Look Out For Stock-Specific Action!
By the time this editorial reaches you, the devotees would have turned up in large numbers to bid adieu to the Vighnaharta (remover of obstacles) Lord Ganesh on the occasion of Anant Chaturdashi. The auto makers would be seriously praying and hoping that the Vighnaharta would take along with him the long-winding 'vighna' faced by the auto sector. Each passing month, auto companies are reporting falling sales as the passenger vehicles sales have seen the worst ever monthly drop since 1997-98. Like always, the companies are pinning their hopes on the oncoming festival season. With Durga Puja and the country’s biggest festival Diwali round the corner, and marriage season expected to start from November, auto companies are hoping against hope that the demand will revive soon. Additionally, auto makers are hopeful for some more gestures from the government as, while addressing the media on 100 days of the Modi 2.0 government, madam FM said that the government would respond to the demands of the automobile industry. However, an interesting observation is that, amidst all the chaos, the Nifty Auto index witnessed a rally of just over 10 per cent from the recent lows. Meanwhile, another headline which did the rounds during the week was an RTI query filed by Chandrashekhar Gaud, an activist from Neemuch, Madhya Pradesh. The RTI query revealed that 18 state-owned banks disclosed 2,480 cases of frauds worth around Rs 32,000 crore during the first quarter of this fiscal.
On the global front, an interesting development took place as JP Morgan announced that it has created what the bank calls its ‘Volfefe Index’, the name being coined after US President Trump’s infamous and still mysterious ‘covfefe’ tweet. JP Morgan’s new Volfefe Index analyzes how Trump’s tweets affect the financial markets. Also, some media houses have started echoing the view that the influence of tweets of the US Presidents to move markets up or down has raised questions about potential market manipulation and insider trading. Digging deeper, the European Central Bank is expected to deliver additional monetary stimulus in its policy meet on Thursday, which has kept the EU markets chirping. Also, on the backdrop of August jobs report which missed the estimates, it bodes well for another interest rate cut by the Fed to cushion the US economy amid signs of slowing growth. Despite all the headlines these day full of jump scares of the investment variety, Nifty has been rising for the last five consecutive trading sessions with higher highs and higher lows. With this, Nifty has managed to close above the short term moving averages, 8-DMA, 13-DMA and 20-DMA and it is in the process of forming an 'inverted head and shoulders' kind of pattern on the bottom with a positive divergence. The positive closings are mostly because of short coverings, as historical high-level shorts have built-up in the system. There are multiple resistances in the range of 11,140-11,200. The initial resistance is parallel highs or neckline for inverted head and shoulders, which is placed at 11,146. The 50-EMA is placed at 11,168 and the 38.2 retracement level of the decline from the highs of June 3 to the lows of August 23 fall is placed at 11,197. Hence, a close above the all-important psychological 11,200 mark with participation on the buy side from the FPIs would be the first indication that the bulls are changing their gears and we will see a rapid move above this level. Till then, we can consider this rally as a pullback from an oversold condition in a downtrend.
In the coming sessions, host of macroeconomic data will be released and demand investors’ attention, such as India’s industrial production, CPI, WPI. Moreover, market participants will keenly watch the upcoming GST Council meet which is to be held on September 20 as this could dictate the short-term direction of the markets. In the last five trading sessions, broader market indices such as Nifty Midcap and Smallcap have delivered about 4.5 per cent return each from lows of September 4. For investors, it’s time to look for stock-specific action and strike while the iron is hot!
