Its a kind of flat to ranging market in equities on Monday ahead of crucial US Federal Reserve Bank meeting. However, in commodities, it has been northward journey since three to four trading sessions. WTI Crude oil prices on MCX India quoted above 5900/bbl. mark, at the time of writing while Gold prices quoted at 73420 and Silver at 90200 mark. Industrial metals, Copper, Zinc and Aluminium price showing decent upside globally and locally in India.
The main theme ahead is the Fed meeting where the MPC is expected to cut the benchmark target rate by as much as 50 basis point with slowing inflation and weak job market. In the US, the New York Fed's probability model suggests that there is 61.8 per cent probability that the American economy may enter recession in next 12 months. Hence a more demand for rate cuts may arise in coming months. One should note that two consecutive quarter of negative GDP reading is technically called recession and as we move on I personally do not think this recession is going to be severe like the GFC of 2008. If recession comes, it is less likely to hit India much. The only concern globally is the excessive valuation and some terming this as bubble. The US market is trading at 1.96x of GDP and India is trading at 1.3x of GDP while undervalued China is at 0.65x of GDP. Lot of hot money flow has resulted in exponential rise in equities in these two markets and it can be a cause of concern, may be in the short term. The long-term investors SIP investors should stay calm and enjoy every decline as long-term story of India remains intact.
In some positive things today, those who got allotment of Bajaj housing Finance may have seen their investment getting more than double in the first listing day. Bajaj Housing Finance listed on the exchanges with a premium of 114 per cent, debuted at Rs 150 against an issue price of Rs 70. The grey market premium of the stock was at 120 per cent ahead of the listing. The IPO crazy fans should be careful with some SME IPO, s and consider applying after reading the RHP and valuation. In upcoming IPO, the Shapoorji Pallonji Group’s flagship infrastructure firm, Afcons Infrastructure, got SEBI approval for its Rs7,000 crore initial public offering.
In corporate developments, TVS motors, has introduced the refreshed Apache RR310, now starting at Rs2.75 lakh, up Rs3,000 increase from its earlier price. JK Tyre & Industries said that its board of directors has approved a scheme of amalgamation with its subsidiary, Cavendish Industries Ltd. Reliance Power secures Battery Storage Contract of 500 MW/1000 MWh in India's Renewable Energy sector.
Now from overall market outlook perspective, all depends on Fed meeting. If a 50 bp rate cut by the US or 25 bp cut, how the market shall react. Once the legendary investor, Warren Buffet said, buy the rumour and sell the news. The market across has moved northwards expecting a 50 bp rate cut by the US Fed post CPI data and even if 50 bp cut happens upside may be capped for a day or two or one may see profit taking. A 25 bp rate cut may also shall trigger heavy profit taking of long positions. However, after this liquidation, one might get some better levels to buy. The Indian festive theme is on and every correction shall be a buying opportunity in Auto, Consumer durables, FMCG and off course IT and Pharma.
From index perspective tomorrow, one can expect sideways move in a broad range 25500-25300 levels. Bank NIFTY may face resistance at 52300 levels with immediate support at 51900 levels. The NIFTY midcap select has a important support at 13250 and if breaks then may drop till 13180 levels. The resistance placed at 13350-360 levels which may possible turn into a short zone tomorrow.
The report is being prepared by Bitupan Majumdar, an independent SEBI registered research analyst with registration code INH30006962. Please consult your financial advisor before taking investment decision.
