Author: equichain

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Global Market – Whether U.S. Fed will manage “Soft Landing”?

Global Market – Whether US Fed will manage to get “Soft Landing”?

This week we will discuss that whether US fed will manage to get “Soft Landing” of economy.  Here by we mean by “Soft Landing” is that inflation gets under control without any major downturn in economy.  U.S. economic data released so far in the month of August 2023 indicates mix view.

U.S. economic data from 1-Aug-23 to 11-Aug-23

Jobs data released in the month of August 2023 indicate stable number with no major surprises, neither positive nor negative.  U.S. Inflation data released on 10-Aug-23 came at 3.20% Vs estimate of 3.30%.  PPI & Core PPI data released on 11-Aug-23 came above estimate. 

What is “Soft Landing” of economy?

“Soft Landing” of economy here means that inflation comes under control without any major economic shock or recession.  U.S. Fed ‘s objective is to keep inflation target at 2% for long term and optimum employment, which usually can be referred to as stable economy with steady growth.

Equichain Wealth Advisors: Market View & Opinion

Current economic data from U.S. indicates mix picture and we see this as long-term positive development for U.S. economic and global stability.  We also expect some softness in economic activity and expect market to correction in next 1 – 2 months.

Looking at the data mentioned in table above, we believe this set of data does indicate moderation in economic activity at slow pace, which we assume as high probability of “Soft Landing”.   

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Weekly Reports

5-Aug-23 Technical & Fundamental Insight

Last week – review

We expected some correction / consolidation before market makes its next move, Nifty tested 19458 but was trading above 19160 & Banknifty tested 61.8% retracement level of 43541 to 46256 rally.  Indian market remain mix with Banknifty correct by 1.29% as high interest rate would be major concern.

Technical Insight

• Nifty continue to remain in correction / consolidation zone with 19160 to act as decisive support level this week & break-out above 19678 to act as fresh trigger.

• Banknifty took support at 61.8% retracement level of 43541 to 46256.  Banknifty close below 44578 could open further weakness & above 45219 Banknifty could expect another round of rally.

Approach on Technical: Technical trend continue remain mix and no clear direction in short term while medium term trend remains positive.

Nifty @ 19160 & Banknifty @ 44578 & 44138 to act as critical support level.  Indices would turn negative only if this support level are broken on closing basis and uptrend could resume once Nifty goes above 19674 & Banknifty above 45615.

Fundamental Insight

1) Forex Reserves Drop By $3 Billion To $603.87 Billion
2) India’s Unemployment Rate Falls in July Due to Farm Demand
3) Banks Spend More In Q1 As Employee Costs Continue To Mount

Equichain Wealth: Market View & Strategy

This week focus would shift to RBI MPC meeting outcome on 10-Aug-23.  Most private banks came out with Q1FY24 result in-line or better than street estimate but SBIN seen some increase in slippages to 7659 crores from 3185 crores, quarter ago.  RBI has kept rate unchanged in last two policy meeting and is expected to maintain status quo.  RBI Governor commentary and guidance on future action will provide fresh set of triggers.  Q1FY24 earnings season in last phase as PSU & defense PSU stocks will be in focus.

We would continue to focus on capital allocation strategy which is currently around 70% to 85% with allocation in defensive stocks around 15%.  Any major correction would provide us opportunity to deploy fund which is already available.  In case of sharp up move, we would prefer to keep exposure at same level and look for rotation of stocks within exposure limit.

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Global Market – Fitch downgrades U.S. rating to AA+ from AAA

Global Market – Fitch downgrades U.S. rating to AA+ from AAA

This week we will discus the decision by Fitch, a rating agency which downgrade U.S. rating from AAA to AA+ as budget deficit increases.  China may continue to support economy and provide stimulus package to aid recovery and we will discuss BOE policy outcome as it raises rates by 25-bps to 5.25%.

U.S. rating downgrade by FITCH

U.S. sovereign credit rating was downgraded to AA+ from AAA, 1 notch down from AAA rating which highest rating by FITCH.  The rating downgrade expects the fiscal deterioration over next three years on concern of growing general government debt burden and erosion of governance.

BOE Raises Rates to 5.25%

The UK central bank lifted its key rate a quarter point to 5.25% on Thursday, which was in line with market expectations after a surprise half-point increase in June. Still, signs of debate between policymakers prompted traders to pare bets on the pace of further hikes, with markets priced in for rates to peak below 5.75% in February.

China expected to cut Bank’s RRR to boost economy

That’s according to several analysts who’ve pointed to the mounting value of policy loans maturing this month and through the rest of the year as reason for the People’s Bank of China to unleash more liquidity.

Equichain Wealth Advisors: Market View & Opinion

Interest rate at current level is high compared to 2006 – 07 period which was followed by 2008 economic crisis.  Interest rate hike seen from March 2022 was steepest rate hike in recent history and is yet to show its impact on economic activity.

Globally equity market is trading near its recent high, commodities are trading at lower level compared to post Russia-Ukraine crisis increase in prices.  Global financial have not factored in any of the risk which can arise out of high interest rate and rating downgrade for U.S. or any other develop economies.  

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Daily Reports

Daily Report 1-Aug-23

Wall Street was marginally positive as oil stocks help market gain while health care stocks struggle, big tech stocks such as APPLE & AMAZON remain in focus ahead of its earnings later this week.

Domestic natural gas prices were raised from Aug. 1, 2023, to Aug. 30, 2023. Domestic natural gas prices were raised to $7.85/mmBtu from $7.48/mmBtu. The price of gas from ONGC and OIL nomination fields will have a ceiling of $6.50/mmBtu on a gross calorific value basis.

WTI Crude above $80 & Brent Crude above $85.  Metal price remain strong on hope of China’s stimulus package.

F&O data: FII continue to reduce long position in index futures, net short by 8147 contracts in index futures on Monday.  Net long position now stands at 51.46%.

Approach on Indices: Nifty likely to test 19835 & Banknifty likely to test 45835, indices above this level could open further upside and support remain on Nifty @ 19478 & Banknifty @ 45219.

GIFT NIFTY @ 19883 Vs 19844 Nifty future previous close.


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Daily Report 31-Jul-23

Wall Steet had another positive session with NASDAQ gain by 1.90% as tech stocks did well.  DOW30 was up by 0.50% & S&P500 was up by 0.99%.

China Seeks to Boost Consumption to Spur Economy’s Recovery – China’s economic data continues to remain weak as Chinese government continue to focus on economic revival since beginning of 2023.

Metal & Chemical stocks will be focus as China’s is expected to announce fresh set of measures to boost economy.

F&O Data: FII net long position in index futures by 13814 contracts, FII reduced 19427 contracts in index futures.  Nifty PCR @ 0.82 Vs 0.90 & Banknifty PCR @ 0.74 Vs 0.70.

Approach on Indices: Nifty @ 19478 & Banknifty @ 45219 could act as important support level and indices remain in uptrend till these levels hold.

Market View: We would focus on Metal stocks, Defense stocks for fresh allocation.  PSU’s where Q1FY24 earnings is pending could provide fresh entry opportunity.

GIFT NIFTY @ 19785 Vs 19751 Nifty future pre close.

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Global Market – U.S. Fed meeting outcome & BOJ Policy outcome

Global Market – U.S. Fed meeting outcome & BOJ Policy outcome

This week we will discuss U.S. Fed meeting & Bank of Japan policy outcome.  U.S. Fed increase rate by 25-bps to 5.25% to 5.50% is highest in 22 years and further tightening not ruled out.  Bank of Japan continue to maintain ultra-low interest policy and continue with its QE and manage JGB yield between -0.50% to 0.50%.

U.S. Fed hike rate to 22-year high, keeps door open for further rate hike

The Federal Reserve resumed raising interest rates and Chair Jerome Powell left open the possibility of further hikes, which he emphasized will depend on incoming data that has recently signaled a resilient US economy.

Bank of Japan policy decision outcome

The key move that jolted markets was the BOJ’s switch to a more flexible approach on bond buying. The bank turned its heavily defended yield cap into little more than a yardstick. The BOJ will now allow movements beyond 0.5%, further diluting the meaning of a 0% target aimed at stimulating the economy and prices.

Equichain Wealth Advisors: Market View & Opinion

Global market continues to focus on U.S. Fed and BOJ which are currently adopting contrarian policy approach.  U.S. Fed continue to raise rates and keep door open for further rate hike while BOJ keeps rate ultra-low and but however, they may allow JGB yield to move up to 1%.

We would continue to focus where we see risk arising out of tight monitory policy.  Globally inflation seen softening.  Global monitory policy shift to downward trajectory will provide fresh trigger to risk-on sentiment whereas further tightening would lead to risk-off.

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Weekly Reports

29-Jul-23 Technical & Fundamental Insight

Last week – review

Market started this week with cues from RELIANCE, KOTAKBANK & ICICBANK result.  Technical setup does indicate some pause and market this week after brief consolidation have seen correction. Market corrected on Thursday & Friday making indices to close with minor loss on weekly basis.

Technical Insight

• Nifty rally from 18646 to 19991, retracement @ 38.2% comes @ 19478 & 61.8% comes at 19160.  Nifty below 19478 could test 19160 level and Nifty above 19861 could resume fresh uptrend.

• Banknifty rally from 43541 to 46256, retracement @ 38.2% at 45219 was tested on Friday, further correction could test 44578.  Banknifty above 45841 could resume positive trend.

Approach on Technical: Indices after all most 16% -18% rally in last 3 – 4 months is showing some sign of weakness on charts.  Indices have witness sideways consolidation during this rally and we may continue to see that trend.

Nifty @ 19478 & Banknifty @ 45219 are 38.2% retracement level of their recent rally.  Any weakness could trigger correction up to 61.8% retracement level on Nifty @ 19160 & Banknifty @ 44578.  We assume that uptrend will resume once Nifty @ 19841 & Banknifty @ 45927 is crossed.

Fundamental Insight

1) India GDP To Grow 6-6.3% In FY24, Economic Prospects Brighten: Deloitte India
2) Surging India Prices May Keep RBI on Extended Pause, IMA Says
3) IMF Raises India’s GDP Forecast To 6.1% For FY24

Equichain Wealth Advisors: Market View & Strategy

During the last few weeks, we have maintained our strategy to participate in this rally with keeping exposure around 70% to 85% and some allocation towards defensives.  We would prefer stock rotation while keeping exposure at same level and we continue to maintain our strategy.  This week we would focus on defense stocks, telecom & PSU where result is awaited.  Any correction would provide fresh view on market to deploy fund available with us. 

Buying keeping allocation at 70% – 85% in last few weeks, we have managed to perform in-line with index and any we would deploy fresh fund on correction as we believe market will continue to correct and have stock specific approach.

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Daily Report 21-Jul-23

Wall Street: TESLA & NETFLIX was down after result, NASDAQ & S&P500 ended down by 2.05% & 0.68% respectively.  DOW30 ended in green with 0.47% gains.

INFY Q1FY24 result in-line with estimate, revised revenue guidance downward to 1% – 3.5% from earlier 4% – 7%.  INFY ADR down by 8.5% overnight, expect to open with deep cuts.

RELIANCE will come out the result today.  LT result on 25-Jul-23 will consider Buy-back and special dividend and record date for same will be 2-Aug-23.

F&O data: FII added 11091 contracts in index futures, net long position for FII is now above 1 lakh contracts in index futures, net long position now stands at 70.68%.

Approach on Indices: GIFT Nifty indicate down opening due to INFY & other IT stocks could remain under pressure, Nifty @ 19697 & Banknifty @ 45110 could act as support level in case of any correction.  Banknifty will continue to outperform.

GIFT NIFTY @ 19880 Vs 19967 Nifty future previous close at 8:05 AM

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21-Jul-23 Daily-Report.pdf
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Daily Report 20-Jul-23

Wall Street had muted session with minor gains as corporate earnings continues to boost sentiment, TESLA Q2 result beat margin despite price cut.  NETFLIX was down reacting to result.

RELIANCE & JIO Financials to trade at separate entity from 20-Jul-23.  Price discovery session from 9:00 AM to 10:00 AM.  Cost of acquisition for Reliance Ind @ 95.32% & RSIL @ 4.68%, values RSIL @ 132.98*

HINDUNILVR & INFY will announce Q1FY24 result today.  INFY expected to declare result after market hours, stock will react to its number tomorrow.

F&O data: FII were net seller in index futures by 3464 contracts, net long position remains above 70% currently at 70.20%:29.80%.  Nifty PCR @ 1.34 Vs 1.34 remains unchanged.  Banknifty PCR @ 1.12.

Approach on Indices: Indices continue to make fresh high now on daily basis and Nifty is in unchartered territory and heading towards 20000 historic level.  With weekly options expiry Nifty @ 19800 & Banknifty @ 45500 will be in focus.

GIFT NIFTY @ 19830 Vs 19847 Nifty future previous at 8:30 AM

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20-Jul-23 Daily-Report.pdf
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Daily Report 19-Jul-23

Wall Street had another positive session as US indices closed at yet another closing high in recently times.  US Banks rally as result beat estimate, Microsoft hits record high after AI-Optimism.

LTIM corrected yesterday reacting to its result, LTTS may correct today as it announced result after-market hours yesterday.  INFY is set to announce it result on 20-Jul-23, rallied by 3.73% on deal win.

JIO Financial will get listed in a separate entity from 20-Jul-23 and will be included in Nifty 50 and other indices.  All outstanding F&O contract in RELIANCE will be closed today and physical settled.

F&O data: FII added net long 5590 contracts in index futures, net long position now stands at 71.18% and 96701 contracts.  Nifty PCR @ 1.34 Vs 1.54 previous.  Banknifty PCR @ 0.99 Vs 1.46 previous.

Approach on Indices: We expect further profit booking on indices, we are not comfortable with the pace of rally to add fresh long at current level.  Nifty @ 19622 & Banknifty @ 45110 are near term support level in our watch list.

GIFT NIFTY @ 19800 Vs 19771 Nifty future close at 8:30 AM

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19-Jul-23 Daily-Report.pdf
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