Buoyancy witnessed in domestic bourses; Midcaps and smallcaps continue their rally..
Last week was great for investors as
benchmark indices witnessed a strong rally. The S&P BSE Sensex rallied by
1,353 points or 3.69 percent while the Nifty50 rose 3.5 percent in just 5
trading sessions. The S&P BSE Sensex closed above 38,000 for the
first time since September 14, 2018, while the Nifty50 also reclaimed 11,400
for the first time since September 18, 2018, and is all set to hit higher
target towards 11,500 levels. Banking shares, mainly of private lenders,
along with Reliance Industries (RIL), have helped the benchmark S&P BSE
Sensex reclaim the crucial 38,000 levels after six months. With Friday’s
gain, the benchmark index has rallied 7.8 per cent, or 2,752 points, from the
2019 low of 35,353 on February 19. FPIs have pumped in net amount of Rs. 30,537
crore during the same period, Sebi data shows.
The benchmark indices outperformed the
broader market in the week gone by as the S&P BSE Mid-cap index rose 2.4
percent while the S&P BSE Small-cap index was up 2.1 percent for the week
ended March 15. Nifty midcap, small cap indices extended gains over a
fourth consecutive week.
Shares of public sector undertaking
(PSU) banks continued their northward journey with Nifty PSU Bank index hitting
two-month high on expectation of improve financial performance. On Friday,
State Bank of India (SBI), Punjab National Bank (PNB), Oriental Bank of
Commerce, Canara Bank, and Bank of Baroda were up in the range of 2 to 3 per
cent on the National Stock Exchange (NSE). PNB was the top gainer among PSU
banks, hitting six month high of Rs 87.25, up 3 per cent on the NSE. The stock
of state-owned bank was trading at its highest level
since September 3, 2018. In past one month, PNB has rallied 24 per cent against
6 per cent rise in the Nifty 50 index.
Sectors & Stocks
Reliance Industries, ICICI Bank, Axis
Bank, HDFC Bank, Kotak Mahindra Bank, Bajaj Finance, and Asian Paints were up 6
per cent to 20 per cent from their respective September 14, 2018 levels.
Bank, Manappuram Finance, Muthoot Finance, Power Finance Corporation, Oriental
Bank of Commerce and DCB Bank from the financial and Bata India, Titan Company,
TTK Prestige, InterGlobe Aviation, PI Industries, Symphony, Divi’s Laboratories
were among 27 stocks from the S&P BSE 500 index surging more than 20 per
cent during the same period.More than half, or 347
stocks, from the S&P BSE 500 index are still trading below their September
Reliance Communications (RCom), Reliance
Power and Reliance Capital from the Anil Dhirubhai Ambani Group (ADAG) have
tanked more than 60 per cent.
RCom hit a new low of Rs 4.37, plunging
73 per cent during the period. The lenders of RCom sold about 4.34 per cent
stake of promoters in the telecom firm. With this sale of shares, promoters'
stake in the company has come down to 37.57 per cent from earlier 41.91 per
cent. The pledged shares belonged to promoters including that of Ambani, his
family members and RCom group entities, according to a BSE filing.
Infibeam Avenues, Dewan Housing Finance
Corporation (DHFL), Shankara Building Products, Indiabulls Ventures, Graphite
India, HEG, Indiabulls Housing Finance, Dish TV India, Deepak Fertilisers and
Chemicals and Rain Industries among 21 stocks from the S&P BSE 500 index
were slipped more than 40 per cent from their September 14, 2018 levels.
US markets ended higher during the week
on smooth progress of US-China trade deal talks. China’s state-run
Xinhua news agency said Washington and Beijing were making substantive progress
on trade talks, providing relief after news that a summit to seal a deal
between the two sides would not happen at March-end.
US data showed manufacturing output fell
for a second straight month in February and factory activity in New York state
was weaker than expected this month. The S&P 500 posted its best
weekly gain since the end of November and Nasdaq had its best weekly gain so
far this year. For the week, the S&P 500 was up 2.9 percent, the Nasdaq was
up 3.8 percent, and the Dow was up 1.6 percent.
European markets ended higher during the
week on positive global cues.
Asian stocks advanced on Friday as
sentiment improved on a report that U.S.-China trade talks were making progress
and after UK lawmakers voted to delay a potentially chaotic exit from the European
MSCI broadest index of Asia-Pacific
shares outside Japan gained 0.55 per cent. The Shanghai Composite Index added
0.7 per cent and Japan’s Nikkei climbed 0.8 per cent.
Brent Crude prices were up and closed at
US$ 67.3/barrel as compared to previous week's close of US$ 65.8/barrel.
We believe the recent rally is owing to
expectation of stable government formation at the centre, likely improved
Q4FY19 earnings season, smooth progress of US – China trade talks and US Fed
commentary. After the recent buoyancy, some profit booking is expected. The
midcaps and smallcaps are still at discount of 40-50% of their 52 week peak even
after the recent upsurge.
All eyes would be now on Q4FY19 earnings
season, global cues (oil prices, currency movement, relations between economic
giants) and domestic cues amidst ongoing tussle between India - Pakistan. Globally,
improving relationship between US and China will improve global sentiment
amidst slowdown in China’s economic growth. Going ahead, street participants
would keenly watch political developments, outcome of exit polls and actual
result of General Elections. We believe domestic bourses would remain volatile till
general elections 2019 results are out.
We believe the Indian equity markets are in
a structural bull run as the benefits of implementation of GST, Insolvency and
Bankruptcy code, digitization, thrust on Make in India and improving relations
with key foreign countries would augur well for the economy in the long run. The
strategy at present should be to invest in phased manner only in companies
which are not connected to any political party, have a robust business model,
strong earnings and cashflow visibility, low debt and backed by quality
management especially on the corporate governance front. Considering the above
factors, investors can have a stock specific approach in midcaps and smallcaps
space. We would suggest investors to have a look at Consumption stocks, top
quality Pharma companies, NBFCs having strong parentage, Auto and auto
ancillary stocks, Gas companies, PSU banks (looking better after the cleanup of
NPA mess, progress made under IBC), IT sector and Private Insurance
Companies at the current moment.