Markets In Consolidation Mode— Time To Accumulate Quality Stocks!

The NPAs and PSU banks are the talk of the town in India. While the PNB share price is down in the dumps, I believe the impending reforms in the banking sector will permanently improve the way PSU banks are run. The Narendra Modi government is taking the banking crisis seriously and will, in my view, take decisions that will make the PSU banks a lot more efficient and accountable. At the current valuation levels, when the sentiments have turned sour for the PSU banks, one can only think of accumulating such stocks for the long term. There might be some consolidation happening in the PSU banking sector and, eventually, the issue will settle down, thus providing ample opportunities for the long term investors to enter the banking space. 

Moving from the banking woes that are adversely affecting market mood in India, the overall Q3FY18 results for Corporate India impressed us with the growth. What was heartening to see was the growth in sales for the large-caps, along with expanding margins. The healthy results in Q3FY18 point towards solid economic recovery. The global issues will dominate the markets, along with the economic data that will be published at regular intervals. The GST revenue collection will improve this year and the government should be able to deliver the promises it has made in the budget. Globally, the US markets seem to have recovered more than 50 per cent of their recent losses. The global equity market set up looks positive. 

I expect the Sensex to trade in a narrow range of 34,000 to 36,000 as the markets are currently in a consolidation mode. 

In our cover story, we have discussed at length the quality of Q3FY18 results. Do find out which sectors did better than expected and which ones underperformed. 

In our special story on NPAs, we have reasoned out on why the NPAs may be nearing the bottom for the PSU banks and that there is a good case for adding a few stocks in the portfolio from the banking and NBFC space. 

In this issue, we have also thrown light on an interesting technical analysis technique called the Pin Bar. This is a tool that is used to catch trend reversals in the stock prices. 

Investors who have spent time in the markets will know that consolidation in the markets is good for accumulating quality stocks. In such consolidation phase, one gets time to analyse the stocks and buy them as the prices are in no hurry to move higher. Accumulate banking stocks, including the PSU banks, as some of them are really run as professionally as any other bank in the private sector. Just keep a long term focus on the sector. 

So, keep hunting for quality stocks and do not let the noise affect your stock-picking ability. The economy is recovering fast and you will find the same reflected in the earnings sooner rather than later. 

Happy Investing !