D-Street Apprehensive As Election D-Day Approaches
While different colours means different things to different people, the colour red is probably the most talked or buzzing colour of the week. As it is a Valentine Day week, the whole world would be splashed by the red colour. The Indian stock markets are no exception with the raging bulls of the stock market taking a beating from a soft cuddly bears and the D-Street turning red with markets not witnessing a single day in the green since last Friday. Honestly speaking, the sentimental landscape has deteriorated on Dalal Street from the dizzying peaks into the deep valley within a span of just 4-5 trading sessions. However, during the week, there was some silver lining over the dark clouds on the macroeconomic front. The CPI inflation for the month of January 2019 came in sharply lower at 2.05 per cent as well as the wholesale prices in India eased to 10-month low of 2.76 per cent in January as compared to 3.80 per cent in December. The IIP growth for December 2018 came in at 2.4 per cent, which was better than the consensus estimates. The stock of Yes Bank soared in an otherwise depressing market after the bank said that the RBI has not found any divergence in the asset classification and provisioning during 2017-18. On the quarterly earnings front, we finally bid adieu to December quarters earnings. Overall, the earnings were in line with expectations, with few hits and misses.
On the global front, the US stocks climbed higher to mark their best closing levels in over two months. The sentiments turned merry after lawmakers reached a tentative deal to prevent a government shutdown as well as the optimism fueled by a potential trade war deal between the US and China. With the trade talk’s deadline looming in March, media reports suggested that both the sides expressed that the new negotiations which began in Beijing would bring them closer to a trade agreement. Also, a cooler-thanexpected read on inflation seemed to keep the Fed concerns in check.
The price of oil futures settled higher with the global benchmark marking its highest close since November, on the back of supply cuts by Saudi Arabia and also hopes of a pick-up in oil demand if the trade talks between the US and China were successful. The coming days are likely to be a close contest between oil demand and supply.
Since the beginning of the New Year, the Indian stock markets have been on a rollercoaster ride and no clear directional trend has emerged. On a YTD basis, the Indian benchmarks have underperformed significantly, while the Emerging Market Index has gained about 8 per cent. Now such an underperformance is really a cause for concern for the domestic investors.
However, given the fact that this being a general election year, the bulls will have to hold their horses till political uncertainty is out of the picture. Until then, the only thing certain on the D-Street is uncertainty, which is making market participant apprehensive and edgy. However, we believe this period of uncertainty is a good time to accumulate fundamentally sound companies with strong financials for the long run. After a significant dent in the valuations, these are starting to look reasonable in the mid-sized category, but that does not mean the stocks cannot fall further. It is going to be a test of patience, but as an investor we have to accept the fact that the best buying opportunities arise when others are dumping them in panic. As Bob Marley has stated ‘Truth is everybody is going to hurt you: you just gotta find the ones worth suffering for.’
