Getting to the end of April 2019, election season has caught up with the markets. It is doing up and down moves every day. Crude Oil at $75 and yet the market is not giving way to downward moves. BJP retaining power is fully factored in the market today.
Presently market is going through consolidation with news flows from the election front. Few stocks making it big in the markets continues to be the norm. Broad market rally is yet to catch up. Current market type is bullish Quiet, which would mean slow up and down moves with bullish bias.
With the SENSEX and NIFTY close to their all time high’s, by the time election results are out, we can expect both the broad indices reach historic peaks like the 40K on the SENSEX and 12K on the NIFTY.
Nifty has 44% of its stocks trending bullish and 8% trending bearish. 18% is bullish non-trending and 30% bearish non-trending. On the broader index NSE 500, the picture is different. It has 25% trending bullish and 22% trending bearish. 14% of the index is bullish non-trending and 38% is bearish non-trending.
We can see that the SENSEX and NIFTY has the potential to scale up, the broader market is going to be flat. We need a shift of bearish non-trending stocks to move towards bullish trending, which might get through as election results are out.
Due to this divergence mutual funds are likely to underperform the benchmarks on their returns. Investors need not worry as the trend will catch up soon. Only that there can be a prolonged sideways moves in the market which might not give outperformance by the funds for some time.
Stocks above 50 EMA index is also moving down below 50 mark without moving past 75 which is a need for the market to turn bearish. This indicates that after a consolidation, markets will attempt a rally which will be the deciding factor for the next big moves in our market.
Sectors supporting the markets now are Pharma, though not having participation from the whole bunch of stocks, names like Dr. Reddy, Astrazen, Cipla, Aurobindo Pharma & Lupin are doing good. Pharma was expected to do well in 2018, which it failed due to the USFDA clearance taking time. Though late, we expect a good trend here.
Metals made a recovery with TATA Steel results showing recovery in margins along with reduction in their debt. The stock had a big rally after results were announced. It also brought support from stocks like SAIL & Jindal Steel. Will metals lead in the next market rally? At present it is early to get confirmation.
Auto sector lagged in performance. There was buoyancy in the whole of auto sector a couple of weeks back, while most of them could not manage follow through. Maruti cracked with a big drop in prices from the 7500 levels giving back more than 8%, which followed by a poor results announcement were it showed a 5% decline in profits. Hero Motors, TVS Motors which were showing signs of strength too declined. Only Tata Motors is holding strength for now.
Maruti phasing out diesel variants by 2020 brought a big change in analyst views about the sector. This is not a surprise as the whole world is moving towards electric vehicles, we should see a normal shift bringing down sales of fossil fuel variants. On the background all the top names are working on their electric versions. It might take time for the sector to reign again, until then Auto might not be on the limelight.
IN the finance sector, Private banks are not showing strength. Yes Bank loss reporting was a surprise for the markets. Other major banks too have not shown big strength apart from RBL Bank and Axis which have come out with very good numbers. Public sector bank results are expected to show recovery, if not in the current quarter, it is likely in the coming quarters.
On the NBFC side, the Bajaj Twins, Bajaj Finserve and Bajaj Finance continue to be robust. Patterns show that, there is likely to be a continuation in their strength.
Mutual Funds having exposure to top performing stocks will show big gains in their NAV’s in the coming months. We look forward to a good volatile month in May for the markets, while there is no panic of any sorts.