The Price Factor
14th of April 2017 is a trading holiday for markets on the eve of Ambedkar Jayanti and Good Friday. Infosys results will come a day before the holiday. It will announce the annual financial results for 2016-17 along with the Q4 performance. As the strong Rupe, which has hit a 20-month high at 64.16 (intraday 64.32) against the US Dollar, Infosys results may disappoint market to some extent.
The industrial production data for February month will be known on April 12, Wednesday. The same day, the announcement of CPI Inflation figures for March 2017, with a new base year 2012, will come. There is a pick-up in the march month’s consumption, which was postponed due to the demonetisation disturbance. However, the remonetisation brings the situation under control. The monthly retail inflation rate for March will be higher than the 3.65% recorded for February month.
With the remonetisation and the foreign inflows of $13B in the first three months of 2017, there is a sudden spurt in the liquidity. This excess liquidity in the system has caused the market buoyancy of recent weeks in which the share prices defied the gravity. The RBI in its bi-annual monetary policy announced last week maintained a status quo concerning the policy rate and instead increased the reverse repo rate (the rate at which RBI accepts deposits from the banks) which helps to suck the excess liquidity in the system. This measure will reduce the money supply in the market.
The trade data also come this week. As per the market expectations, the annual exports for 2016-17 must be $ 300B but the actuals may be short of it by around $30B.
The factors like the four-day short trading week, three weekend holidays, US Military Action on Syria may dampen the spirits of the over-heated markets and they will get corrected. In this expected correction, individual shares will lose more than the indices. Already, so many stocks are trading at prices that are higher than their intrinsic values. Even a small correction now will cause heavy losses.
With the positive factors such as the BJP’s landslide victory in UP, Parliament nod for the GST bills inspired the markets and shares were quoting at abnormal prices that are many times the intrinsic values. The share prices of market behemoths were rapidly growing in the recent period. But the trend in penny stocks trading is really alarming. These penny stocks became ‘gems’ thanks to the market rumours, immature opinions swamping the social media, sponsored information through the electronic media, and the free SMS calls have made the giants and lily put equally on the trading platform. To say, now the markets are in a frenzy. In this situation, the wise thing is to assess the Real Value of a stock before taking a decision. If the price more than the value one has to sell it off as soon as possible. In case any share is changing hands at a price lesser than its value, one has to buy it with a wait time of at least six weeks. Do not get excited with the spiking prices.
If we keep the markets that will be after a temporary correction in mind, all stocks in the steel pack are worth buy. You can have a smooth sailing for a lengthy period with the public sector Steel Authority of India Limited (SAIL). Building up bulk positions using both cash and futures & options segments would be more advantageous.
The BS-4 environmental standards have now come into force since April 01, 2017. it is decided to bypass the originally planned BS-5 norms and implement BS-6 standards in the next phase that is from April 01, 2020. It means that the auto component companies must prepare their production facilities accordingly by April 01, 2019 itself, ahead of one year. The way telecom industry upgraded from feature phones to smartphones in a short span, a quick change will happen in the auto component sector, too. The component makers have just entered a golden era which will last at least a decade.
The government has confirmed the decline in sugar production by allowing to import raw sugar up to five lakh tonnes until June 12 without any duty. After three months, it may repeat the facility as the production in Tamil Nadu, which may experience scanty rainfall this season also, the third year in a row, is expected to be very low. Though there is some improvement in the north and west regions, Tamil Nadu will be a drag.
As per the latest crop data, the advanced estimates for sugar production in the sugar season 2017-18 reveal that the production is going to be limited to 23 million tonnes that will be lesser than the consumption. Sugar prices will continue at the current levels in the coming 12 months also. One can consider sugar shares positively even now.
The restructuring of Grasim Ltd and Aditya Birla Nuvo Ltd is going to offer a beautiful opportunity to the strategic investors, with a six-month waiting period.
With all good reasons, markets are buoyant. But investors are in a belief that the markets move forward like this forever. It is nothing but an illusion. In this illusion, the investors are ignoring the real values of the stocks and prices are shadowing the values.
Everything is Okay, but Value is more important than Price.