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Nifty Closes Flat; IT Stocks Continue to Rally

October 13 2020
Today’s Action

Nifty, +0.03%; Sensex, +0.1%; Nifty Midcap, -0.5%; Nifty Smallcap, -0.2%; Model Portfolio, -0.3%

Market Pulse Rally Attempt

Nifty opened on a flat note and quickly lost over 40 points and made an intraday low of 11,888 within the first 10 minutes. Buying was seen at the lower levels among IT stocks and Nifty gained 100 points to make an intraday high of 11,988. In the end, Nifty managed to close in the green for the ninth consecutive session. 44% of Nifty50 stocks advanced today led by Hcl Technologies (Nse) (+4.0%) and Infosys (+2.3%). On the flip side, Cipla (-3.3%) and Titan Company (-2.2%) were the major decliners.

Barring Nifty IT (+1.4%) and Metal (+0.3%), all the sectoral indices closed in the red. Nifty Pharma (-1.9%) declined the most, followed by Nifty Media (-1.7%) and PSU Bank (-1.6%). The advance-decline ratio was in favor of decliners. Of 2,209 stocks traded, 814 declined, 1,019 advanced, and the rest remained unchanged.

Looking forward, we would prefer to see a follow-through day before shifting the market to a Confirmed Uptrend.  A follow-through day is a solid up session, generally a 1.5% or higher gain, with volume being higher than the previous day. Should this occur, the focus will be on ideas that show the best relative strength with good accumulation. Stocks that recover the quickest tend to lead the next run. On the flip side, if Nifty breaches its recent low of 10,790, the market will be moved back to a Downtrend.

 
 

High-Stakes Competition In India

The heavy investments underscore the high stakes in the country. Despite its vexing red tape and protectionism, India offers a young and smartphone-obsessed population. It’s now Facebook’s biggest market in the world by number of users. And it’s the second-largest market for Google’s YouTube, behind the United States.

Amazon and Walmart together control more than 60% of the Indian e-commerce market. Meanwhile, Walmart is also in talks with India’s Tata Group for a potential investment of up to $25 billion in its new super app, sources told India’s Live Mint earlier this week.

Mukesh Ambani controls Reliance Jio
Mukesh Ambani runs the Reliance Industries empire. (Reuters/Newscom)

A key entry point for international tech companies in India is Mukesh Ambani. He runs the Reliance Industries empire that spans petroleum, retail and telecom. He is also Asia’s richest man with a net worth of nearly $90 billion, well above Alibaba (BABA) founder Jack Ma’s $54 billion.

Ambani has a reputation as a ruthless mogul, known for undercutting rivals with low prices. His Reliance Jio telecom unit came out of nowhere five years ago to overtake then-market leaders with low data rates and free phones. But he has alienated many ordinary Indians who think there’s no business the company sees and doesn’t want to control.

Keys To The Kingdom: Ambani, Reliance Jio

Analysts say the most attractive part of Ambani’s vast portfolio is Reliance Jio. The company boasts India’s largest mobile telecom network. It’s also the foundation of a buzzy new digital services company called Jio Platforms.

Facebook and Alphabet subsidiary Google bookended a $20.2 billion fundraising spree by Jio Platforms earlier this year, plowing $5.8 billion and $4.5 billion, respectively, into the Indian startup. By July, Jio Platforms had a $58 billion valuation within a year of being formed.

Reliance Jio Platform
By July, Jio Platforms had a $58 billion valuation. (Piotr Swat/shutterstock.com)

Though each partner has its own reasons for investing, partnering with Reliance Jio is key because it owns the digital highways, says Arvind Singhal, chairman of India-based retail consultancy Technopak Advisors. Reliance Jio boasts 388 million mobile subscribers. Its customers will do more online shopping on their phones in the future, even in small towns and villages.

But Ambani’s sprawling ambitions could make his conglomerate both a rival and a partner to U.S. tech companies in India. Like Walmart and Amazon, Reliance Jio is developing a digital ecosystem across e-commerce, logistics, electronic payments, movie and music streaming, and cloud storage. It even has a videoconferencing service, challenging Google Meet and Zoom Video (ZM).

In fact, Reliance Jio is creating a “superapp” like Tencent‘s (TCEHY) WeChat, says Singhal. Its MyJio app already offers instant messages, while also allowing users to pay bills, listen to music, play games, keep photos in the cloud, read news, access government services and more.

What do you think? Please email us any questions or comments.

Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.For more information, see our Legal disclosures here.

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