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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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Research Report

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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Research Report

Global Market – U.S. Fed focus to shift to inflation on strong jobs data

Global Market – US Fed – focus shift to inflation on strong jobs data

This week we will discuss another part of the world where high inflation is problem will be back in focus as US Fed meeting on 26-Jul-23.  Last week, we have discussed that China’s PBOC is reducing policy rates and support growth and providing stimulus package.  

US Fed to hike to highest level seen in year 2000

US Fed current policy rates is 5.00% – 5.25%.  If US Fed increase policy rates by 25-bps on 26-Jul-23 to 5.25% – 5.50% – it will be highest policy rates in 21st Century near to rates seen in the year 2000.  Back in 2006 – 2007 policy rates in U.S. were at 5.25% before market has seen sub-prime crisis followed by recession.

US FOMC meeting minutes for June 2023 policy

Almost all members agreed for more rate hike needed and guided for at least 1 – 2 more rate hike in 2023.  Powell said at a conference in Madrid hosted by the Bank of Spain last week. “Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go.”  

Equichain Wealth Advisors: Market View & Opinion

We believe, it is time keep balance approach as globally risk-on sentiment is high despite fear of further rate hike by U.S. Fed.  We do believe that such high interest rate in U.S. could have global impact and market has not fully factored in steepest rate hike by US Fed in last 15 – 16 months.

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Weekly Reports

1-Jul-23 Technical & Fundamental Insight

Last week – review

We went into last week with muted expectation, but indices witness healthy rally in a holiday shorten week and F&O expiry.  HDFCBANK & HDFC merger will be effective from 1-Jul-23 and that trigger huge rally in HDFC twins.  All major indices were up by around 2.5% recording in one of the best weeks in recent times.

Technical Insight

• Nifty RSI @ 72.04 & RSI average @ 64.08.  Nifty RSI back to above 70 level and gap between RSI & average has more than 8 and indicate overbought zone in near term.

• Banknifty RSI @ 65.36 & RSI average @ 55.93.  Banknifty gap between RSI & RSI Average is around 10 points indicate overbought zone.

Approach on Technical: Indices rally this week was sharp which has increase gap between RSI & RSI average by 8 to 10 points on Nifty & Banknifty, indicate overbought zone in near term.

Our strategy this week would be seek buying opportunity around on Nifty around 18932 & 18765 & Banknifty around 44530 & 44253.  Going into trade next week do indicate overbought zone and current momentum could take indices higher on Monday before we expect some cool-off or profit taking.

Fundamental Insight

1) Share Of Loans Bearing Over 9% Interest Rate Hits 56.1% In March, Says RBI
2) Commerce Minister Asks Bankers to Ensure Enhanced, Affordable Credit to MSME Exporters
3) HDFC Bank-HDFC Merger To Be Effective July 1

Equichain Wealth: Market View & Strategy

This week, SGX Nifty will start to trade in GIFT CITY from Monday 3-Jul-23 and will be now know as GIFTNIFTY.  Market momentum remains strong and major economic data will come only later in the week.

Our strategy going into this week will be to find suitable entry opportunity and would be preferred on decline and will continue to maintain exposure around 70% to 85% as we mentioned in last week.  We would continue to seek opportunity with basket of stocks and place our allocation to be beneficial going into result season.  We are optimistic on Banks & infrastructure and have cautious view on IT sectors.

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Daily Reports

Daily Report 26-Jun-23

Wall Street was down by 0.65% to 1.01% as economic worries continues to weigh on sentiment.  Rate hike of 50-bps to 5.00% by BOE surprised market participant.

Russia’s political crisis seems to be de-escalated over the weekend but may continue to remain an important geo-political event to watch out for, crude oil rises on Monday morning as supply may be impacted.

SGX Nifty indicate flat opening going into trade on Monday morning for final F&O expiry for June series.

VIX @ 11.24: continue to trade near lower end of the range.

Approach on Indices: Technical do indicate further correction and consolidation and Nifty @ 18567 & Banknifty @ 43314 could act as important support level, below these indices could witness further downside.

Market View: There are very little cues from global as well domestic market as indices continue to trade in narrow range, Mid-cap & Small-cap corrected after 12 weeks of gain and we think further correction in Mid-cap & Small-cap likely. 

SGX Nifty @ 18718 up 3 points at 8:25 AM

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Research Report

Global Market – BOE hike rate by 50-bps & Powell’s testimony

Global Market – BOE hike rate by 50-bps & US Fed Chair Jerome Powell testimony

This week we will discuss, BOE surprises street by raising interest rate by 50-bps to 5.00% and US Fed chair Jerome Powell in a testimony over 2-days to US Congress indicated further rate hike by 1 or 2 before end of 2023.

BOE raises rates by 50-bps to 5.00% – highest level since 2008.

The nine-member Monetary Policy Committee voted 7-2 for an increase to 5%, the highest level in 15 years and the biggest move since February.

Markets had priced in only a 40% chance of a half-point hike, with most economists anticipating a quarter point.

US Fed chair Jerome Powell – may need one or two more rate hike in 2023

Policymakers feel “it will be appropriate to raise rates again this year, and perhaps twice,” if the economy performs about as expected, even as they’ve been hiked to an appropriately restrictive level, Powell told the Senate Banking Committee Thursday.

Fed officials held rates steady last week after 10 straight increases, giving themselves more time to evaluate how the economy is responding to recent banking stress and higher borrowing costs.  The move left the Fed’s benchmark rate steady in a range of 5% to 5.25%.

Equichain Wealth Advisors: Market View & Opinion

Barring BOE decision which hike rate by 50-bps, decision by all other major banks were in-line with market estimate.  Last week US Fed “PAUSE” on rake hike, ECB raise rates by 25-bps & BOJ maintain its negative interest rate policy and guidance on JGB remains at -0.50% to 0.50%.

We believe further rate hike could impact global economy, which could be pushed in recession for short period of time and globally central banks are prepared to take pain in near term for long term objective to keep inflation at 2%.

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Weekly Reports

24-Jun-23 Technical & Fundamental Insight

Last week – review

Going into trade this week, trend remain mix as indices was trading near its recent highs, BSE Sensex made fresh and manage to cross December 2022 high while Nifty is yet to make fresh lift-time high.  Market witness profit booking and selling pressure from higher level, Mid-cap & Small-cap were looser on weekly basis after 12 weeks of continuous gains.

Technical Insight

 Nifty RSI @ 54.84 & RSI average @ 62.25, Nifty RSI indicating negative trend in near term with 18567 as first support level & 18374 as intermediate support level.  

• Banknifty RSI @ 47.92 & RSI average @ 51.38.  Banknifty is trading below its 20-DMA @ 43956 which is now acting as resistance level.

Approach on Technical: Indices are currently trading near upper-end of the range and facing supply ahead of F&O expiry next week for June 2023 series.  

Nifty below 18567 & Banknifty below 43314 could open further downside which could test lower level on Nifty @ 18131 & Banknifty @ 42493.  This week could turn out to be broader correction, while uptrend would resume in case of Nifty manages to move above 18807 & Banknifty above 44046.

Fundamental Insight

1) RBI Nowcasting Model Pegs Q1 FY24 GDP Growth At 7.9%
2) MPC Minutes: Job to Contain Inflation Only Half-Done, Says RBI Governor
3) EPFO Adds 17.20 Lakh Net Members In April: Labour Ministry

Equichain Wealth: Market View & Strategy

We believe it’s time to book profit and reduce exposure, with Q1FY24 result season to begin from 2nd week of July, market will focus on final F&O expiry and global cues.  We have reduced our exposure around 75%, but will continue to maintain allocation around 70% on lower side and 85% on higher side.  

Going into final F&O expiry for June series, we expect market to correct / consolidate at lower level which could provide fresh entry opportunity.

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Research Report

Global Market – It’s “PAUSE” or “Indicative PIVOT”

Global Market – It’s a “Pause” or “Indicative Pivot”

This week we will discuss all three central bank’s meeting outcome and its impact on global sentiment and interest rate policy.  Our focus will be that whether it will be “Pause” or “Indicative pivot”.  US Fed & ECB meeting outcome was in-line with estimate and BOJ outlook and guidance was positive as they maintain JGB yield curve at -0.50% to 0.50%.

US Fed meeting outcome on 14-Jun-23

• US Fed kept interest rate unchanged after 15-months of rate-hike cycle.
• Current interest in US at 5.25% is same rate as seen in 2007, back in 2006 – 07 – interest rate remains at 5.25% for 14 months before interest rate heads downward.

U.S. Fed chair Jerome Powell had signaled that they would prefer to skip rate hike at June meeting, while still leaving room for a hike in coming months, if needed. 

ECB meeting outcome on 15-Jun-23

• ECB hikes rate by 25-bps to 4.00%.  Deposit rate now stands at 3.50%, highest level in more than 2-decades.
• ECB guides for continuation of rate hike to bring long term inflation at 2% and to keep interest rate higher as long as necessary.

BOJ meeting outcome on 16-Jun-23

• BOJ kept interest rate by -0.10%, maintain interest rate at ultra-low level.
• BOJ signaled JGB yield curve between -0.50% to 0.50%.
• BOJ maintain its current pace of quantitative easing, and said that it will continue to purchase exchange-traded funds and Japanese real estate investment trust.

The BOJ’s move on Friday comes largely in line with market expectations, as analysts saw little scope for immediate change in the bank’s dovish stance under new Governor Kazuo Ueda.

Equichain Wealth Advisors: Market View & Opinion

While BOJ maintains its ultra-low interest rate and QE policy.  If we compare all these policies, we see significant contradiction as all these central banks are key liquidity provide for global financial market.

Our base case assumption does suggest that – we could consider this as early sign of “PIVOT” as higher interest rate will show its impact sooner rather than later.

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Weekly Reports

17-Jun-23 Technical & Fundamental Insight

Last week – review

We went into trade in this week expecting momentum build-up as there was US Fed, ECB & BOJ central bank’s meeting.  After RBI’s meeting last week, indices failed to gained momentum as supply seen from higher level.  Mid-cap & Small-cap continues its upward momentum as defense stocks rallies. 

Technical Insight

• Nifty RSI @ 67.18 & RSI average @ 64.90.  Nifty after consolidation this week continues its upward momentum with highest closing at 18826.
• Banknifty RSI @ 53.53 & RSI average @ 54.94.  Banknifty is currently underperforming Nifty.  Last week RBI meeting & this week, US Fed, ECB & BOJ continues to weight on Banknifty.

Going into trade this week, Nifty support level @ 18503 & Banknifty support level at 43552 will re critical.  Indices continue to indicate mix view with upside target on Nifty @ 18965 & Banknifty @ 44959.  As we have seen in last 2 weeks, indices remain in narrow range, we could again see this week indices trade in narrow range, we would be watching VIX closely for any change in view on increase in volatility.


Fundamental Insight

1) India’s Trade Deficit Widens To $22.1 Billion In May
2) Government Lines Up Two Tranches Of Sovereign Gold Bonds In First Half Of FY24
3) Housing Prices Rise in Top Indian Cities, Delhi Sees Highest Spike

Equichain Wealth: Market View & Strategy

Major events such as RBI MPC meeting in previous week, US Fed, ECB & BOJ meeting outcome concluded in week just concluded, outcome was mostly in-line with market expectation.  Globally market is trading near their respective high, marking 2023 with positive return after flat or negative 2022.  

Our strategy this week to remain invested around 80% – 85% and any rally to be used to reduce exposure and fresh deployment of fund to be done on major correction.  Meanwhile if market continue to trade in range, stock rotation with limit of 85% could be preferred.

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Daily Reports

Daily Report 16-Jun-23

Wall Street rallied over 1% on all major indices as market bets that interest rate in U.S. interest rate is near its peak, S&P500 & NASDAQ closed at 14-months high.

ECB raises rates by 25-bps to 4.00%, highest interest rate in 22 years and signal more hike to come, ECB maintain long term inflation target at 2%, which is currently far away from 6.1% latest inflation figures.

Bank of Japan kept rate unchanged at -0.10%, maintain yield for JGB at -0.50% to 0.50%.

VIX @ 11.08: continues to trade near lower end of the range.

Approach on indices: Indices likely to bounce after correction / profit booking seen post US Fed meeting outcome.  Indices do indicate sharp probability of bounce back.  Nifty continue to trade above important support level where as Banknifty underperform and closed below 43552.

SGX Nifty @ 18802.50 up 42.50 points at 8:55 AM

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