Market Mantra: Stocks May Open a Tad Lower

Photo: Kalinga TV

Trading of Nifty 50 index futures on the Singapore stock exchange indicates that the Nifty could fall 6 points at the opening bell.

Overseas, most Asian stocks were trading lower, signaling fading investor applause for the US-China trade truce. US stocks rallied yesterday, 3 December 2018 after the US and China declared a truce in their trade war.

Back home, key equity benchmarks extended gains for sixth straight trading session yesterday, 3 December 2018. However, the trading was volatile as gains triggered by strong global cues were almost offset by lower-than-expected domestic GDP data. The Sensex rose 46.70 points or 0.13% to settle at 36,241, its highest closing level since 1 October 2018.

The trading activity on that day showed that the foreign portfolio investors (FPIs) bought shares worth a net Rs 293.12 crore yesterday, 3 December 2018, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) sold shares worth a net Rs 806.45 crore yesterday, 3 December 2018, as per provisional data.

Among corporate news, Axis Bank will be in focus. With reference to a news item titled "I-T dept probing Axis Bank staff for allegedly facilitating benami deals," the bank clarified after market hours yesterday, 3 December 2018, that the matter reported in certain sections of the media pertains to a complaint received by the bank in March 2018, referring to incidents of an earlier period. 

An internal inquiry in this regard has already been conducted by the bank. In case there are any queries from the income tax authorities in the said matter, the bank, as always, shall fully co-operate with the concerned authorities. The bank has always adhered to the highest standards of regulatory compliance and will continue to work towards maintaining a strict code of conduct in all spheres of business that it undertakes, it said.

The 2nd quarter real GDP growth fell to 7.1% YoY, lower than the primarily due to the weaker-than-expected services sector. Although fiscal spending and investments posted a double-digit growth, weak private consumption and very high net imports dragged GDP growth in Q2FY19.  Implied domestic savings rate also fell to a new low of 25.6% in Q2FY19, while investment rate improved to 30.9% on account of a wider current account deficit (CAD). Growth in investments was driven by the private sector (households & corporate), while government capex declined in the said quarter. 

Recent data showed that strong growth witnessd in H1CY18, was basically due to a favorable base (H1FY18: 6%), which is set to fade off in the 2nd half of the year (H2FY18: 7.4%). Although exports grew by a healthy 13.4% on Yo--Y basis, imports shot up by 25.6% in Q2FY19. As a result, net imports widened, shaving off 2.7pp from GDP growth as compared to the previous quarter. Both, investments and government consumption posted double-digit growths (12.5-13%) in the quarter under scrutiny. 

Although construction growth slowed to 7.8% in the 2nd quater of FY19, from 8.7% in the previous quarter, growth remained in line with the average of 7.5% seen during the last four quarters. Mining GVA declined by 2.4% in Q2FY19 after rising 2.8% on an average during the last four quarters.

The recent encouraging signals coming from the US President Donald Trump and Chinese President Xi Jinping's meeting in Argentina have to some extent succeeded in defusing the impending global trade war. The escalating tensions between the two major trading nation already had a sentimental impact on the financial markets across the world. The news filtering in from that summit that no additional tariffs will be imposed by the US and both the two sides will engage in negotiations, is a big relief for other trading nations, including India. 

Over the past couple of years, the RBI has over-projected headline inflation for six quarters and the actual headline inflation in Q2FY19 was as much as 75 bps lower than its projection. Similarly, as against the market expectation of 4.34 % during the past six months, the actual inflation has averaged 4.11 % 

Interestingly, while headline CPI-inflation has fallen consistently during the past two years, bond yield has risen during the past one year probably due to higher-than-expected actual inflation giving a kick to the expectation of a rise in policy rates. Thereafter, as the market participants dwelled on the details, we after another nine months that the 364-day T-bill (or 1-year G-sec) and not the is the basis for the calculation of the real interest rate. 

Key equity benchmarks extended gains for sixth straight trading session, yesterday. However, the trading was volatile as gains triggered by strong global cues were almost offset by lower-than-expected domestic GDP data. Global shares were upbeat as truce talks between US and Chinese leaders at the G20 summit improved investors' risk appetite.

The Sensex rose 46.70 points or 0.13% to settle at 36,241, its highest closing level since 1 October 2018. The index rose 251.86 points, or 0.70% at the day's high of 36,446.16. The index fell 94.62 points, or 0.26% at the day's low of 36,099.68.

The Nifty 50 index rose 7 points or 0.06% to settle at 10,883.75, its highest closing level since 1 October 2018. The index rose 64.45 points, or 0.59% at the day's high of 10,941.20. The index fell 31.40 points, or 0.29% at the day's low of 10,845.35.

The S&P BSE Mid-Cap index and the S&P BSE Small-Cap index rose by 0.46% each. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On the BSE, 1,321 shares rose and 1,263 shares fell. A total of 195 shares were unchanged.

Among the sectoral indices on BSE, the S&P BSE Realty index (up 2.6%), the S&P BSE Power index (up 2.47%) and the S&P BSE Metal index (up 2.14%), outperformed the Sensex. The S&P BSE Healthcare index (down 1.21%), the S&P BSE Energy index (down 0.52%) and the S&P BSE Auto index (down 0.19%), underperformed the Sensex.

#A BUY call was initiated in the shares of Balasore Alloys Ltd near the supports of Rs.27-27.50 for short term targets of Rs.41/62. This is a Pramod Mittal group company. He is the brother of the Kolkata (Calcutta) based Steel baron L N Mittal. When, so much talks are underway, for buying Essar Steel by L N Mittal's Arcelor Mittal, I thought it fit to recommend the scrip of his brother's company. The company has a Captive Chrome Ore Mine in Sukinda Valley in Jaipur District of Orissa which is about 170 kms from  the plant. The mine takes care of the Chrome Ore requirement of the Company. 

The company was allotted Manganese ore mines at Balaghat district of Madhya Pradesh. The produce from mines of Balaghat Sector is coveted for its low Phos and Low Fe content. Commercial operation in the said mines has commenced. 

This is a safe scrip to buy and hold considering its high book value and low risk due to it having mines. It is pertinent to mention here that Ferrochromium is having its maximum share of consumption in the steel industry and due to the ever - increasing demands from the construction and steel sectors, the global ferrochromium market is forecasted to flourish in the near future. The Asia Pacific is having the maximum market share in global ferrochromium market with China and India taking the lead.  Europe is an emerging market in the field of ferrochrome and is anticipated to have a considerable market share in future due to its flourishing automobile sector. In North America and Latin America, the demand for Ferrochrome is slowly picking up. The global ferrochromium market is anticipated to be in deficit to cater the increasing global steel demands, in near future. Ferrochromium is mostly produced in India, China, South Africa and Kazakhstan because of their large chromite resources. 

Balasore Alloys got a bargain in this market when it recently announced acquisition of 70% stake in Zimbabwe Alloys. Zimbabwe has the second largest reserves of ferrochrome in the world. For the ferrochrome industry, Africa is strategic location for two reasons. Firstly, the continent has a huge logistic advantage in terms of being near to western market. Secondly, it is very cheap to produce ferrochrome in Africa, which even China cannot match. 

#Yesterday, the shares of my well researched company Omkar Speciality Ltd and its group company Lasa Supergenerics Ltd hit their respective buyer freezes at Rs.14.10 and Rs.22.45 in the NSE. Both these stocks will give superb returns going forward and hence accumulate in declines (if any). To make money on a consistent basis, there is no need to invest in 100s of scrips. Just choose 3-4 of them at a given time and keep on investing or reducing your stakes in them, as the company either fares well or its fundamentals starts to go down. I might be recommending a momentum counter today or tomorrow, first to the Premium Member and then in Twitter (Handle: suman2009s). If you want to get the 1st mover advantage, then you need to join the Premium Information Service and get the required discounts; which is valid till 31st December 2018.

#Those who had earlier invested in the shares of Aro Granite Industries Ltd can average near the CMP of Rs.51 and exit near Rs.55-56 levels, ekeing out slight profits. The scrip is not performing according to expectations and hence it is better to put the money elsewhere. 

#The scrip of Kwality Ltd (Rs.10.50) which was hitting upper circuits eased after touching a high of around Rs.11.90 Profit booking was suggested to the Premium Members who bought around Rs.7, when it came down. The scrip might come down to Rs.8.5 before taking a fresh upmove. Though the company is facing temporary cash cruch, but these are blue chips in their respective sectors and the investors should do well to accumulate them on market declines, albeit with appropriate stop losses. I had said the same for Vedanta Ltd and Hindalco Ltd when they fell near their all-time lows, around a couple of years back. 

#Another encouraging development is that the Bank Nifty (26857.55) almost touched my target of 27000, I gave last month. You can book profits and wait for dips to enter The Entry and Exit levels will be mentioned to the Premium Members only.  

~~with inputs from Capital Market Live News and other sources including net searches and brokerage reports.