Sunday, September 06, 2015

Weekly Review - 07.09.2015

Dear All,

Fresh data released Friday — showing unemployment at a seven-year low and a cooling pace of jobs growth — provided conflicting signals about America's economic momentum as the Federal Reserve considers raising interest rates for the first time in nearly a decade. The U.S. added 173,000 jobs, slightly below expectations, while the unemployment rate fell to 5.1 percent. Never before has the nation’s unemployment rate plunged so low — a point when companies should be competing aggressively for workers — while wages have stayed so flat.

Only weeks ago most investors figured the Fed would make the move in September, but market volatility over the last month and evidence of a slowdown in China has thrown that plan into doubt. Since the beginning of August, the Dow Jones Industrial Average has fallen more than nine percent, while enduring two of its steepest daily drops since the financial crisis.

Though the U.S. has only modest direct exposure to China — trade with Beijing accounts for less than 1 percent of the U.S.’s GDP — a sudden deceleration in the world’s second-largest economy would cause broader ripples, potentially leading to trouble in other emerging economies while further pushing down prices of oil and other commodities.

In a speech Friday morning, Richmond Fed President Jeffrey Lacker argued that the economy is strong enough to withstand a small rate increase by the Fed. He pointed to strong gains in consumer spending and the rapid decline in unemployment over the past two years. Meanwhile, he said, inflation measured from January to July has reached the central bank’s target of 2 percent.

Central bankers from around the world are telling their American counterparts that they are ready for a U.S. interest rate hike and would prefer that the Federal Reserve make the move without further ado.

While Yao Yudong, head of the People's Bank of China Research Institute of Finance and Banking, last week blamed the Fed for the market turmoil and said a U.S. hike should be delayed, most central bankers from emerging markets contacted by Reuters at Jackson Hole and over the past month shared Carstens' view.

India's RBI governor Raghuram Rajan, too, has said that emerging markets including India may witness volatility but India is prepared with its forex reserves and lower inflation.

>>>Impact on Indian equities<<<

The Indian equity market has been receiving a slew of funds from foreign investors since the beginning of 2009 (when the dollar carry trade began and the first round of stimulus began).

Net foreign investment in Indian equity market in this period was around $102 billion.

But there are many reasons why the risk of all this money flowing out is lower. From the beginning of 2009 till now, the Sensex is up more than 200 per cent but the gain in dollar terms is just 116 per cent. Again, many of the listed stocks have delivered poor returns since 2008.

An analysis of the change in market capitalisation of various countries between 2008 and now in dollar terms shows that Indian market cap is down 11 per cent since January 2008. This is despite the Sensex trading 37 per cent above this level currently. The difference is largely explained by the currency movement.

According to this metric, US market capitalisation has gained the most, up 38 per cent from January 2008. It is, therefore, likely that many global investors preferred US equity markets due to the better economic prospects and the sexy tech and social media stocks where possibility of heady gains were brighter. This renders US equity more vulnerable to a decline if de-leveraging begins.

Since equity investors take a bet on the growth prospects of the economy, India’s relatively superior growth can help ward off a steep sell-off. The high impact cost in Indian markets is another deterrent to sustained selling in equities.

Equity prices could, however, be adversely impacted if the rupee goes into a tailspin against the dollar. The resulting increase in the cost of foreign borrowing and imported inputs will deal a blow to India Inc’s earnings.

>>> Nifty Hourly Chart <<<

>>> Click the chart to see on full screen <<<

Lot of Nervous on Upcoming FED's Decision - Nifty slipped on friday trade also. As shown here on Hourly Chart - If 7615 breaks - Possibly another 100 points fall can't be ruled out, as the next support at 7500.

>>> Nifty 5 Mins Chart <<<

>>> Click the chart to see on full screen <<<

Above 5 mins chart suggest 7630 as a good support. But if Monday Opening may have a gap down - may look for the next support @ 7575 and 7500. If 7630 Holds on monday morning - recovery possible.

>>> Bank Nifty Daily <<<

>>> Click the chart to see on full screen <<<

Not sure about this channel on Bank Nifty. But Possibly - If price able to hold it, may see some recovery.

>>> Bank Nifty Hourly <<<

>>> Click the chart to see on full screen <<<

Looks like the Current wave has completed 1-5 fall, if holds we may see some relief rally. Lets wait and see.

>>> PERFORMANCE till 04th Sep, 2015 <<<

>>> Click the chart to see on full screen <<<

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