way to go professor! thanks for sharing Dinesh
I have been watching this market and wondering at what stage of the correction we are presently. Though the mid caps had started melting down since Jan 18, the large caps went on for many months before hitting roadblock. Though the investors who invested prior to 2017 did make money, the market invariably did not have all the trappings of bull market frenzy even at end of 2017 which is normally followed by all and sundry getting lured into the market. Hiteshji did say in Jan 18 that distribution seems to be taking place in small and mid caps but almost all were of the opinion that the final melt down was at least many months away and hence did not book profit and saw their notional gains evaporating . In the same way, many are expecting this meltdown to get more ugly and display all the signs of erstwhile market meltdowns and then they can go and load up on their favorite blue chips at rock bottom prices. Looking at the way the meltdown caught even the marquee investors like Ashish Kacholia and others unawares (He bought Butterfly at 570 I think), I think we may have seen the lowest prices on many scrips already like PNB housing, Edelweiss, etc. Since I have yet to learn the nuances of TA, can someone throw light if my musings are/are not way of the mark. If not proper, the moderators may delete my post.
One basic theme in bull market – Leaders of last rally will not lead the next bull market rally .
So while we all have recency bias , we should try to forget stocks that grew 10 times in last rally and look what can lead the way up …
I see following themes merging you may like to spot winners and losers in these theme
Increasing Power Demand/ Cost on account of increased economic activity
Shift of bargaining power in financial services from Asset side to liabilities side –
China Tariffs & Ganging up of Australia + Japan + US against China - Leading to shift in global supply chains
Formalisation of Indian economy : RERA , GST
Higher Interest rates and Higher Inflation unlike last 5 years wherein we had lower interest rates and inflation
Higher rates and inflation are bad for stock market and economy
Each of the above themes result in winners and losers … For examples
Higher interest rates winners are companies with huge cash balances like ITC , HUL , Infosys etc … They earn huge other incomes whereas companies with high debt are losers as their interest cost goes up …
Similarly Inflation is great for companies with high pricing power esp Brands that buy commodities - Their nominal revenue growth will be higher + many of them are able to control RM prices on account of their bargaining power …
While inflation is bad is companies which buy brands and sell commodities … while RM prices will go up , they will not able pass it on to their consumers …
@kb_snn it will be really helpful, if you can let me know how to analyze this shift. Should I start with import/export data and then see which companies get effected by that?
China Import and export data is one important data point but if you don’t want to go through that then look at “Facilitators of trade” which have quasi monopolies or high Market shares who will gain when there is more global trade from India –
Ports , Containers handlers , CV manufacturer ( finance companies ) etc .
Corporate Banks that can gain from increased making LC & Export Credit etc + Fee incomes
SEZ providers ( e.g construction companies like Mahindra Lifespace )
Losers : Many …
Chinese industries will focus aggressively towards Asia and also possibly India for replacing US market
Also in case you want to discuss on any of the above themes in further detail , lets take this to another thread BULL in BEAR Market so that we don’t clutter this thread
Interest rates are rising, which is bad for stocks.
But rates are rising because the economy is growing, which is good for stocks.
High growth could cause inflation, which is bad for stocks.
But inflation could boost earnings, which is good for stocks.
Repeat until crazy.
Courtesy : Morgan Housel
Crude is retreating and is under $75. Technically it looks like it could slip to $65-$70 levels within a month. That’s the “good times” levels. At least one macro is softening.
And so are interest rates in India.
However, the selloff in global equity market appears to have gathered pace with developed markets taking the lead in Oct.
Here is a link to my Global Equity Monitor that I built using country ETFs that trade on NYSE and prices from Goolge Finance.
This sheet uses ETFs that track major equity index in respective countries and priced in USD. So equity returns are inclusive of currency movement wrt USD.
As the data in the sheet shows, equity sell off is happening globally. Emerging markets began to correct earlier this year while developed markets have joined the sell off in last 4-6 weeks. With developed markets joining the sell off, we can start counting down to the bottom. Since this sell off is driven by tightening liquidity, I think it may not be very bad, or deep or prolonged. Selloffs created by bursting bubbles, global recessions etc are much worse. Just my humble opinion.
What goes up comes down… No one invites recession it happens because of failure of countries and that too major economies. Right now the world is roughing it out in Nationalism & protectionism. A protracted stance and no global consensus is bound to impact growth rate of the world but if there are no defaults or major disruption recession seems unlikely. But be prepared for a slower global growth despite moderate oil & rise of dollar.
Last consumer demand hope for the FY18-19 was festival season (Onam, Dushera (Navratri) and Diwali) but all are trends are disappointings -
Auto sales - Though manufacturer’s pushed up sales fig by pushing inventory to dealers’ showroom, dealers are not able to sell. Demand is lower than last year in festive season.
Jewellers are also disappointed with muted festive gold demand -
No crowd for festive real estate discount sale -
Agreed. Views from the ground seems to concur.
This year’s retail offline sales are lacklustre compared to previous years. Online and modern trade (malls) data is not available, but feedback from small and medium Consumer Durable retailers is that sale is poor. I will try to extract more info from a friend at Nielsen after Diwali.
What makes this info interesting is: this year finance availability and penetration was much higher than previous years, but still sales could not revive.
My sample size was a small geographic cluster in a specific industry segment (Consumer Electronics / IT) and does not represent a pan India trend.
But Nifty is likely to make fresh highs… It is a recorded feature, that retail investment is high when Nifty PE is above 24…
Bingo for retail garments industry as well. A friend who manages a big retail garment chain in Pune told me the same thing.
Interesting chart from MO’s 23rd Annual Wealth Creation Study -
Some sanity has returned to the market in Oct '18 after crazy valuation excesses in last couple years.
Sir- can you please share which price action, are you referring to Nifty/Sensex charts.
2 sides to every story
I find nothing strange here. One of them is talking solely about mobile phones while another is talking primarily about apparel. The former continues to be affected by online retailers offering discounts while the latter looks to be wresting back control. That much is clear by reading the two articles.
As for the quality of journalism - See this
The ET article speaks of retail chains by names - Shoppers Stop, Reliance Trends, Lifestyle, Future Group, Arvind Brands, Max and FabIndia and goes on to quote Rakesh Biyani of Future Retail, Rajiv Suri of Shoppers Stop, Alok Dubey of Arvind Brands, William Bissell of FabIndia with very specific information on how the festive sales has been, which is to say very good. This makes the numbers more credible.
The Times Now article mentions a few mobile store chains but has no credible quote. The only quote I found was by some Subhasish Mohanty of Spice Hotspot - Is this the sort of information you want to base anything on?
I find articles like these mostly irrelevant for Investment decision-making.
Stocks may See Major Surge if History Repeats on D-St
IN PAST 12 YEARS Every time the index has fallen about 14%, it had recouped all the losses the next 3 months; Many factors now favourable for Indian stocks: Analysts
Over the past two months, the Mumbai markets have been in a bear grip. The Nifty declined more than 14% from its high, pointing to the vulnerability of Indian equities to the falling rupee, rising oil prices, and widening trade deficits.
But long-term believers in the Mumbai miracle should not lose hope. Every time the index has fallen about 14% in the past 12 years, the next three months have seen the benchmark recoup all the losses, showed a study by Elara Securities. The only exception to this pattern was 2008-09, when the global financial industry had to ride out its steepest decline since the Great Depression.
Currently, the Nifty has recovered about 5% from its two-month low reached October 26. Since 2006, there have been 15 instances, barring the 2008-09 crisis, in which Indian stocks fell more than 10%. During these deep corrections, on an average, the Nifty declined 14% and the average duration of such corrections is 58 days.
After each bout of corrections, the Nifty recoups most of the losses over the next three months, thus offering a 15% return, according to the Elara study. On these 15 instances, the Nifty reclaimed its peak in 11 within six months after each round of declines.
Two notable prolonged corrections were in 2012 — 105 days due to the Eurozone crisis, and in 2015 — 125 days due to the China slowdown, steep drop in oil prices and increasing NPAs. Periods of prolonged corrections were also followed by periods of slow recovery. In both instances, the Nifty took about 6 months to regain its peak.
There are four instances when the Nifty failed to reclaim its peak levels even after six months of bottoming out and in all these instances, the corrections was prolonged — ranging from 52 days to 97 days.
Various factors indicate a recovery in Indian stocks, said analysts.
“We expect the market to rebound from the current levels due to valuation comfort, easing crude prices, a pause or deceleration in currency depreciation, underperformance of ‘Defiant’ sectors like IT and pharma, a rally in ‘Rebounders’ like metals, and easing market volatility,” said Ravi Muthukrishnan, head — institutional equity research, Elara Securities.
Asian Paints, Britannia Industries, Colgate, GlaxoSmithKline Pharma, Kansai Nerolac, Crisil, Dabur, and Marico are some of the leading stocks that have performed through the latest round of corrections.