Record Sensex, Nifty: Waiting for that elusive correction

Record Sensex, Nifty: Waiting for that elusive correction




Waiting for that big correction to enter the market? Chances are that you may have to wait longer, because there are too many people praying for the same thing. And anecdotal evidence shows that next to liquidity, skepticism and caution are the two big drivers of a bull market.

Money has resumed flowing through mutual funds, but retail investors still seem to be wary about committing money into equities in a big way. At least the types who directly invest in shares instead of equity mutual funds. You are still not hearing stocks being discussed in trains and at social functions, unless you happen to be from the stock market community. Nobody is yet bragging about having made a fortune from that stock he bought two months back.
High net worth individuals are a bit more active, but that’s not saying much. It is still a market for institutional investors for the moment. But even institutional investors will need an exit at some point. That is why retail participation becomes important, never mind other lofty causes like cheap domestic capital helping Indian entrepreneurs.
Still, if you look around, there are signs that retail investors are itching to take the plunge. Some of my acquaintances in the broking and trader circles say they are getting enquiries from relatives if this is a good time to be putting money in the market. I too had one such experience. My school friend Vinod called me up the other day requesting that he put me in touch with a broker, but one who is willing to take orders for stocks quoting at less than Rs 10.
“I have been studying the market for the last two months, and I get a feeling that I will be able to make decent money through trading,” he told me, adding, “but I want to start with low-priced stocks before taking bigger bets.”
Going purely by fundamentals, there are no strong triggers to take the market much higher from here in the near term. The economic recovery so far has been patchy and erratic, and corporate earnings trend shows that demand is sluggish even if companies are expanding their bottomlines through cost savings and operating efficiencies.
Falling crude price seem to be the most compelling argument in favour of the bull market. Already, economists are penciling in a steeper-than-expected fall in inflation, and hopes of a rate cut in February are on the rise.
But will the rate cut be a good enough trigger to spur the corporate investment cycle? Mint columnist V. Anantha Nageswaran made an interesting point in his column earlier this week.
“More than interest rates, stretched balance sheets of banks and corporations hold back a revival in domestic investment. Government has to nurse the banking system to health quickly and Indian corporations should do their part with their balance sheets,” he wrote.
There are enough factors—local and global—why the Indian market has to correct. But I get a feeling that it is investors like Vinod and the excited relatives of my broker and trader contacts who hold the key to the next leg of this rally. And I am betting that they will take the plunge and take the market to a new high. 

Market Update ... 28 Nov 2014

Market Update ... 28 Nov 2014

There seem to be no road blocks in sight to stall the market upmove although intution says market needs to correct to stay healthy.

Liquidity flows from domestic, FIIs and HNIs have so far kept the momentum going for the market.

The worst is behind for SBI and the management too sounded positive ... can look for levels of 400 in 4 to 5 months.

Government’s initial steps to turnaround the Indian economy. And now, steep fall in global crude oil prices is cherry on the cake for Indian equities, whose stellar Bull Run continues. 

Hoping RBI governor Rajan to slash rates in the upcoming policy. “If rate cut is not announced on December 2nd, then the market could see a mild negative reaction,”

On the whole we are in pretty much blue sky kind of scenario over here with politically lot of developments taking place positively. We have a Budget where expectations are going to certainly climb higher and higher considering the statements coming in from there. Globally there is a fair degree of calmness with a lot of important indices getting to new highs.

Biggest advantages which today the market has is not only the Indian situation which is benefitting from this but the fact that the global markets are conducive for equity.

Making the best out of real estate investment

MAKING THE BEST OF REAL ESTATE

The real estate sector is one of the highly sought out sectors in India today. Almost every investor today seeks to invest some part of his asset allocation in the real estate sector to safeguard against any financial market fluctuations. Investing in real estate through home loan route not only gives the convenience of investing, but also tax benefits for the amount repaid. The re introduction of Real Estate Investment Trusts (REITS) and the influx of  a vast number of affordable housing projects has meant that investors with limited capital can today look to invest in the real estate sector and be a part of the success story of the sector.  Let us look at some of the factors that are likely to determine the future growth prospects of the real estate sector of the country in the coming years.

Affordable Housing: Affordable housing is going to be the biggest sunshine segment in the coming years as the government has already made it a priority sector. Not only is the government offering relaxation in FDI norms for international companies and investors seeking to invest more than 30% of their funds in the affordable housing sector, the vast majority of Indian population seeking a affordable house gives the sector sustenance and growth. The quantum of money to be invested in an affordable housing sector is less for the real estate companies as well as the investors and end users making it a win-win situation for all concerned. Real estate companies can finish projects with a lower budget while low selling price would mean people of all financial classes would be able to invest in the project.

Smart City Investment Opportunity: With the Narendra Modi led NDA government announcing its plans to build over 100 smart cities, smart city development is the next big opportunity for real estate manufacturers and investors. Some of the existing smart city projects have been witnessing a growth prospect of 10-15% annual increase with experts suggesting a much better long term investment prospective. Kochi Smart City, Gujarat International Finance Tec-City (GIFT) in Ahmedabad, Naya Raipur in Chhattishgarh and Wave Infratech's 4,500-acre smart city near New Delhi are some of the popular smart city projects that have already taken a lead with active investments from end users, investors and real estate manufacturing companies. For those seeking to invest with a long term prospective, investing in Smart cities is the best investment decision in the current market scenario.

Smaller Tier 2 and Tier 3 Cities Offering Immense Growth Potentials: Tier 2 and tier 3 cities have been offering far more real estate projects leading to a pan India growth. Some of the biggest real estate companies are focusing on smaller centers offering investment opportunities galore. With real estate prices in the metropolitan cities getting stagnant to an extent, expect for projects located the new industrial corridors the smaller centers are offering a great opportunity for both investors and real estate manufacturing companies. A large number of non resident Indians have also been supporting the smaller centers with active investment in NRI centric projects in smaller towns and cities.

Real Estate Investment Trusts (REITs): The introduction of real estate investment trusts (REITs) as announced by the finance minister Mr. Arun Jaitley in his annual budget speech is one of the positive factors likely to lead a positive impetus in the real estate sector. Real estate investment trusts (REITs) would not only increase liquidity in the cash strapped sector, it would allow end users to invest in the real estate sector from as low as Rs. 2 Lakhs and be a part of the real estate growth story. With SEBI finalizing the guidelines for REITs earmarking a minimum investment at Rs 2 Lakhs, people who were earlier willing to invest in the realty sector but did not have enough money to purchase a physical asset can now get involved in the real estate sector.

BANKBAAZAR.COM

10x in 11 years: Indian stocks' mcap crosses Rs 100 lakh cr

MARKET HITS NEW HIGH

Scaling a new peak, the total investor wealth in Indian stock market today hit a record high of Rs 100 trillion, marking a jump of ten times in little over a decade.

Measured in terms of total market capitalisation of all listed companies on the country's biggest bourse BSE, the overall investor wealth in the Indian stock market rose to Rs 100.01 lakh crore in early morning trade at 1005 hours as benchmark Sensex soared by over 300 points in its continuing record rally.

The total market cap of all BSE listed companies had crossed Rs 10 lakh crore mark nearly 11 years ago in 2003, while it has doubled from about Rs 50 lakh crore five years ago in 2009.

The 30 Sensex companies alone, which are among the biggest companies in the country, now account for nearly 50 per cent or about Rs 47 lakh crore of total investor wealth. This included TCS, the country's most valued firm and the only entity to have a market value of over Rs 5 lakh crore, followed by state-run ONCG and private sector behemoth Reliance Industries with market caps of over Rs 3 lakh crore each.

Those commanding market cap of over Rs 2 lakh crore include ITC, Infosys, HDFC Bank, SBI and Coal India. Besides, ICICI Bank, HDFC, Sun Pharma, HUL, Bharti Airtel, L&T, Wipro, Tata Motors, HCL Tech, NTPC and Axis Bank have market cap of over Rs 1 lakh crore each. Among these, ICICI Bank is very close to moving into Rs 2 lakh crore club.

Of the overall stock market wealth, promoters command nearly 50 per cent share, while foreign investors own close to 20 per cent and the rest is shared between institutional and retail investors from India.

Moneycontrol.com

The December for Markets

What will be ..The December Market


The market do perform well in December since it has been a good month for equities historically. “December is never a bad month seasonally. From 1980s, the average return that market has given is 4.5 percent. And out of 35 Decembers, in only six, market has fallen.”

What is happening to ITC

What is happening to ITC




A report in the Economic Times said, apart from banning sale of loose cigarettes and raising the minimum age of smoking to 25 (which had been reported earlier), the note sent to Cabinet suggests several other measures.
These include banning designated smoking zones in hotels and airports, banning tobacco advertising on Internet and mobiles, discouraging efforts by tobacco companies to earn goodwill through CSR, dropping nicotine/tar details on cigarette packs lest they may appear to users as ‘safe’, and setting up special courts to try offences related to anti-tobacco law among others.


ITC shares plunged 5 percent on Tuesday after it emerged the government was considering banning sale of loose cigarettes (which constitute 70 percent of cigarette sales) and raising the minimum age of smoking.


But they recovered some ground yesterday, rising about 2 percent, after analysts said a ban on sale of loose cigarettes, perceived to be the toughest measure to curb smoking, may be difficult to implement as it would be practically impossible to monitor the 7.5 million small stores around the country that sell the product. As also, cigarette companies could resort to coming out with packs of fewer than 10 sticks, something they have done in the past.


Moneycontrol.com

Warning: India's recovery may have hit a wall

Warning: India's recovery may have hit a wall

Growth in Asia's third largest economy decelerated to between 5-5.3 percent in the July-September quarter, down from 5.7 percent in the previous three months, according to analysts' forecasts.

India's economic recovery hit a wall in third quarter as industrial activity lost momentum and patchy monsoon rains hurt farm output, gross domestic product (GDP) data due Friday is expected to show.

Growth in Asia's third largest economy decelerated to between 5-5.3 percent in the July-September quarter, down from 5.7 percent in the previous three months, according to analysts' forecasts.

"Signs are the economy hit a soft patch," Radhika Rao, economist at DBS wrote in a note.

Industrial output growth is expected to have slowed sharply to 1.1 percent on year in the third quarter, from 4 percent in the previous three months, according to Goldman Sachs. Meanwhile, agricultural output growth is forecast to have weakened to 1 percent, from 3.8 percent in the previous quarter.

Service sector growth, however, is expected to have increased to 7.0 percent on year, from 6.6 percent in the previous quarter, according to the bank, helped by relatively strong growth in transport, communication and construction sectors.

High hopes

Nevertheless, economists expect the slowdown will be temporary.

"We expect that India's growth will ease in Q3…But this does not distract from our call for growth to recover to above 6 percent in 2015 as the lift from reforms and investment revival percolate through the economy," said Vishnu Varathan an economist at Mizuho Bank.

Hopes are running high for a revival of India's lacklustre economy since Prime Minister Narendra Modi came to power in May. This optimism is reflected in the performance of the benchmark Sensex, which has rallied over 30 percent so far this year, making India thebest performing equity market in Asia-Pacific. Rao agrees that a growth upturn is around the corner.

"While China has slowed down, India's high-frequency data and buoyant sentiments suggest that the economy is gradually on the mend albeit not off to the races as yet. We expect a cyclical recovery in FY15 to be followed by a structural upturn into FY16," she said.

Unlocking growth

While India's economic fundamentals are improving, helped by lower commodity prices, reforms remain key to putting the economy on a sustainable growth path, say economists.

The Indian parliament's month-long winter session that kicked off on Monday is crucial for Modi's Bharatiya Janata Party (BJP) government to prove they can deliver on reforms.

The session – taking place between November 24 and December 23 – has 22 working days and a heavy legislative agenda.

Around 37 bills are up for discussion including raising the ceiling for foreign capital in the insurance sector, making changes to the land acquisition act and the Goods and Service Taxes (GST) bill.

"Concrete progress on the reform agenda will be important to sustain the financial markets' positivity and maintain the reform momentum," said Rao. 

Moneycontrol.com

Market Update Nov 2014

ECONOMIC UPDATE   Index of Industrial Production (IIP) remained subdued at five-month low of 0.4% in August'14, down from 0.5% in July'14, mainly due to contraction in manufacturing output and lower production of consumer goods.   CPI inflation in September'14 fell to the lowest level in nearly three years to 6.5%, from 7.7% in August'14. Most importantly, core CPI inflation has declined by 105bps m/m to 5.7% in September'14. WPI inflation fell to a five-year low of 2.4% in September'14 against 3.7% in August'14 due to decline in primary articles and fuel inflation.   Exports in September'14 grew 2.7% yoy to $28.9bn, while imports grew 26% to $43.2 bn. As a result, trade deficit widened to $14.2bn, the highest in 15 months, from $10.8bn in August'14.   Indian rupee appreciated by 0.6% to INR 61.37 per dollar in October'14 versus INR 61.76 at end September'14. Direction of dollar index, FII flows and trade deficit would be the key determinant for rupee levels in coming months.

EQUITY MARKET UPDATE   Indian markets continued to scale newer highs in October with FIIs (foreign institutional investors) inflows continuing. Mid cap and small cap stocks underperformed the broader market with the CNX midcap index gaining 3.7% in the month. BSE100 index gained 4.6% in October.   FIIs continued their buying streak and were net buyers to the tune of INR.8.8bn; also mutual funds were net buyers to the tune of INR.55.0bn.   Sectors that outperformed were capital goods, banking, power and auto. Sectors that underperformed were realty, FMCG, pharmaceuticals, IT, metals and oil & gas.

Outlook-   Government has seized the opportunity provided by the easing global crude oil prices by announcing long awaited diesel deregulation. This would open the field for private players and eliminates subsidies.   Government has also resolved the long-pending issue of domestic gas price by hiking the same from US$4.2/mmbtu to US$5.6/mmbtu.   Inflation is expectedly moving lower and the RBI remains committed to keeping the economy on a disinflationary course.   We believe, if the economy stays on course, further policy tightening will not be warranted. On the other hand, if disinflation, adjusting for base effects, is faster it will provide headroom for an easing of the policy stance.   With this backdrop we maintain a positive bias on the market going forward. The market valuations are reasonable at about 17.6x FY15 estimated earnings for SENSEX.

DEBT MARKET UPDATE   Bond markets moved significantly during the month. 10Y G-sec moved down by 23 bps. Long bonds moved more and spread compressed.   However, RBI unexpectedly announced OMO sales of INR. 10,000 crore during the month to suck out additional liquidity. This move caused 10 bps sell off but market overcame the shock as inflation data was better than expected.   The FII interest in bonds continued to remain strong. FIIs have invested INR 145,600 crore in current year (till Oct). FIIs’ purchases in the Corp bond segment continued to remain strong as limits in G-sec are almost full. FIIs buying in corporate bonds have caused spread compression in 3/5year segment.   Both CPI and WPI surprised on the lower side with core CPI falling more sharply. Importantly, the fall in inflation data was more than what can be attributed to base effect in both series.   Market reacted positively as sustainable fall in core inflation is in line with RBIs inflation target. Crude Oil price fell significantly and is now hovering around USD 85 per barrel.   The 10-year benchmark G-sec bond eased to 8.28% at the end of the month from 8.51% at the end of the previous month.

Outlook-   Inflation would continue to dominate the factors that determine the monetary policy. Core inflation has been steadily trending lower. The fall in commodity prices, especially crude oil prices, iron ore, coal are likely to keep core inflation subdued.   In the near term, there seems to be little evidence of any pick-up in growth led demand as readings of industrial growth are tepid. Hence, fear of demand led price pressures are unlikely to surface as quickly as it were feared earlier.   We expect RBI to continue to maintain a sharp vigil for evidence of any demand led pressures for a few more months, as the RBI is targeting a 6% CPI inflation level for January 2016. However, probability of a rate cut by the end of the financial year is higher than was earlier.   Meanwhile, the Government is committed on maintaining the fiscal deficit for the year at the budgeted level of 4.1% of GDP. The recent announcement of 10% cut in non plan expenditure shows that Government is already making room for revenue short fall which is almost certain. We currently do not expect any additions to the scheduled borrowing during the remainder of the year.   The continued slide in crude oil price has improved the economy’s macro parameters with both CAD & fiscal deficit being impacted positively. If sustained, recent fall in crude oil prices will improve the economy’s outlook and investors’ confidence in the economy.   We expect bonds to continue to trade in a narrow range with a bias towards lower yields. At the short end of the curve, the RBI’s pro-active measures have helped contain the volatility in overnight rates and anchor the short end yields. However, we believe that yields might fall sharply if inflation data surprises more on lower side and market starts discounting a rate cut earlier than previous expectations. However, more aggressive OMO sales by RBI might slow the pace of fall in yields.

Source : Bloomberg