More Than Just Big Bang Announcements Needed To Enthuse Markets
It seems Friday has become a ritual for the finance minister to make some Big Bang announcements. Last Friday, the FM announced mergers of public sector banks. However, if madam finance minister had believed that this would get the market to have a ball on the beat of the drums, well, she gauged the market's mood far off the mark as the PSU banks mobbed the list of top losers post the announcement. Pouring cold water on the FM’s announcements for two consecutive weekends were a slew of domestic and global developments over the weekend. To begin with, India’s GDP growth had slumped to over 6-year low of 5 per cent in the June quarter of 2019-20. The auto sales for the month of August 2019 continue to reflect the downward trend, with major players having reported a significant decline in their respective sales. The GST collection for the month of August has dropped below the Rs 1 lakh crore mark. On the global front, a new round of tariffs came into effect as Washington and Beijing launched additional tariffs on each others' goods. However, things stabilised soon as global concerns appeared to cool a bit following some developments overseas. Hong Kong’s leaders withdrew the controversial extradition bill, the UK parliament voted to block a no-deal Brexit, and Italy approved a coalition government.
Meanwhile, keeping the investors on D-Street apprehensive was the fact that the FIIs continued with their selling spree as they sold shares worth Rs. 14,828.76 crore in the month of August. Also, in the first two trading sessions of the September month, FIIs have sold equities worth Rs 3,754.69 crore, despite positive announcement from the FM on tax surcharge.
Technically, Nifty, after breaking a bearish flag, re-tested the flag support line. Now, there early signs indicating it is in the formation of an inverted head and shoulder-like pattern, not a perfect text book one, but giving some hopes for the bulls. It is very early to come to the conclusion that the market will turn bullish in the short term. As long as it does not violate the 11150- 11200 zone, better watch the market behaviour closely. It is not an easy task to overcome these levels. For those who do not want to be caught on the wrong foot and for those who wish to avoid the whipsaw, let it overcome these resistances first, and buying interest or follow through days must support that. Let us examine some fundamental factors that will have a definitive influence on the markets. The consumption, which is the backbone of the economy, is almost minimal. Manufacturing growth is also minimal. And there are downgrades on economic growth by global agencies. Not to forget the fears of a global recession. These factors loom large and are exerting a dominant influence on the markets. The government announced a host of measures to spur growth in the economy, but a lot more needs to be done and extraordinary interventions are needed, given the scale of the manufacturing slump. A mix of policy decisions and demand management could be helpful to raise income, encourage households to spend more, revive business confidence and, thereby, bring in the growth momentum in the economy.
Going forward, the market participants, especially the bulls, will be eagerly waiting for Friday to see whether madam FM will continue with the tradition of making Big Bang announcements to address the economic slowdown. We sense that some announcements related to real estate might be underway.
We would conclude this with a famous quote by Peter Lynch ‘You get recessions, you have stock market declines. If you don’t, understand that’s going to happen, then you’re not ready, you won’t do well in the markets’.
