11th September 2017

Indian Equity market is waiting for fresh trigger for clear direction!

Following is the English transcript of the article published in Economic Times section of Navbharat Times by Ashish Kyal, CMT published today morning before markets opened.

Indian Equity market is waiting for fresh trigger for clear direction!

Indian Equity markets have been consolidating over past few weeks after forming a high in month of August 2017. Sensex closed near 31687 levels on Friday of previous week. August month showed increase in volatility with the high made at 32686 and low near 31128 levels. As compared to that, September showed narrow range bound movement so far and there is possibility that volatility can again increase in coming weeks.

Simple method to look at the trend: To understand the trend one very simple or basic method that investors can follow is to look at the highs and lows of previous month. August month low is at 31128 and so for positive trend to continue protecting this support level is very important. If prices break below this support then profit booking can be expected that can result into stocks moving lower. One should avoid buying stocks showing very high Price to Earnings (P/E) multiples as they might have deviated from the fundamental fair valuations.

Impact of GST: GST rollout and compliance has been ongoing smoothly but it seems that the economic activity lost some pace that slipped to three year lows of 5.7%. This is also because of the slowdown in manufacturing activity probably due to GST implementation. It will be important to see if the earnings can start picking up in coming quarters or not.

Banking index: Bank Nifty that measures the performance of both PSU and private sector banks has also shown some selloff in month of August after forming a high above 25000 level on 2nd August 2017. Majority of banking stocks have failed to show any meaningful bounce back in September. Bank Nifty has a very important support near 23850 levels. It is important to see if this support level can be protected or not over coming week. 

Currency outlook: Indian Rupee has shown depreciation against JPY, GBP and EURO currency pair. It seems that Indian Rupee is getting weak over past few weeks and it is therefore important to see if weakness can spread to INR movement against USD as well. USDINR has an important level of 63.60 as support and 64.30 as resistance. Break above 64.30 will indicate that volatility in currency is going to increase and it will not be a very good signal. So currency has also arrived at crucial juncture along with equity markets.

Week ahead – Sensex has been moving in a narrow range of 32000 on upside and 31350 on downside. We can expect a trending move to emerge in coming week. Breakout above 32000 will be positive whereas if the important support of 31350 is broken then we can start seeing selling pressure. Investors should therefore use proper stoploss level in case there is sudden reversal for existing positions.

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