Power Stocks Pump the Markets
The BSE Sensex on Friday touched an important milestone, breaching the 60,000 mark for the first time ever, while the Nifty touched a fresh all-time high of 17,947.65. But thereafter, the Indian benchmark indices witnessed profit-booking and what was the reason for this movement? It was the huge spike in the volatility index, India VIX. As mentioned in our last editorial, India VIX moving above the 18 mark would signal signs of caution in the market and we hope this guidance would have helped our readers to book profit at the right time. That said, if we monitor the price action of the markets, the buy on dips template continues to work on D-Street as dips are being bought by the market participants.
The testimony of this is that on Tuesday and Wednesday the indices managed to recover from the day’s low. India VIX has jumped up 10.84 per cent since last Thursday’s closing and moreover, it’s still above the 18 mark. However, what is heartening to see is that it has cooled off significantly from the highs of 19.43 which it touched on Wednesday. Apart from India VIX, power stocks have gained a lot of attention in the last couple of days. The BSE Power index hit a multi-year high on Wednesday. On a WTD basis the BSE Power index is up by 6.16 per cent. So what’s the buzz with power stocks and why are they witnessing electrifying moves lately?
Well, the answer to the above question can be found in both domestic as well as global triggers. On the domestic front, the Electricity Amendment Bill 2021 is said to be a big game-changer for many players in the power industry and there is a buzz that it may be passed. On the global front, elevated energy prices and increasing power demand – particularly in China and the European region resulted in a surge in power stocks across the world with Indian power companies following suit. September 30, 2021 would be an important day for the Indian bond markets. Global index provider FTSE Russell in March this year placed Indian government bonds on a watch list for possible inclusion in its bond index.
It is set to announce the result of its review on September 30. The outcome of this review would be eagerly awaited. Why so? That is because if it decides to go ahead with bond inclusion, it is likely to spur sizable foreign inflows. As per the report of Morgan Stanley, India’s inclusion in the global bond indices would attract inflow of USD 40 billion in the next two years and a potential USD 250 billion over the next decade. So what are the key triggers that market participants needs to watch out in the coming days? The most important one is the US Dollar index and automobile sales figures for the month of September. The US Dollar index has crossed the uncomfortable mark of 94.
On the upside, the key level to watch out is 94.80- 95 on the US Dollar index. A move beyond this could be negative for the emerging markets. Could this be the twist in the fairytale? Yes, in the short-term this could be a hiccup for the markets but we believe that just as in recent times, the markets would take the negative news in their stride and move forward! Technically, the index has strong support placed in the range of 17,250- 17,350 and any dip towards these levels should be used as incremental buying opportunity because history shows that the October-December quarter is most bullish for the Indian benchmark indices.
