has delivered the best October month performance since 2013, gaining 13 per cent for October 2019. However, any disappointment in the numbers would result in profit booking in selective auto stocks. Also, the earnings for the quarter ended September 30, 2019, would continue to influence the markets.
