SGX Nifty Indicates Positive Opening; India’s Q4 FY20 GDP Growth at 3.1%

Market Preview

At 8:00 am IST, the SGX Nifty Futures was trading at 9,657, compared with Nifty’s Friday’s close of 9,580 showing indications of a positive nifty opening.

Market status: Confirmed Uptrend

Global stock markets: Dow 30, -0.1%; S&P 500, +0.5%; Nasdaq, +1.3%; KOSPI, +1.3%; Nikkei, +1.2%; Hang Seng, +3.7%; Shanghai Composite, +1.5%.

Last week, Nifty trended higher and gained about 6% in higher volume. Nifty Bank and Financials led the move and advanced more than 10%. Nifty reclaimed its 21-and 50-DMA, which is a very constructive setup. The confidence in the current rally will build up if Nifty is able to trade above its 21-DMA for a few more sessions and if we see the downward trending 50-DMA starting to turning upward. In addition, the broader market participation in the rally is a good sign. Also, distribution days observed on May 18 and May 22 expired during the week, as Nifty moved more than 5% higher from those levels again indicating a positive nifty opening.

We remain in a Confirmed Uptrend and are open to increasing risk selectively in quality names coming out of proper bases. However, the volatility is very high in the market. Keeping a watch on the downslide is also crucial. If we see Nifty add more distribution days, breaching key moving averages, and begin to see leaders falter at support, we will likely shift the market status to an Uptrend Under Pressure. We will take what the market gives us and continue to monitor unfolding conditions.

We do our best to narrow our focus on stocks that meet our leadership profile. This indicates they are showing strong earnings and sales, and also have an interesting potential catalyst – a new product, a new mode of operation, or new management. Once we have identified these companies, it is a matter of buying them after a period of consolidation along with conviction in demand for their shares.

Key News

• Q4 FY20 GDP grew 3.1%, which is above consensus estimates. The Central Statistical Organization noted that data collection was a challenge on account of the lockdown and can be revised later. India’s FY20 fiscal deficit came in at 4.6% of GDP, higher than FY20 revised estimates of 3.8%.
• Amara Raja Batteries reported Q4 FY20 results. Revenue grew 1% y/y and dropped 9.5 q/q. EBIDTA for Q4 was at 16.3% versus 15.9% y/y and 16.9% q/q. PAT grew 14.5% y/y and down 16.9% q/q.
• Polycab India reported Q4 FY20 results.  Wires/cables market share was 13%. Revenue was down 14% y/y and 15% q/q but at a 13% CAGR over the last five years.

O’Neil Market Condition Report

For the 24 emerging markets tracked by our institutional research team, the market status breakdown is as follows Confirmed Uptrend, 60%; Rally Attempt, 0%; Uptrend Under Pressure, 40%;  Downtrend, 0%.

For the 24 developed markets tracked by our institutional research team, the market status breakdown is as follows:Confirmed Uptrend, 80%; Rally Attempt, 0%; Uptrend Under Pressure, 20%; Downtrend, 0%.

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