The Rally of April and Its Implications
For the entire market, April was a month full of uncertainties. By the time the month expiry came, bears were completely defeated, their spirits are broken and bull seemed to be firmly in charge. Shyam Advisory recognized the trend pretty early and our stock tips made grand profits for our clients. But our responsibility lies not just in ensuring profits for our clients but also educating them about the market. So through this article, we would teach our readers what drove the present market rally, and what does the upcoming market days look like.
The Reasons for the Rally
At one point, the doomsday seemed to be dawning upon us as the market touched 7600 mark. Bears were even hoping that the Nifty will touch the 6000 marks. Even if it did, no one would have been surprised. The Nifty touched circuit breakers 3 times and it seemed that only pain lies in the future. But came April and the market regained strength. Nifty bounced back from below 8000 to nearly 9800 and the banknifty tips by Shyam Advisory made a huge profit for the traders.
There are multiple reasons being cited for the present market rally. Amongst them, standing tallest is the positive spirit shown by the central bank and the government. The second reason behind this rally seems to be news of flattening of the curve in Italy, Spain, and many other European countries. Germany has started showing signs of reviving the economy.
It is quite debatable whether the rally of April is a sure shot sign of the rebound or not but for a short span of time, the market finally seems to have found some peace.
Points of worry
The major points of worry for the economy remain the lowered projections for the upcoming quarters and fiscal year. The growing rate of unemployment globally is the first sign of the impending danger that is looming upon the economy. The International Labour Organisation says globally 1.6 billion workers in the informal economy are in danger of losing their livelihoods. So in such a situation, the market rally needs cautious scrutiny. Further, the market outlook in the coming needs to be analyzed in light of these numbers. Similarly, the stock tips and nifty option tips need to be traded with attention.
A Few Things That Are Not Making Any Sense
A question that has been asked in all the corners of the world is why the present market scenario has a disjuncture with economic fundamentals. COVID has not been eradicated and the world is still in search of a vaccine. Companies are still struggling and the market is still facing a liquidity crunch. Consider airline business, for example. Globally airline stocks have corrected largely. Be it Indigo or Boeing. Even the bond rating of Boeing, the world’s largest place manufacturer, has been downgraded to BBB-, by S&P Global Rating. The company has further warned that there can be further rating downgrade in the future and it would essentially amount to being labeled as junk. But somehow, the company has been able to raise $25 billion in loans.
Similarly, in India, when Franklin Templeton announced to wind up operations, RBI came to its rescue with all its guns blazing. Even though the strategy of RBI can be questioned, there is very little doubt on the intentions of the central bank. The motto is very simple. Save the economy at any cost. Considering similar moves in the coming future, Axis Bank has made a significantly large provision for bad loans. As a result, it slid 6%, the very next day. However, other banknifty tips provided by Shyam Advisory performed significantly well for the traders.
Outlook for May and June
Now that we have factored in some of the biggest questions, let’s shed some light on what a trader can expect from the market in the coming days. How are the upcoming stock tips going to behave? Whether Bank Nifty tips would be as useful as they were in the past? All these questions must be weighing on a trader’s mind.
Beginning with a general outlook, it is certain that the profits of many companies are going to take a certain hit. As per a report by ICRA, several of the AAA-rated companies have requested payment relief from the lenders. In such a situation a bailout for the industry looks the only option. The government has been discussing a bailout package since the first week of April. Many other countries have already announced similar packages.
Now that the lockdown has been extended till the 17th of May, all we can hope is that the lockdown 3.0 will not give way to another extension and there will be a gradual increase in the economic activities. Temporary measures of color-coding the districts and allowing of economic activities, such as the opening of liquor shops, takeaway orders in restaurants can be considered as a positive start in that direction. However, we must not overlook the fact that the biggest economic hubs in India like, Mumbai, Delhi, Ahemadabad are mostly in the red zone. Hence the rally might be only shortlived, as has been pointed out by many veterans.
The Deeper Implications of the Rally
Despite what one might be wishing for, the fact remains that the rally of April was only temporary relief. The worst in the market is far from over and it has already been termed as “Dead cat bounce rally”. The market has been cautious as the rally was mostly driven by the service sector and banking companies. As a result, our IT related stock tips and Bank Nifty tips were praised by our clients. However, one can’t overlook the fact the NSE realty index, for instance, is still down 44 percent in the last three months, the metals index is lower by 35 percent.
Perhaps, as the great Benjamin Graham said in his critically acclaimed book The Value Investor, diversification remains the key to intelligent investing. Even though the sectors may be performing poorly, on a whole, but there are valuable companies that are present in each segment. It is time for us to identify those valuable picks. On the part of our traders and readers, we expect them to adhere by our value investment tips. Our stock tips, banknifty tips, and currency tips would be sent after even more thoughtful research than in the past.
What Makes China Significant in the Coming months
China, once the global hub of the virus, has more or less recovered from the disaster. The world is looking forward to China because of a number of reasons. First, it holds valuable lessons in virus containment. Secondly, China remains the hub of global manufacturing. So the future of market hinges on China, once again. China has already started to look for active and valuable arenas of investments. A few days back, China’s Public Bank of China picked a 2% stake in HDFC. Even though it has brought a policy change in India but it was a strong reminder that the Chinese economy is kicking back and looking for a fresh start in the post-Corona world. So the performance of all the stock tips in the coming days will be significantly determined by the Chinese market and economy.
Identifying Valuable Stock Tips for May and June
Since many of the fundamentally strong stocks are beaten down, the present time may serve as the perfect opportunity for any value investor. So here we are providing 5 stock tips with a view of long term investment. These nifty tips can be accumulated by readers and clients of Shyam Advisory in SIP mode. They are HUL, Reliance, Dmart, Bharti, and HDFC.
During the Corona driven crash Reliance touched a year low of 900 rupees. But the stock has been in the news since then for all the right reasons. With its plan to become debt-free, its profitable Q4 reports, and riding on the wave of Reliance Facebook deal, the stock has been up by nearly 50%, since the March lows.
Recently SilverLake investment has picked up stock in the industry giant. Although in the near term the company may see some profit booking, it’s fundamentals remain incredibly strong. Hence it tops our recommendations in selected stock tips.
Even when the whole world was turning upside down, HUL was holding its fort firmly. On the one hand the companies like Reliance saw a correction of nearly 50%, HUL merely corrected only 20% and soon regained its year high mark. In April, HUL made a lifetime high of 2480 rupees. Because of being the biggest player in the FMCG segment, HUL remains one of our favorite stock tips. Our readers would do themselves a whole lot of favor, by adding HUL in SIP mode.
D Mart or Avenue Supermarket is a low cost multibrand retail mart that sells all the household supplies in a single place. It corrected from a lifetime high of 2500 to 1800 in the march. But the stock has regained its lost steam in April and gained nearly 30% from its lows made during the crash. In the first week of May, Dmart has shown signs of weakness but the stock remains incredibly strong fundamentally. Hence it gains entry into our favorite 5 stock tips.
At one point all the things looked lost for investors of Airtel. The stock was among the biggest losers of 2019 as it was hitting a new low every day. It even touched a low of 320 rupees in 2019 and 408 during the March crash. But after clearing its AGR dues, the company has regained the lost confidence of the investors. It looks well set to touch its high point reached in Feb 2019. Given the internet usages are looking well set to be increased during the lockdown, Airtel is bound to gain extra revenue and hence remains one of our favorite stock tips.
Even though the market is facing a liquidity crunch, HDFC is one of the very few companies for whom the future holds many promises. It is true that growth is likely to take a back seat in the coming days but HDFC looks all set to focus on the liquidity and risk management remains its top priority. So even though smaller NBFC may face certain issues and look for support, large NBFC are well set to tackle the repayment liability in the coming 6 to 8 months. They might even gain from exit of other companies.
Other Stock Tips and Advice from Shyam Advisory
Haruki Murakami in his critically acclaimed novel ‘Kafka on the Shore’ states that how once the storm is over, the passengers would not even remember about the storm, if they fight it bravely. Similarly, all the traders need to have some patience, as the storm of Corona, however strong it might appear to be, will certainly pass. Once this is over, traders and investors will not only regain their wealth, they will benefit from the renewed strength of the market. Till then, we at Shyam Advisory will keep on bringing valuable stock tips, nifty tips, and bank nifty tips for our readers.