F&O settlement and Budget expectations to drive the markets ..

Bullish signals from global markets , better than expected Q3 figures from blue chips , Fresh cuts in GST rates and news that 100% FDI may be allowed in banking sector pushed the Indian markets to new highs last week . The markets ignored the rise in crude oil prices. The benchmark indices – The Sensex and the Nifty closed 919 and 213 points higher at 35512 and 10895 respectively. What was noticeable was that the small and mid-cap stocks did not show as much enthusiasm as in the many previous weeks and the BSE mid and small cap index closed lower by 2.1% and 2.7% respectively. This along with the news that the US markets are at over bought territory is a cause of worry.

Going ahead, the week is likely to see some actions as the January derivatives expiry is on Thursday. Markets are expected to be volatile ahead of F & O expiry. We may also see some profit booking, as the participants will now turn their focus to the upcoming budget. As long as the Q3 earning seasons spells out more good news, the current trend in the markets may continue ahead of the budget. The other near term factors that might influence the market movement are FII fund flows, Crude oil prices and Global cues. For the week ahead, an trading range of 35000-36000 is expected for the Sensex and 10700-11000 is expected for the nifty with positive bias.

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The week ahead: Q3 and the budget expectations to dictate the market moves.

Optimism on Q3 results, continuous flow of foreign funds and positive expectations over the upcoming budget kept the market ticking higher for the week ended. Markets closed in green for the second consecutive week. Both the Sensex and the nifty closed the week by gaining 1.28% and 1.16% to settle at 34,592.39 and 10681.25 respectively.

Going ahead, the direction of the market will be dictated by the Q3 results season, crude oil prices and expectations over the budget. The compulsions of giving a rural bias in the budget is something that the market participants are worried about and hence more volatility is expected in the markets as the date draws near.

The present Bull Run is giving good opportunities for investors to book some profits and, we believe that some profits must be booked at this stage. The Oil rates which had hit USD 70 per barrel last week is an indication that the 3 year gift that we enjoyed in terms of low oil prices is now coming to an end. This in turn, will put a lot of pressure on the finances and inflation figures in the near future. So any slight trigger such as earnings disappointments or a budget that fails to please everyone can cause the markets to correct

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The week ahead: Q3 earnings to dictate the trend.

The Indian benchmark indices – the Sensex and the nifty – ended last week at 34154 and 10558 thanks to positive cues in the domestic front and global economies, especially US. There was renewed buying interest from the FIIs and we could observe that the positive mood created in the markets were reflected in the broader segments as well – the small and mid-cap segments too performed with the BSE mid and small cap indices rising .60% and .97% respectively.

Going ahead the markets will be focusing on two critical events – the on-going Q3 results season and the budget scheduled on Feb 01 2018. The Feb 01 budget would be the last full-fledged budget from the government ahead of the next year elections and hence, it is likely to be a populist budget. The expectations of the market participants can result in volatility and stock specific actions in the next couple of weeks.

Another critical factor that is to be watched is the crude oil price which is at USD 68 per barrel now. The oil has reached this level after a long gap of 2 and half years. Oil price experts are of the opinion that crude can touch USD 70 in the days to come. This is risky for the Indian markets since it will widen the fiscal deficit.

So overall , the three factors that’s going to dictate the markets trends are the budget expectations , Q3 results and crude oil prices. For the week ahead a trading range of 33600-34500 is expected for the Sensex and 10370-10700 for the nifty.

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The year ahead : What’s in store for 2018?

There was a break in updating this site due to personal reasons. I am overwhelmed by the enquiries that came from my readers soon after I stopped updating the site. Thanks to one and all. It’s New Year and Share market school is back.

Without doubt, 2017 was a very good year for Indian stock market investors. In fact, most of the global markets have recovered well in 2017. As far as indian markets are concerned, the BSE Sensex and the NSE nifty has delivered returns of roughly over 30%. Over 130 stocks have doubled between January and November 2017 against just 13 in 2016. The general view is that the markets will continue its bull run in 2018 too. However, given the spectacular returns in 2017, one should be expecting a more tampered rate of return in 2018 – a 15% to 20% return would be ideal for the indices. The bad effects of demonetization and GST are expected to fade away and the economy is expected to settle. The 1st week of 2018 would start with the auto sales numbers for December and it’s also the start of the earnings season for 0ctober-December quarter.

Although everything seems to be alright, there are some concerns too- The risk of high crude oil prices and high inflation is back. The Brent crude oil prices have hit USD 65 and it’s expected to hover around that range. Should the prices move up again, it would be a cause of worry for the markets.

The market participants also seem to have already discounted most of the positives of 2018. As such, it should be borne in mind that any upward movement would come with the possibility of downward corrections. Corrections are likely to happen in 2018 and these should be utilised for adding up stocks to your current stock portfolio. One sector that experts focus in 2018 is banking. The current issues of cleaning up balance sheets will be over in 2018 and that will result in a good show from this sector. Apart from banking stocks, auto ancillary and housing sector are the other two sectors which are expected to give good returns to the investor.

There are a lot of queries on investing in Bitcoins and other crypto currencies. At present in India the RBI or the SEBI has not given any licence to anyone to trade in bit coins. These online currencies are not backed by any assets and do not have any intrinsic value. Its pure speculation that’s driving the prices up. Hence it is advised to stay away from these investments.

Share market school wishes it’s readers a very happy and prosperous 2018.

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