Sensex falls 470 pts, Nifty at 7-month low; here are 5 factors that weighed on Dalal Street

The GST Council will be meeting on September 20 and the outcome will be important for giving direction to the economy.

After an uneventful session, market once again succumbed to selling pressure on September 19, with the Nifty50 decisively breaching the crucial 10,800 levels.

Banking & financials, metal, technology and pharma stocks pulled benchmark indices lower. The broader markets also traded in line with frontliners as the Nifty Midcap and Smallcap indices fell 1.6 percent and 1.5 percent respectively on Thursday.

The BSE Sensex was down 470.41 points or 1.29 percent at 36,093.47 and the Nifty50 fell 135.90 points or 1.25 percent to 10,704.80.

Fed Delivers Rate Cut But Holds Further Rate Cut

As expected, the US Federal Reserve lowered its overnight lending rate by 25 basis points to counter recession concerns. This was the second cut since 2008 and also the second in the year.

The current Fed funds rate range is 1.75-2 percent. The Central bank also cut interest it pays on excess reserves by 30 bps.

However, what stood out was that Fed officials were divided about the decision and over the need for future cuts.

Only seven of the 17 members of the Federal Reserve Open Markets Committee, voted in favour of September 18's cut. Two members wanted to hold the rate steady, while one wanted to cut further.

"This 25-basis-point rate cut and not much changed in the statement or in the economic projects was on expected line. However, the divided nature of the FOMC seems to be causing a concern," Sutapa Biswas of Stewart & Mackertich Wealth Management said.

The Fed sees GDP growth at 2.2 percent in 2019, against 2.1 percent projected in June this year.

BOJ Keeps Rates on Hold

The Bank of Japan kept monetary policy steady on September 18 but said it would re-examine economic and price developments more thoroughly at its next policy meeting, signalling the chance of expanding stimulus as early as October.

As expected, the BOJ maintained its short-term interest rate target at -0.1 percent and a pledge to guide 10-year government bond yields under a policy dubbed yield curve control (YCC).

Announcing its decision, the central bank said in a statement that it was becoming necessary to pay "closer attention" to the chance that the economy will lose sufficient momentum to achieve the BOJ's 2 percent inflation target.

"Taking this situation into account, the BOJ will re-examine economic and price developments at its next policy meeting" when it reviews its long-term growth and price forecasts, it said. (Source: Reuters).

No Major Announcement in Cabinet Meeting

Apart from approving the blanket ban on e-cigarettes, Finance Minister Nirmala Sitharaman did not make any other major announcements in her September 18 presser. Analysts say that the lack of announcements could have spoiled the sentiment as the market closed off its day's high in the previous session.

On the domestic front, the recommendations of GST Fitment committee to not reduce rates in certain sectors has impacted sentiment; however, the final decision would be taken at the GST Council meet on September 20.

Caution Ahead of GST Council Meet

The market is eagerly awaiting the GST Council meet scheduled on September 20.

Among the slew of expectation, the street expects a GST rate for the auto sector from 28 percent to 18 percent. However, with the approval of such rate cut, government will have to forgo a substantial portion of tax, especially at a time when the tax collection is already lower than expectations.

Hence reports suggested that the government might have rule out the demand.

The auto sector has been in doldrums recently with demand dropping to almost 20-year low.

Among other expectations, the Council may cut rates on hotels, cement, steel, ceramic tiles and sanitary wares, and also could consider road map for reducing the number of slabs.

Technical View

The Nifty50 remained under pressure from word go and formed bearish candle on daily charts. The index hit a seven-month closing low, though overall it has been in a range of 10,700-11,100 levels for several sessions now.

Experts feel if the index breaks its August lows then it could move towards its crucial support 10,500 levels in coming sessions and even the Bank Nifty was showing weakness.

Source : https://www.moneycontrol. com/news/business/markets/sensex-falls-over-400-pts-nifty-near-4-week-low-here-are-5-factors-that-weighed-on-dalal-street-4453411.html

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Here are 4 volatility biases that are impacting your investment decisions

Volatility often brings out the worst tendencies in investors. When torn between fear and loss, the investors might get pushed into making decisions which they could regret in the future.

The four most dangerous words in investing are - This time it’s different” - Sir John Templeton.

Volatility often brings out the worst tendencies in investors. When torn between fear and loss, the investors might get pushed into making decisions which they could regret in the future.

While some depend on expert commentary, others rely on their own decision-making skills. However, expert opinions may not always work in the favor of investors as they sometime come with certain inherent cognitive biases.

Hence, before you take any action in the current scenario, ask yourself - are you succumbing to these cognitive biases?

Herd Mentality

Investors often follow the footstep of famous investors instead of trusting their own analysis. While following the trend may work, this is not advisable as you may end up booking heavy losses.

This is especially true in a volatile market where market chatter seems more appealing that your individual analysis.

Always remember that if everyone is saying “A” while you are saying “B”, you need not be wrong. Following the trend without conducting researches can make you invest in the wrong assets or products, which eventually can lead to losses or inadequate returns.

Therefore, understanding what you invest in and why you invest in it is very essential.

Loss Aversion

Loss aversion is the tendency to avoid booking losses rather than focusing on making profits. We often focus on the risks associated with the investments instead of the potential gains.

This is solely because a small loss may overpower a large gain psychologically. When we think about change, we focus more on what we might lose rather than on what we might get. Some of the well-known examples of loss aversion are:

> Forgoing promising investments that carry marginally higher risk vs investing in low-return funds with fixed returns.

> Holding on to a particular stock despite rational analysis indicating that it should be abandoned.

To simply state, always keep in mind the big picture and builds a long-term view of your investments.

Framing Cognitive Bias

Our choices highly depend on how the information is presented to us. The same facts presented in two different ways can alter people’s judgments and decisions.

The marketing strategy of soaps is a classic example of this bias. We all have heard statements about XYZ soaps killing 99 percent germs, what they don’t state is the 1 percent germs we continue to consume on a daily basis, for which there is no counter. The idea, however, is to present statements which have a more positive impact.

This is particularly relevant for a volatile market, where you should draw your own conclusions rather than getting swayed by how the information is being presented to you.

This can be achieved by rephrasing the information presented to you and trying to kick in the logical, reflective approach towards decision making to avoid impulsive, reflexive decisions.

Sunk Cost Fallacy

Say two years ago, you bought a stock when the markets were at a high with the fundamentals and price trends looking optimistic. Now, when the markets are undergoing a volatile phase, the stock has started cracking and financials look bleak for the upcoming quarters.

If you continue investing in the stock believing it will hopefully recover its profit and costs, then you are suffering from a classic case of sunk cost fallacy.

It happens when you invest more money into a losing project because of previous investments.

Since the costs cannot be recovered, we don’t want to waste the time, effort and money spent on it and in turn keep spending more and more with a hope of getting returns someday.

Keeping track of all your investments, whether time-wise, effort-wise or money-wise and be ready to cut your losses when the numbers don’t look good can help avoid sunk cost fallacy.

Most importantly, in a volatile market, give all your dilemmas a careful consideration.

Understand how your biases are impacting you monetarily and instead of realigning your financial positions, if you work on your biases – then it will be more helpful in reducing losses and getting adequate returns.

Source: https://www.moneycontrol .com/news/business/markets/here-are-4-volatility-biases-that-are-impacting-your-investment-decisions-4419291.html

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Ashok Leyland announces non-working days at manufacturing facilities in September

Accordingly, Chennai-based heavy commercial vehicle major has announced 16 days non-working days for its facility in Ennore, five days at Hosur (Tamil Nadu) unit, 10 days each in Alwar (Rajasthan) and Bhandara (Maharashtra) unit and 18 days in Pantnagar (Uttarakhand) facilities.

Hinduja Group flagship firm Ashok Leyland on Monday announced non-working days at its various manufacturing facilities following weak demand. "Following are the non-working days at our various plant locations during September 2019 due to continued weak demand for our products", the company said in a BSE filing.

Accordingly, Chennai-based heavy commercial vehicle major has announced 16 days non-working days for its facility in Ennore, five days at Hosur (Tamil Nadu) unit, 10 days each in Alwar (Rajasthan) and Bhandara (Maharashtra) unit and 18 days in Pantnagar (Uttarakhand) facilities.

The move by the company follows slowdown in the automobile sector that has forced many manufacturers and component suppliers to cut production and plan temporary plant closures.

Last month, Chennai-based TVS Group auto component maker Sundaram Clayton, automobile major Maruti Suzuki, and two-wheeler maker Hero MotoCorp had announced suspension of production at their facilities in line with market demand.

Tata Motors and Mahindra & Mahindra have also said they are suspending automobile manufacturing in order to adjust production with market demand.

Shares of Ashok Leyland were trading at Rs 63.05 apiece, down 1.33 percent over the previous close at the BSE.

Source: https://www.moneycontrol. com/news/business/ashok-leyland-announces-non-working-days-at-manufacturing-facilities-in-september-4416491.html

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India VIX rose 30% since Budget; should investors turn cautious?

History suggests that India VIX and equity markets move in the opposite direction, and the bouts of volatility is likely to continue as long as the index is trading above 13 levels, suggest experts.

Volitality index, India VIX, which measures market's expectation of near-term volatility, rose more than 30 percent in just 2 months.

The index rose from 13.06 on July 5 the Budget Day to 17.27 levels on September 5, a 32 percent rise, data shows.

Consequently, the Nifty50 has fallen by over 8 percent in the same period. The index dropped from 11,811 recorded on July 5, to 10,847 on September 5 which translates into a fall of over 8 percent.

History suggests that India VIX and equity markets move in opposite directions, and the bouts of volatility is likely to continue as long as the index is trading above 13 level, suggest experts.

“Although India VIX rose sharply but fall in August month was less than 1 percent mainly because VIX is not moving in line with the market movement and nowadays more activities are being witnessed in weekly options contracts,” Chandan Taparia, Associate Vice President, Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.

“Since India VIX is trading above 16 zones so volatile swings likely to continue in September series with limited upside while VIX needs to cool off below 13 zones which could provide short term stability in the market,” he said.

Historically, Nifty and India VIX have inverse correlation and India VIX needs to close below 13 zones to witness stability in the market, but experts also say that it is not a perfect correlation. Other factors which could influence markets include movement in USD/INR, crude prices, Gold and Silver price fluctuations and interest rate.

The rise in India VIX is due to a rising consensus in the market participants about the bleak economic conditions, and weak global cues with respect to escalating tensions of a trade war between two biggest economies - the US and China.

In the last one month, we saw spikes in India VIX reading as, 17.78 on August 13, 17.85 on 22 August and 18.06 on September 3 which was triggered by a sharp fall in Nifty on these dates.

“The correlation between India VIX and Nifty has been negative in general but it is not a perfect correlation so the 30 percent rise in India VIX is not reflected in a similar fall in Nifty,” Romesh Tiwari, Head of Research, CapitalAim told Moneycontrol.

Source : https://www.moneycontrol. com/news/business/markets/india-vix-rose-30-since-budget-should-investors-turn-cautious-4410571.html

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11-year data suggests bears control D-Street in September; can bulls defy odds?

The Sensex was down 11 percent in September 2008, 5.4 percent in 2018 and dropped by 2.1 percent in the same month in 2011, data from AceEquity shows.

Indian markets remained in a bear grip in August and the trend is unlikely to shift towards the bulls with no big triggers expected in September, say experts.

The month of September is off to a muted start, with both the Sensex and the Nifty trading below crucial support levels. The Sensex broke below 37,000 and the Nifty 11,000.

Anecdotal evidence suggests that the index has given flat to negative returns in September in six of the last 11 years. The index saw a drop of more than 11 percent in September 2008, followed by 2018 when it slipped 5.4 percent, and in 2011 it dropped by 2.1 percent, data from AceEquity shows.

Apart from two tall towers witnessed in 2009 and 2010, the gains in September in the 11-year period have not been that inspiring.

The index rallied 10.2 percent in 2010, followed by 10.13 percent in 2009 and 7.9 percent three years later.

Benchmark indices are trading marginally in the green this time but the midcap and smallcap space is technically trading in a bear grip.

The rollover data for September series was not inspiring either. The Nifty Future rollover stood at 68 percent compared to a 3-month average of 75 percent.

“The rollover data is disappointing at present as the Nifty and the Nifty Bank both have the rollover data below 6-month average i.e. 66 percent and 68 percent. Usually, such data is followed by a consolidation,” Mustafa Nadeem, CEO, Epic Research, told Moneycontrol.

“Hence, the pressure may remain with the Nifty in September and the index could move in the range of 11,400-10,800. Long rollovers were seen in Nalco, Colpal, Torrent Pharma and Ujjivan. On the short side, weakness was seen in Mannapuram, MFSL, NTPC, and L&T.”

In terms of macro cues India’s GDP is at a six-year low, auto companies suffered a double-digit falls in August sales, core sector output, too, has slowed down, the currency is weak, and on the global front, trade war between the US and China has kept investors on the edge.

Analysts are not advising investors to go and sell but maintain some cash that can be used to get into quality stocks on declines. But, there are other fundamental factors such as stimulus measures from the government, trade talks and macro dat that investors should keep an eye on.

“Key event to be watched out will be the policy meeting outcome on the stress in the realty sector and any other such events for the revival in the domestic economy. Till date, although the monsoon in totality is normal, there are still patches of below-normal monsoon in most of the agrarian areas of the country,” Sumeet Bagadia, Executive Director, Choice Broking, told Moneycontrol.

“So, the progress of monsoon is important and will be keenly tracked. Apart from this any political development on Kashmir will have an impact on the market. Internationally, the development related to Sino-US trade war, Brexit and Hong Kong protest can bring some negativity in the market.”

Institutional flows

Institutional activity picked up in September. Anecdotal evidence suggests that foreign institutional investors (FIIs) were net buyers in Indian markets in September in six of the last 11 years.

FIIs poured in nearly Rs 30,000 crore in September 2010, followed by Rs 20,769 crore in 2012, and about Rs 20,000 in 2009 .

On the other hand, mutual funds were also net buyers for six of the 11 years. They poured over Rs 17,000 crore in 2017, followed by over Rs 9,000 crore in 2015, and about Rs 8,000 crore in 2018, data shows.

Source: https://www.moneycontrol. com/news/business/markets/11-year-data-suggests-bears-control-d-street-in-september-can-bulls-defy-odds-4402881.html

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'Brighten portfolio with paint stocks; Asian Paints, Berger are good bets'

Paint companies outperformed consumer staples and discretionary subcategories in terms of volume growth in the June quarter.

Shares of Asian Paints and Berger Paints India have witnessed healthy gains, in calendar 2019, thanks to upbeat quarterly results and prolonged weakness in some raw materials, including crude oil.

Analysts think the paint companies may remain on an upward trajectory for a medium as well as a long-term horizon.

"The sector is showing a lot of traction. The numbers and the margins for Asian Paints and Berger Paints India have been among the best during the last many quarters and the management have given a positive outlook for the future as well," said Sanjiv Bhasin, EVP-Markets & Corporate Affairs at IIFL.

On the consumption side, non-institutional demand was keeping the paint companies buoyant, said Nav Bhardwaj, Research Analyst- Institutional Equities at Anand Rathi. “Also, the fall in raw material prices has also supported them," he said.

In Calendar 2019 till September 3, shares of Asian Paints jumped nearly 15 percent, while those of Berger Paints gained 10 percent, against a 1.37 percent gain for the Sensex during this period.

In June quarter, Asian Paints reported an 18 percent year-on-year (YoY) growth in consolidated net profit, while total income rose 16.67 percent YoY.

Berger Paints' Q1 profit jumped 32 percent to Rs 176.8 crore versus Rs 133.9 crore, while revenue rose 15.7 percent to Rs 1,716.5 crore versus Rs 1,483 crore YoY.

Paint companies outperformed consumer staples and discretionary subcategories in terms of volume growth in the June quarter, which was in the range of 8-16 percent.

"The overall volume growth for paint companies largely remained strong in Q1—Asian Paints (16 percent), Berger Paints (13 percent), Kansai Nerolac (13 percent) and Akzo Nobel (8 percent). This was well ahead of the staples peers with only two companies reporting double-digit volume growth—Dabur (10 percent) and Nestle (11 percent)," said brokerage ICICI Securities.

"We estimate industry volume to grow at 11-12 percent in FY20, as GST-led price-cut benefits come in the base. This still translates into 1.6 times GDP multiplier, which is higher than the 14-year average rate of 1.5 times."

"We estimate industry volume to grow at 11-12 percent in FY20 as GST-led price cut benefits come in the base. This still translates into 1.6 times GDP multiplier, which is higher than the 14-year average rate of 1.5 times," said the brokerage.

Piling up of inventories and high valuation are among the concerns that can act as speed-breakers. But Bhasin doesn't think so.

Inventory pile-up worries were overblown, said Bhasin. "Paint companies will continue to see demand. The slowdown in the auto sector did weigh on them to some extent but the situation will improve in the coming months. A GST rate cut on auto, if occurs, will be the icing on the cake for the paint companies. Lower crude prices will see the expansion in their margin," he said.

Bhasin was bullish on Asian Paints and Berger Paints, saying both were big brands and enjoyed lion's share in the paints sector.

Bhardwaj had a similar view.

"The penetration of these companies in the market is still lower. So, there is a lot of latent demand for these companies," he said.

About the valuation, Bhardwaj said valuation typically was in tandem with prospective growth. Current valuations would prevail as long as the growth was good.

While the prospects of growth for paint companies look decent, competition and a fall in consumption demand remain key risks.

"Key downside risk is unexpected irrational competition due to deceleration in general consumption demand," ICICI Securities said.

Source: https://www.moneycontrol. com/news/business/markets/brighten-portfolio-with-paint-stocks-asian-paints-berger-are-good-bets-4400591.html

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Fund managers worried, think recession may be imminent: BofAML FMS survey

Overall, 34 percent thinks a recession is likely in the next 12 months against 64 percent who think it’s unlikely.

The recent signs of slowdown in major global economies has fund managers worried and quite a few of them think that the world is staring at recession.

A recent survey of global fund managers by Bank of America Merrill Lynch (BofAML) reveals that a one-third of the fund managers expect a recession in the next 12 months.

Among the 224 panelists, with $553 billion of assets under management, who participated in the survey from August 2-8, a significant "34 percent think a recession is likely in the next 12 months against 64 percent who think it’s unlikely, the highest recession probability since October 2011", an August 13 note from BofAML says.

As per the report, 5 percent of them expect value to underperform growth over the next 12 months, which is the lowest since the global financial crisis, reflecting extremely bearish inflation and growth expectations.

While the picture looks gloomy, with global policy stimuli at a 2.5-year low, the onus is on major central banks, including US’ Federal Reserve, European Central Bank and People’s Bank of China, to restore animal spirits.

"A 43 percent FMS (fund manager survey) investors expect lower short-term rates and only 9 percent expect higher long-term rates over the next 12 months. Cumulatively, this is the most bullish FMS view on bonds since November 2008," the report says.

The shaken faith in equities has forced investors to slash exposure to cyclicals to buy US treasuries and US growth stocks, the survey reveals.

Concerns over the credit cycle have heightened, the survey shows.

"A record 50 percent of FMS investors say corporates are overleveraged, with 46 percent saying they want corporates to use cash flow to improve balance sheets, against the 36 percent who want an increase in capex and 13 percent who seek cash-return to shareholders via dividends or buybacks," it says.

Global corporate earnings expectations have slumped. As per the report, 84 percent of FMS investors expect less than 10 percent earnings per share (EPS) growth over the next 12 months. Consensus global EPS estimates are 8 percent for the next 12 months and 10.5 percent for 2020.

As per the survey note, a 33 percent investors think corporate bonds are the biggest central bank-induced bubble risk, followed by government bonds (30 percent), US equities (26 percent) and gold (8 percent).

Source: https://www.moneycontrol. com/news/business/personal-finance/fund-managers-worried-think-recession-may-be-imminent-bofaml-fms-survey-4346941.html

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Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance. Moneyplant Research SEBI Registration Number: INA000007924

To get more details about share market call us on 8818886453 or visit our website https://www.moneyplantresearch.com