Sensex, Nifty charts (Jan 17, 2020): touch new highs again

FIIs were net buyers of equity on Mon., Wed. and Fri. (Jan 13, 15 and 17), but were net sellers on Tue. and Thu. (Jan 14 and 16). Their total net buying was worth only Rs 0.64 Billion. DIIs were net sellers of equity on all five trading days of the week. Their total net selling was worth Rs 31.0 Billion - as per provisional figures.

India's exports fell by 1.8% in Dec '19 to US $27.36 Billion against $27.86 Billion in Dec '18. Imports fell by 8.8% in Dec '19 to $38.61 Billion against $42.35 Billion in Dec '18.

Sugar mills in the country produced 10.9 Million tonnes of sugar till Jan 15th, nearly 26% lower than the 14.7 Million tonnes produced in the same period in the previous year. Production in Maharashtra and Karnataka was affected by rains.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex breached the psychological 42000 level intra-day on Thu. and Fri. (Jan 16 and 17) - touching a new high of 42064 on Fri. - but failed to close above the 42000 level.

Daily technical indicators are in bullish zones. MACD is moving sideways above its signal line. RSI is also moving sideways above its 50% level. Slow stochastic is drifting down inside its overbought zone. 

Sensex is trading above its three rising EMAs in a bull market. However, all three technical indicators are showing negative divergences by failing to touch new highs with the index. Some more consolidation or correction may follow.

Q3 (Dec '19) results declared so far have been as per expectations. Bandhan Bank and RIL reported very good results. RIL's debt has ballooned to Rs 3 Trillion, which should be a matter of concern for investors and lenders.

The stock market seems to be expecting market-friendly announcements in the budget on Feb 1. Several mid-cap and small-cap stocks have started rising in anticipation. Small investors should be wary, because the current dispensation has not walked their market-friendly talk.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty had dropped sharply below a large 'rising wedge' pattern in the previous week, but had formed a 'reversal' bar (lower low, higher close) and bounced up to close inside the 'wedge'. The index traded inside the 'wedge' and touched a new intra-week (12389) and closing (12352) highs.

The index is trading well above its rising weekly EMAs in a long-term bull market. However, formation of a bearish 'rising wedge' pattern at an index top should be treated with caution. The expected breakout from a 'rising wedge' pattern is downwards.

Weekly technical indicators are looking bullish and overbought. MACD is moving sideways above its rising signal line inside its overbought zone. ROC is showing negative divergence as it has crossed below its 10 week MA and dropped from its overbought zone. RSI and Slow stochastic are moving sideways inside their respective overbought zones. 

After touching a high of 28.67 at the beginning of the week, Nifty's TTM P/E has moved down a little bit to 28.61, but remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising inside its oversold zone, hinting at near-term index consolidation or some correction.

Bottomline? Sensex and Nifty charts touched new lifetime highs after brief corrections. The stock market celebrated a de-escalation in US-Iran tensions and seems to be anticipating market-friendly announcements in the forthcoming budget on Feb 1. For long-term wealth building, avoid the urge to buy near lifetime index tops.

Nifty chart: a midweek technical update (Sep 26, 2018)

FIIs were net sellers of equity on all three trading days this week. Their total net selling was worth Rs 25.6 Billion. DIIs were net buyers on all three days. Their total net buying was worth a whopping Rs 53.7 Billion, as per provisional figures.

The government has approved a Rs 55 Billion package for the sugar industry that includes a two-fold increase in production assistance to cane growers, and transport subsidy to sugar mills for exporting up to 5 million tonnes of surplus domestic stock of sugar.

India's fiscal deficit for the period Apr-Aug '18 touched 94.7% of the estimate for the full year. However, it was slightly lower than the 96.1% figure during the same period in the previous year.

The daily bar chart pattern of Nifty has corrected sharply below its 20 day and 50 day EMAs, but appears to have found some support from the 'Support/Resistance zone 1' (between 10800 and 10900).

Though the index is trading above its 200 day EMA in bull territory, a fall towards 'Support/Resistance zone 2' (between 10400 and 10600) can't be ruled out. By touching a 'panic bottom' of 10866 with strong volumes on Sep 21, the index retraced almost 50% of its rally from the Mar '18 low to the Aug '18 top.

A 61.8% Fibonacci retracement will drop the index to around 10650. That means, it will be imperative for bulls to mount a rally should the index fall towards the 'Support/Resistance zone 2'. Otherwise, a change of trend will become inevitable.

Daily technical indicators are looking bearish and a bit oversold. MACD is falling below its signal line and is ready to enter its oversold zone. RSI has bounced up weakly after receiving support from the edge of its oversold zone. Slow stochastic is oscillating at the edge of its oversold zone. Some consolidation or a pullback towards the falling 50 day EMA is possible.

Nifty's TTM P/E has moved down to 26.87, but still remains much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is hovering below the edge of its overbought zone, and is hinting at some consolidation.

Macro headwinds like high oil prices, a falling Rupee and widening twin deficits now include chaos and uncertainty about the financial stability of private banks, housing finance companies and NBFCs. 

Lack of transparency about the Rafale aircraft deal, and Supreme Court's decision against linking of Aadhar cards to bank accounts and cell phones have cast a huge shadow of doubt about the credibility of the NDA government.

The stock market detests uncertainty and usually votes with its feet. That seems to be the real reason behind the indiscriminate selling of even fundamentally strong stocks.

Stick to existing SIPs, but avoid any lump sum investments or adventurous forays into unknown small-caps. Nifty hasn't bottomed out yet.

Is BrExit offering a good stock-picking opportunity? - a guest post

The BrExit referendum was expected to be a close contest between those who wanted the UK to 'remain' within the Eurozone and those who wanted the UK to 'exit'. The actual result was unexpected. 

Actually, UK was never a fully integrated part of the Eurozone - as they maintained their own currency and visa system. A large number of those who voted for BrExit may have been duped by politicians into thinking that the 'leave' vote was an 'anti-immigration' vote.

The legal negotiations between UK and the Eurozone will start now to make the referendum a reality. That will take till the end of calendar year 2017. Nothing has actually changed on the ground yet. Still, stock markets over-reacted on the downside.

And therein may lie an opportunity. In this month's guest post, Nishit identifies some industry sectors that are unlikely to be affected whether UK eventually leaves the Eurozone or not.   

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BREXIT has happened and the world is behaving as if it is about to end. The stock markets are correcting and this is a time to add several good stocks.

What is BREXIT? It is simply the UK leaving the European Union. All trade agreements made with the EU will not be valid after 2 years (from the date when the UK triggers the Exit clause). Fresh trade agreements will have to be put in place with the UK.

Now, there are several sectors which could be affected, viz. the IT sector as also export dependent sectors like pharma, textiles and auto-ancilliaries. What will happen is that the currency market will be in a state of flux. The Pound will get weaker and the US Dollar will get stronger with safe haven demand. The US will try to devalue the Dollar for its exports to remain competitive.

International Trade will face some hiccoughs. At the same time, there are several sectors which are not dependent on exports. They are purely domestic consumption stories. These are Sugar, FMCG, Packaging and sectors whose products are mainly consumed in India.

A safe bet during these turbulent times would be to focus on sectors which have less exposure to exports and are more focused on the domestic markets. India’s growing middle class will continue to consume, and there will always be demand for soap, hair oil, cooking oil, toothpaste, biscuits, cigarettes, liquor.

Also, with news of a good monsoon, rural demand will pick up. Two wheeler and tractor manufacturers will be in demand. Last 2 years have been drought years so many farmers have not changed their equipment for a substantial time now. A good harvest can led to increase in rural demand.

The Power Sector also is not dependent on external factors ever since Coal India made plentiful coal available. When the markets fall, everything falls and this is a good opportunity to focus on such stories which are not affected by BREXIT.

Such falls give the best buying opportunities. Remember the 'GrExit' drama in August 2013 when the Nifty hit 5118. Those who bought then doubled or tripled their money.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan. You can reach him at nish.stockid@gmail.com)

Are sugar sector stocks turning sweeter? - a guest post

Most small investors will be wise to stay away from sugar sector stocks for several reasons. Like most commodities, sugar's price moves in cycles. That makes long-term investing a challenge. One needs to carefully time entry and exit to make money from sugar stocks.

The other major reason is government interference and price control. Sugar manufacturers are not always at liberty to decide whether they will sell in the domestic or export markets and at what prices. Government also dictates what prices producers have to pay farmers for their sugarcane produce. As an agricultural produce, weather plays an important role in sugar production.

However, experienced investors who are not risk-averse and are adept at timing their entry or exit can take a look at sugar stocks now. In this month's guest post, Nishit explains why the current water scarcity and drought-like conditions in several states may benefit stock prices of sugar companies. 

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Summer is a time of drought and water scarcity in many regions of India. While the main reason for this is deficient rainfall, the impact has been higher - especially in Maharashtra - because a lot of water has been diverted to water-guzzling sugarcane crops.

The most drought-affected areas are the sugarcane belt and Maharashtra Government has declared a moratorium on new sugarcane factories for the next 5 years. Sugarcane output may fall to 50% of what it was 2 years back in Maharashtra, which is supposed to be one of the highest producers of sugar within the country.

Sugar stocks are in the limelight and they should be. Lower production leads to higher prices. That means bigger profits for sugar companies.

In Maharashtra, the drought cycle will continue till the farmers switch to cash crops which require less water. Sugarcane farming will lead to more droughts. Often it takes a crisis for us Indians to act. We have a crisis staring at us right now in terms of drought.

The sugar cycle is a long cycle and the prices have still not gone up very much. Global sugar prices had peaked at around US $35 in 2011 and are currently at US $15 after touching a low of US $10.

With increasing population and lower production, sugar sector is looking up. One of the issues which need to be considered is the debt of Sugar Mills. During the last price rise in 2011-2012, this debt factor prevented many sugar stocks from gaining ground.

Sugar producing companies in the southern part of the country need to be looked at also. With water scarcity unfolding and production of sugarcane dropping, sugar sector stocks cannot be ignored.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan. You can reach him at nish.stockid@gmail.com)

Will a poor monsoon affect your portfolio? – a guest post

This year, monsoon rains have been conspicuous by their absence. While a few parts of the country have received excess rainfall, that has been the exception than the rule. Drought-like conditions are prevailing in many parts. In other parts, rainfall has been scanty to mediocre.

By all accounts, rainfall will be below average this year. What will be the effect of a poor monsoon on your investment portfolio? In this month’s guest post, Nishit looks at a few sectors that may get negatively affected by a poor monsoon and a few that may not do too badly.

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The monsoon this year is likely to be deficient. Which sectors and stocks will feel the impact? This is a burning question in the minds of investors. Let us try and analyse the impact of a poor monsoon.

The rainfall deficit has shrunk to about 15% from 22% a couple of weeks earlier. Also, the reservoirs are filling up. They are now 96% filled as compared to the last 10 years’ average and 80% filled as compared to last year at this point of time.

With steady rains falling across the country, there should not be any drinking water problem. Agriculture output will be hit, but there will not be food shortages - thanks to the surplus food grains of the previous years.

Having said all this, what will be the impact? The hardest hit will be the farmer. He will have less produce to sell in the markets and consequently less money to spend. All the rural focused sectors will be hit. The hit will not be immediate but come during the harvest season, a few months down the line.

The farmers will not be celebrating the festive season by buying new motorbikes. Thus, the 2 wheeler segment may face the biggest hit. When the times are down, farmers will also not invest in new tractors and farm equipment. This also means tractor manufacturers will face lean times.

In recent times, FMCG majors like HUL and ITC have risen to new all time highs based on uncertainty in the markets. They may take a major hit if the rural population cuts down on spending. Less colas and chips will be consumed. Sectors like IT (Information Technology) will be neutral to a poor monsoon. The banks may take a hit in the form of NPAs in case loans to farmers turn bad.

Amidst all this gloom, the sugar sector - especially the sugar mills having previous stock - will flourish. The farmers may not get much, but the sugar mills will benefit from higher realisations thanks to surplus inventory.

Overall, Indian GDP may come down by 0.6% or so. Surprisingly, in previous years of scanty rainfall, the stock markets have actually done well. The fiscal deficit may increase if the government comes up with any populist schemes. Higher food grain prices may lead to higher inflation forcing the RBI to go slow on interest rate cuts.

In the current scenario, it pays to focus on sectors like sugar and also sectors which may not get impacted much by a poor monsoon. PSU banks with their good dividend yields offer one area where folks with expectations of moderate returns may park their funds.

Cyclical sectors like steel and infrastructure, which are currently beaten down, can be nibbled at. Also, this may be the last chance to lock in at relatively high rate of interests. Bank FDs (ICICI Bank is still offering 10% to Sr Citizens for a period of 4.9 years and Bank of India 9.7%), NCDs (Shriram Transport offered 11.4%), some stocks would be a good mix to be invested in right now.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan).

Stock Chart Pattern - Balrampur Chini (An Update)

During my previous look at the stock chart pattern of Balrampur Chini, the stock had jumped up from the Mar '09 low of 42 and had nearly doubled in value by early May '09. I had expected the stock to face some profit booking after the rapid rise.

The stock consolidated in a triangle pattern instead of correcting, and after the election results embarked on a steady northward journey with occasional dips. The bull rally finally terminated with a key reversal day on Oct 30 '09, as the stock hit a higher high of 167 and a lower close of 149.

The spectacular 450% rise from the low of 30 made in Dec '08 still fell short of the high of 205 made on Apr '06. Let us take a look at the 9 months bar chart pattern of Balrampur Chini to see what transpired next:-

 

The reversal day pattern stopped the bull rally on its tracks and the stock has been drifting sideways with a downward bias since then. The 20 day EMA is resting on the 50 day EMA and the stock has moved below both the short and medium term moving averages.

The stock had recovered well in Dec '09 when the 20 day EMA had moved down to touch the 50 day EMA, but made a lower top. If it moves below 120, a bearish pattern of lower tops and lower bottoms will get formed.

There is a possibility that the 200 day EMA will provide support to the stock. Even if it does, and the stock manages to move up again, a bearish descending triangle pattern will start forming.

The OBV seems to be tracking the stock's movements, as it is supposed to do. But the MACD has moved into the negative zone and has gone below the signal line. The RSI is below the 50% level and rapidly moving towards the oversold zone. Looks like the wind has gone out of the stock's sails.

What has caused the bearishness? Technical analysis alone can't explain it. This is another instance of why both technical and fundamental analysis need to be considered for buy-sell decisions.

The Saraogi family of Calcutta that owns 36.5% of the equity and runs the show at Balrampur Chini seem to have had enough and have been trying to sell the company. In Nov '09, Bajaj Hindustan balked at the Rs 180 per share (of face value Re 1) price. In Dec '09, an attempt by Shree Renuka Sugar to take over the company came to nought.

The other reason for lack of investor interest could be the likely bulk import of sugar by the Government to ease the shortage situation. That would help curtail the runaway sugar prices and dent the profits of sugar manufacturers.

Bottomline? The stock chart pattern of Balrampur Chini shows a distinct dampening of bullish fervour. Existing holders may stay invested with a strict stop-loss at 115, with the hope that a white knight will appear on the scene soon. The risk-averse can book profits. Fresh entry is not recommended.

Stock Chart Pattern - Balrampur Chini

Enough of gloom and doom. In this week's stock chart pattern discussion, I will discuss some thing sweet, for a change. Though I've never quite understood the intricacies of the sugar sector, I do know that the one stock to own in this space is Balrampur Chini.

A look at the 3 months bar chart pattern of Balrampur Chini will show how the trend change in an individual stock gradually takes shape:-

 

(Please right-click on the image above and open it in a new tab or window for a better view.)

The stock closed above its 200 day EMA on Apr 8, '09 and since then has stayed above the long term moving average. That was the first indication of the stock entering a bull phase.

Around the middle of April '09, the 20 day EMA moved above the 200 day EMA from below, just about the time that the 200 day EMA flattened out and started rising. Those were the second and third indications that the stock was in a bull phase.

Volumes increased significantly throughout April '09 and hugely spiked up (nearly 5 times its average volumes over the past 3 months) in yesterday's trade. So the volumes confirm the change of trend.

As an investor, what should you do? Is this a good time to enter? To answer those important questions, let us look at the other technical indicators.

The 50 day EMA is moving up but is still below the 200 day EMA. That will be the final confirmation of the trend change. Looks like it will happen soon enough.

The slow stochastics moved down from overbought zone and is again going up, with the %K above the %D line. This is a bullish sign.

(It is interesting to note what happened in early Mar '09. The slow stochastics moved up from the oversold zone with the %K line bouncing off the %D line on Mar 18, '09. That was the first indication of the uptrend to follow. The RSI also moved above the oversold zone around the same time. The MACD and ROC gave 'buy' signals somewhat later.)

Currently, the MACD and its signal line have flattened and are touching each other, indicating indecision. But both the ROC and RSI are moving down while the stock has made a new high. Both are negative divergences, and is bearish.

On the long term charts, Balrampur has moved up from its 52 week low of 30 in early Dec '08 to hit 81.50 today (a rise of more than 160%). The move from its previous and higher low of 42 in early Mar '09 has been a whopping 95%.

But, today's trade was also a 'reversal day' - a higher high and a lower close than yesterday's trade. Even if the stock doesn't have a big fall, it will definitely encounter some profit booking after a huge rise.

Bottomline? Commodity sector investments can give phenomenal returns if you know how to ride the cycle. Sugar is also a sector that has huge political implications, with majority production in the heartland of India. I would wait till the election results come out before entering.

Stock Market News, Financial News - Mar 5, 2009

India Inc looks at easier loans now

Financial Express

India Inc on Wednesday welcomed the Reserve Bank of India's move on rate cuts as it believed that it will contribute to the positive sentiments in the current downturn scenario. After market hours, the Reserve Bank of India said it was lowering the repo rate, at which it lends to banks, to 5% from 5.5%, effective immediately. It also cut the reverse repo rate, at which absorbs excess cash from the banking system, to 3.5% from 4.0%, effective immediately, it said in statement. (More ... )

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India's lower sugar output to hit global consumers

Indian Express Finance

A sharp decline in sugar output in India, the world's second biggest sugar producer, in 2008-09 crop year is likely to result in global shortfall and then may lead to higher prices, says a report.

According to a report by the Netherlands-based Rabobank, there would be a deficit of over five million tonne of sugar this year globally, which would eventually lead to higher prices. (More ... )

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Fuelling demand and deficit

By Viveat Susan Pinto, Indian Express Finance

The third stimulus package came quietly. This is unlike the two that preceded it, which were announced with much fanfare. But the government had to act, that too fast, given that the third wave of the global meltdown is expected to hit home shortly. Signs of it are already visible.

Experts say that default issues in East European countries, which borrowed heavily over the years to finance their economic activity, are likely to put further strain on an already weak global banking system. This could trigger a further loss of confidence among banks to lend, leading to a general squeeze in liquidity. (More ...)

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RComm, new telcos for lower termination fee

Indian Express Finance

New telecom operators such as Swan, Unitech, Datacom and Loop, and Reliance Communications have asked regulator Trai to reduce the termination charges, while existing GSM players, led by Bharti, want the 30 paise per minute charge to continue.

Deciding on the new mobile termination charge is going to be a tough call for Trai given these extreme positions and the fact that a lower termination fee in the overall review of interconnection charge will impact the retail tariff. (More ...)

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29 FDI proposals worth Rs 616 crore cleared

Indian Express Finance

The Centre has cleared 29 FDI proposals worth Rs 616 crore, more than half of which will be brought in by AAPC of Singapore in the hotel business in India.

AAPC Singapore Pte Ltd will invest Rs 365.78 crore in an Indian company for constructing and managing low-budget hotels as per the proposals cleared on the recommendation of the Foreign Investment Promotion Board (FIPB).

However, the government has deferred as many as 19 proposals including those of Hiranandani Realtors, Yamaha Motor India, BNP Paribas Securities Services and Quippo Telecom. It also rejected a proposal by ICP Investments (Mauritius) Ltd. Besides, AAPC, a proposal by cargo-handling company ABG Bulk Handling was approved, involving FDI of Rs 90 crore for making downstream investment. India's first regulated entertainment venture fund Cinema Capital Ventures Fund will bring in Rs 50 crore for investment in the fund.

Global telecom leader Telcordia Technologies of USA will invest Rs 45 crore in buying equity in Indian companies to carry out mobile number portability solutions. (More ...)

Stock Market News, Financial News - Mar 4, 2009

Stanchart bucks downturn, posts profit on strong India operations

By ENS Economic Bureau

Standard Chartered Bank, the largest foreign bank in India, has announced a 37 per cent rise in 2008 operating profits to $943 million, led by a 33 per cent increase in income to $1.75 billion. The results include proceeds of $146 million from the sale of the asset management business. The Indian arm is the second largest contributor to group profits after Hong Kong, with a 21 per cent share. Standard Chartered plc reported a 13 per cent rise in profits for 2008 to $4.5 billion. (More ... )

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Inflating AUM: MFs will soon have to specify fund source

By Chirag Madia, Indian Express Finance

Mutual funds will soon be asked to specify the money invested in their schemes by their parent bodies, corporates and retail investors. This is expected to bring an additional level of transparency to the mutual fund business in the country. Market regulator Securities and Exchange Board of India is readying guidelines to the effect.

Disclosing the sources of the assets under management (AUM) is, however, expected to be resisted by the industry, as funds now need to disclose only their total investments. The larger the fund house the more is the draw for the new investors to park their funds in it.  (More ... )

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Sugarcane crop, crushing fall in 3 states

By Financial Express Bureau

Three of the biggest producers of sugarcane in India are grappling with a dip in production, primarily due to a fall in the area under cultivation.

Sugar production in Uttar Pradesh, the country's second largest producer after Maharashtra, has declined by 21% at 35.29 lakh tonnes till mid-February in the 2008-09 season, against 44.5 lakh tonne in the 2007-08 season. In the wake of the dip in production, the year's target, which was initially set at 60 lakh tonne, has been revised to 45 lakh tonne.

Reduction in the area under sugarcane cultivation was a major reason for the dip in production. The area under sugarcane reduced by almost 7.1 lakh hectare (ha) this year from 28.5 lakh ha in 2007-08 to 21.4 lakh ha in 2008-09. With the slump in cane production, a number of sugar mills in the state have downed shutters. The story is no different in neighbouring states of Punjab and Haryana.  (More ... )

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Yes Bank urges RBI to take more steps to ease liquidity

By Financial Express Bureau

Private sector lender Yes Bank wants Reserve Bank of India to take more measures to ease liquidity before deciding to cut lending rates, although public sector banks are continuously slashing rates.

RBI has already infused 3,88,000 crore into the banking system since October 2008 to increase the liquidity. It has cut short-term lending rate (repo) and borrowing rate (reverse repo) by 350 basis points to 5.5% and 200 basis points to 4% respectively, while cash reserve ratio has been brought down to 5% from 9%.

(More ... )