Twitter
Advertisement

Avoid greed in equity markets

One should not be greedy, but make bold and contrary bets

Latest News
article-main
FacebookTwitterWhatsappLinkedin

Last week, Nifty once again made a new life high of 11,480 on back of renewed buying interest in banks and financials that outperformed the market. The impressive debut of HDFC AMC on the domestic bourses once again showed the hunger for quality business with great management.

Corporate results continue to cheer the street. Of the BSE 500 companies, 411 companies that have declared their results recorded a revenue growth of 18.2% and Profit After Tax (PAT) growth of 14.4% for the quarter ended June 2018. Some of the top public sector banks and large corporate facing banks came out with their numbers. The market rewarded the ones where the management has been optimistic about the credit growth and recovery in their Non-performing assets. The banking sector witnessed profit booking in high quality banks, with good asset quality.

Meanwhile, the overhang of the regulatory change, with regards to additional surveillance measure (ASM) and other margin requirements in the future & option (F&O) space seems to be over and there has been good recovery in quality mid-cap names. This trend and momentum is likely to continue in mid- and small-cap names with quality earnings. However, one should be careful while choosing the stocks in this segment, as not all will move up. Investors should differentiate the names here between the ones that have fallen 50-60% from the highs, because of margin and other regulatory changes or because the fall is on the back of their earnings and profitability.

With oil correcting nearly 10% from the recent highs it made in early July 2018, oil prices are trading steady at $72-75 per barrel. The fear of oil moving higher is ignored by the street now. The trade war tensions between China and the United States seems to be continuing and any escalation here may impact the equity market in the short term. At the same time, India seems to be the least impacted in this global trade war scenario and this will help Indian equities outperform its peer emerging markets in big way.

For the rest of the August 2018 future & option series, we don't expect big bang moves to continue on the indices. Nifty, after making new high of around 11,480, is more likely to consolidate for the next few sessions before making any further meaningful highs. Meanwhile, we see index being more managed with few large caps moving up and a few others coming down and thereby being in a range bound scenario. With result season coming towards the end, markets will further take clues from the international markets and the development between US and China and their stand with regards to trade war.

One should not be greedy, but make bold and contrary bets. Cement, pharma, large PSU banks and some corporate facing banks gives good trading opportunities. Nifty to stay and trade in a range, but expect a lot action in the broader markets.

 


The writer is Head – Privilege Client Group, Reliance securities.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement