Category Archives: NewsM

Investor wealth zooms Rs 10.35 lakh cr in two days of market rally

Investor wealth soared for the second consecutive session on September 23, rising by Rs 10.35 lakh crore in two sessions, as market sentiment remained euphoric after a host of measures were announced to boost slowing economic growth. The 30-share BSE Sensex soared 1,075.41 points, or 2.83 per cent, to close at 39,090.03 on Monday. During the day, it jumped 1,426.5 points to 39,441.12.

Led by the gains in equity market, the market capitalisation (m-cap) of BSE-listed firms rose by Rs 10,35,213.03 crore to Rs 1,48,89,652.44 crore in two trading sessions.

The m-cap of BSE-listed companies was Rs 1,38,54,439.41 crore on Thursday.

Markets are on a rise since Finance Minister Nirmala Sitharaman delivered a surprise cut in corporate tax rates.

The announcements were made during trading hours on Friday which sent the markets soaring. On Friday, it logged its biggest single-day jump in over a decade by surging 1,921.15 points, or 5.32 per cent.

“The Indian benchmark indices started the expiry week on a strong note buoyed by improved domestic sentiments post a slew of measures by the government last week. The markets registered second straight session of healthy gains, despite unsupportive global cues,” Ajit Mishra, vice president, research, Religare Broking Ltd said.

The government slashed the base corporate tax for existing companies to 22 per cent from 30 per cent, and for new manufacturing firms, incorporated after October 1, 2019, to 15 per cent from 25 per cent.

From the 30-share components, 16 scrips closed the day with gains, led by Bajaj Finance, L&T, Asian Paints, ITC, Axis Bank, Kotak Bank, ICICI Bank, IndusInd Bank, HDFC twins, Maruti and SBI, rallying up to 8.70 per cent.

In the broader market, the BSE midcap and smallcap indices rallied up to 3.08 per cent.

On the BSE, 1,638 scrips advanced, while 972 declined and 184 remained unchanged.

Traders complain of glitch at NSE towards session end

Trading in India’s National Stock Exchange halted for about 20 minutes before the session ended on Monday, according to several traders, even as markets closed up nearly 3% on hopes that corporate tax cuts would revive the economy.

The reason for the trading glitch was not immediately clear and an NSE spokesman did not respond to requests for comment.

The Nifty index soared on Friday after Finance Minister Nirmala Sitharaman cut the effective corporate tax rate to around 25% from 30% and scrapped the minimum alternative tax for domestic companies.

The momentum continued on Monday but many feared losing out on some opportunity to capitalise on the gains due to the trading disruption.

“It is difficult to cope with such glitches right at the end of a trading session,” a trader at a domestic brokerage house said.

Traders said rival exchange BSE Ltd remained operational during NSE’s glitch.

China bursts bubble on digital-currency speculation

China’s central bank is denying widespread reports that it will release a digital currency by November, and saying the internet giants Alibaba and Tencent will not be the first companies to utilize its online payment system when it is rolled out.

The People’s Bank of China made the announcement over the weekend via its official rumor-busting website, Piyao. It gave few details beyond denying an imminent release of the currency.

Numerous industry sources and media outlets had reported that Beijing was close to unveiling the digital payment system, and said the process had been accelerated by Facebook’s FB, -1.64% announcement that it would release its own currency, called Libra.

China would become the first major country to issue a digital version of its currency if the digital currency is released.

It is also unclear if the apparent postponement is the result of reshuffling at the PBOC. Two weeks ago, central-bank veteran Mu Changchun was elevated to head of the PBOC’s digital-currency research institute. Mu has been a strong proponent of the currency and last month said it was “close to being released.”

Mu also said in August that the currency will be based on a two-tier system similar to that used to produce minted money, with the PBOC producing and managing the currency, then issuing it to commercial banks and other entities, which then circulate it to consumers.

But unlike bitcoin BTCUSD, -0.64%  , China’s digital currency is unlikely to rely on blockchain technology, Mu said, which may not be able to support the enormous volume of transactions that take place at any given moment.

China’s creation of its own digital currency was spearheaded by a former central-bank governor, Zhou Xiaochuan, who retired last year. Though many transactions in China are already digital — through the use of Alipay and WeChat — PBOC officials have reportedly been concerned that nascent online currencies could leave the country vulnerable or reduce the government’s control over issuance.

Mu echoed comments Zhou made over the summer that different agencies should be competing to win acceptance of what technology is used, and that multiple government institutions were developing their own road maps for the payment system. Whether this interagency competition is at the center of the delay is also unknown.

Unlike the U.S. and much of Europe, China largely leapfrogged the credit-card era, with payments moving from cash straight into digital wallets à la Alipay and Tencent. Alipay, which is run by Alibaba BABA, -3.03% affiliate Ant Financial, now processes roughly half of mobile payments in China, while Tencent’s TCEHY, +0.23% 700, +0.06% WeChat Pay handles just under 40%, according to Beijing-based research firm Analysys.

The widespread adoption of mobile payments in China means consumers are unlikely to experience significant disruptions once a digital currency is rolled out. Most changes will be at the government and lending levels, allowing institutions greater control over issuing and tracking exchanges, and could help in detecting money laundering and other illicit activities.

Facebook shuts several pro-Trump pages that were managed by Ukrainians

Facebook said Monday it has shut several pages for serving up questionable pro-Trump memes after a story about how the propaganda that was ubiquitous across the internet in 2016 had recently begun popping up all over social media.

According to the Popular Information newsletter, the “I Love America” Facebook page, with its 1.1 million fans, was cited as spreading the kind of viral content that red-blooded Americans typically can’t resist: veterans, flags, guns, God and, yes, cute puppies. Lots of cute little puppies.

Lately, the page had started serving up more Trump than usual, which makes the fact that, according to Popular Information, it is managed by 10 people based in Ukraine all that more timely, in light of the recent headlines.

“I Love America” regularly recycled the same memes used by Russia’s Internet Research Agency, the entity that set up fake Facebook FB, -1.64% pages to boost Trump in the 2016 election, reports Popular Information’s Judd Legum, who founded the left-leaning ThinkProgress website back in 2005.

Here are just a few of the posts:

“The ‘I Love America’ page is only the tip of the iceberg. There is a complex network of Facebook pages, all managed by people in Ukraine,” Legum wrote in his report. “These pages are now being used to funnel large audiences to pro-Trump propaganda.” Some of those pages include “Click Like, if you love Donald Trump as much as we do. TRUMP 2020,” “God bless Donald Trump and God bless America,” and “God bless Donald and Melania Trump and God bless America.”

And, through sites like these, Americans get exposed to adorable animal images along with a steady stream of manipulated content and misinformation relating to the 2020 election. This isn’t just a bit of exposure, either.

Popular Information found that “I Love America” reaches more people than nearly all U.S. media companies. For example, according to Crowdtangle, the page has more engagement over the last 90 days than USA Today and easily tops the likes of the L.A. Times and BuzzFeed News. In fact, the newsletter estimates that the entire Ukrainian network has as much reach as the New York Times NYT, +1.93% and Washington Post combined.

Here’s Legum’s Twitter thread on the story:

Facebook told MarketWatch it has shut down the aforementioned pages but said that there’s no evidence that they are linked to state actors.

“We are removing these pages for violating our policies against spam and fake accounts, and are continuing to investigate for any further violations,” Facebook spokesman Joe Osbourne said.

Meanwhile, Trump continues to grapple with the latest controversy swirling around the White House. The president suggested on Sunday that he talked about Joe and Hunter Biden with Ukraine’s new leader, as Democrats pushed for investigations into whether Trump improperly tried to use his position to dig up damaging information about a political rival.

Opinion: Amazon, Netflix and Apple shares are no longer beloved by the average investor

Prudent investors pay attention to money flows because that gives them an edge.

Professionals already know they are competing with the best and the brightest on Wall Street and seek every edge they can get. However, sometimes the average investor forgets that simple fact. Just like a doctor cannot see everything with the naked eye and may order an X-ray to figure out what is going on, segmented money flows are like X-rays of stocks. Let’s explore the issue with the help of a chart.

Chart

Please click here for a chart showing segmented money flows in 11 popular tech stocks. Since tech stocks are the market leaders, it makes sense to look at the money flows in those in addition to the Dow Jones Industrial Average DJIA, +0.06% and broad ETFs such as S&P 500 ETF SPY, -0.02%, Nasdaq 100 ETF QQQ, +0.04% and small-cap ETF IWM, -0.08%.

Note the following:

• There is an unusual change in money flows in Amazon AMZN, -0.49%  stock. Until recently, the momo crowd money flows in Amazon were very positive. Now they have turned mildly negative.

• Until recently, smart money flows in Amazon were neutral but now they have turned negative.

• The unusual change in momo crowd money flows in Amazon has not yet shown up in the Amazon stock price. Investors ought to look at it as an early warning signal. Money flows can change on a dime. At The Arora Report we will be carefully monitoring any changes.

• The Arora Report gave a sell and short-sell signal on Netflix NFLX, -1.78% when the stock was at $380. And most of Wall Street was highly bullish. Netflix stock is trading at $264 as of this writing, $116 lower from the signal to short-sell. In short-selling, an investor profits when the stock price falls. We have a highly sophisticated system for giving signals based on the six screens of the ZYX Change Method, but suffice to say that part of the reason for the signal was negative smart money flows in Netflix stock.

• As Netflix stock fell, the momo crowd kept on buying it, perhaps based on hope that history would repeat itself. In the past, it was common for Netflix to stage sharp rebounds.

• The big change is that momo crowd money flows in Netflix stock have finally turned mildly negative. In plain English, this means that the momo crowd is finally crying “uncle” and booking large losses. Hope is never a good strategy in investing and trading in the stock market.

• There is also a big change in Apple AAPL, +0.45% stock. Previously, momo crowd money flows have been very positive in Apple stock. Now they have turned neutral.

• Smart money flows are positive in Google GOOG, +0.33% GOOGL, +0.39% stock.

• As the chart shows, smart money flows are mildly positive in Facebook FB, -1.64% and Intel INTC, +0.35%.

• Momo crowd money flows are extremely positive in AMD AMD, +1.96%.

• The chart shows momo crowd money flows are very positive in Microsoft MSFT, -0.22%.

• Momo crowd money flows are positive in Nvidia NVDA, +1.25% and Alibaba BABA, -3.03%.

• As the chart shows, momo crowd money flows are mildly positive in Tesla TSLA, +0.25% but smart money flows are neutral.

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

Ranking

The chart also shows the relative rankings of the 11 popular tech stocks. These rankings are based on the six screens of the ZYX Change Method. Please click here to learn about the six screens.

Risk-adjusted rankings are more useful for medium- and long-term positions. Non-risk-adjusted rankings are more useful for short-term or trade-around positions.

Short squeezes

A short squeeze occurs when short-sellers either panic or are compelled to buy to cover shares that were previously short sold. This leads to a lot of artificial buying that is not based on fundamentals.

The chart lists AMD, Nvidia, Netflix and Tesla as extremely positive for a short squeeze. This means that those four stocks can quickly spike up a lot if a short squeeze starts. Often the trigger for a short squeeze is good news, even if it’s only slightly good.

What to do now

At this time, we are not making any changes in our long-term portfolios. However, we are on high alert to monitor not only money flows but several other factors. We may start short-term trades if these trends continue. Investors ought to pay attention to Arora’s 18th Law of Investing and Trading: Diversifying by time frames provides a consistent stream of profits.

Hedge-fund billionaire raises cash to prepare for potential ‘market meltdown’

Two years ago, Paul Singer warned the global financial system was in bad shape and investors were facing the possibility of a big market drop.

With that, the billionaire behind the $38.3-billion Elliot Management fund, raised about $5 billion in one day in preparation for “all hell to break loose.”

He reportedly put a big chunk of that to work in the first half of this year.

Well, there’s been plenty of volatile stretches since he raised that cash, but stocks have recovered and are once again bouncing around record highs. Nevertheless, according to the Financial Times, Singer is tapping investors for another $5 billion in anticipation of a “market meltdown.”

Here he is talking about his bearish forecast at a panel in Aspen last summer, when he said “The global financial system is very much toward the risky end of the spectrum in terms of debt”

Singer’s fund is up almost 5% this year, the FT reported.

Earlier this month, AT&T T, -0.82% shares surged to an 18-month high after Singer, who had purchased a $3.2 billion stake in the company, outlined his plan to boost the stock by more than 65% in less than two years.

At last check, the Dow Jones Industrial Average DJIA, +0.06%  , Nasdaq COMP, -0.06% and S&P 500 index SPX, -0.01% were all trading higher on Monday afternoon.

Look for alpha in these 4 sectors as midcaps turn best bets: Gautam Shah

What are your own internal estimates and targets that you are placing on the index now? Have you revised them?
We have been optimistic on the markets for the last many weeks now. The fact is that Nifty was unable to move below 10,600, which we thought was a very important medium- term support, That was a very positive, very encouraging development because prior to last Friday, you had a very pessimistic scenario at the marketplace. Midcaps were in a very bad shape. But this comeback of the last couple of days, pretty much breaks the shackles and tells us that the medium term uptrend has indeed resumed.

The market saw a very large dip of about 1,500 points from that level of 12,100 and while this dip has happened, the market has digested the rally of the last one, one and a half years and therefore I would want to believe that this move would continue.

However, if you look at the index itself, it might just take a little bit of a breather because to put things simply, in the last six weeks, the Nifty was in the range of 10,650 to 11,550. If that is the 500 point breakout, then the level that we were working with on the upside for this leg of the move was about 11,650. Today’s high is around that 11,650 mark and from there, we have seen some profit-booking.

The Nifty and the Bank Nifty and the Sensex might just get into a sort of range, take a bit of a breather and going forward, it is just going to be all about stocks. The real action is going to be in the midcap space. The index is currently trading at about 16,600 points and I am looking at a 2,000-point rally for that index over the next two, two and a half months.

The biggest opportunities in the current market is actually in the broader space — midcap and smallcap space. For the Nifty itself, we could have formed a nice short-term base around the 11,300 mark. Over the medium term, we are likely to challenge 12,100 once again. But maybe not in the same breath. There could be some back and forth action before we actually get there.

Where do you see the maximum contribution coming from? Do you believe consumption, which has been so beaten down, will generate higher alpha for you?
Yes it does look like. Just a week back, there was a scenario where apart from IT, everything was coming off. There were no major sectors that were leading the market recovery and every time the Nifty attempted to get pass 11,000, the fact that there was no leadership did not lead to a sustainable rally.

But with what has happened in the last two or three days, it is pretty much a game changer move because now suddenly a lot of sectors which were lying in a range, which were underperforming are coming back very strongly. Banks will definitely do well but just for the time being 30,200 was our working number. Today morning, we got there and it has seen a bit of a cool off. So to be chasing prices after such a big move of the last two days, might not be a very prudent thing.

I would wait for some cool-off. Everybody wants to get in because there were too many fence sitters but you need to be a little rational. The banks look great. Our bigger target is about 32,000 and eventually we will get there over the next six weeks. But apart from that, all the segments of the market which did not do too badly while the markets fell are the ones that are likely to run up. So oil and gas is right up there. FMCG is right up there. Capital goods as a space is likely to do well.

Autos as an index lost 40% in the last 9 to 12 months. The BSE auto index seems to have bottomed out around 15,500 and there is a lot of scope of recovery. In fact, I see bottoming patterns in many of the large auto stocks. So there is clearly a lot of alpha to be made in many of these three or four sectors which I mentioned. But as I said earlier, the best bet is going to be midcaps. I think stock picking is really going to be the key over the next four to six months.

Where do you find opportunities within autos let us take that to start with?
Unfortunately, I cannot talk about specific stocks but I think the top five names, many stocks have lost about 60-65% in the last many months. I think all of these underperformers of the last six months are likely to make a major-major come back. So without taking names I would actually buy the underperformers at these levels.

What about the pockets of the market that are lagging – IT, select pharma — would you leave them behind given that there’s so much more opportunity?
Yes I think so. It makes sense to leave them behind because people are now moving out of spaces where they were hiding for the last six months I think that is quite visible given what IT has done in the last two days, probably the only index which has not gained. So it is quite clear that people are getting into risk on mode and this mode might just remain for the next many weeks to many months. So yes avoid IT, avoid pharma. There are much better pockets in the market. From January 2018 to August 2019, 57% of the market — all the stocks listed on the NSE – had lost more than 50%.

So you can imagine the kind of scope there is for recovery and a lot of stocks will do well. The only point is do not see how much they have gone up from the lows. See how much they have fallen from the highs and that will make investors case much easier to buy them even at current prices.

Trade setup bullish, but Nifty may pause before next leg of rally

The party on Dalal Street continued on Monday as Indian equity market saw yet another gapup opening and ended with a robust gain. NSE Nifty zoomed 326 points or 2.89 per cent at 11,600.20.

The headline index tested intraday high of 11,694 and pared over 95 points from the high point of the day. Also, the index did not make any incremental intraday high in the second half of the session.

The advance-decline remained positive, but it was not as strong as the previous session. These are mild signs that the market may take a breather and consolidate. There are higher probabilities that 11,700 may prove to be a resistance point for the short-term.

We expect a quiet start to the trade. In the event of any continued upmove, 11,700 and 11,745 levels will act as resistance. Supports may come in much lower at 11,470 and 11,410.

The RSI on the daily chart stood at 65.63 and did not show any divergence against the price.

The daily MACD stayed above its signal line while the PPO remained positive. A rising window occurred on the candles. Usually, such a formation implies continuity of the upmove, but in the present context, this will require confirmation on the following bar.

The pattern analysis showed Nifty has retraced from one of its pattern resistance points at 11,700. The price action against the level will be key. On the downside, it has 100-DMA to look at in the event of any consolidation at current levels.

There are no doubts that the market is in a bullish mode. However, given over 900-point rise over the past two sessions, chasing longs may not be a good idea.

For the current upmove to sustain and extend higher, it will be necessary that the market consolidate a bit. This would be healthy in the long term if the index builds a base at the current levels. The unabated rise is making the risk-reward ratio extremely unfavorable for new long positions.

The strike price at 11,600 continued to show highest Call open interest, and this would mean that there are possibilities that Nifty consolidates around this level.

We recommend traders to chase upmoves very cautiously and protect profits at higher levels. It is recommended to curtail exposures at higher levels and approach the market with
caution as volatility is likely to remain ingrained in the coming sessions.

5 things to know before the stock market opens Monday

1. Stocks set to fall amid global growth worries

Worries over global economic growth were set to thwart Wall Street’s run to record highs on Monday. Stock futures pointed to a slightly lower open on Monday. IHS Markit data showed Germany’s manufacturing activity hit its lowest level in more than 10 years. Overall, the euro zone’s services sector grew at its slowest pace in eight months while manufacturing activity hit a more than six-year low. Stocks snapped a three-week winning streak on Friday. The data comes as China and the U.S. try to strike a trade deal.

2. China says US trade talks were ‘constructive’

Senior Chinese trade officials said Saturday that discussions with the U.S. last week were “constructive,” according to China’s state-run news agency Xinhua. The officials said both sides “agreed to maintain communication.” U.S. officials echoed China’s sentiment, saying in a statement that talks were “productive.” Both countries are set to hold formal trade negotiations early next month.

3. WeWork CEO in the hot seat as SoftBank in favor of his ousting

CNBC learned through a source that Masayoshi Son, the head of Japanese conglomerate SoftBank, is in favor of WeWork CEO Adam Neumann’s removal from his post. SoftBank is WeWork’s largest outside shareholder. The news, which was first reported by The Wall Street Journal, comes after WeWork postponed its initial public offering. The real-estate start-up’s valuation may have fallen to less than $15 billion, according to a report from CNBC’s David Faber earlier this month. WeWork’s valuation in the private market was as high as $47 billion.

4. Wall Street wonders if the move toward record highs can be trusted

Stocks have recently challenged the records set in late July, with the S&P 500 about 1.2% below its all-time high. But some investors wonder if this move can be trusted, writes Michael Santoli. The next three weeks have historically been among the most volatile in the calendar for stocks. Investors will also grapple with the back and forth between U.S. and Chinese trade officials as negotiations continue. To be sure, there are signs the move up may be trustworthy. A running count advancing versus declining NYSE stocks hit a record high last week. This often precedes new highs for the market.

5. Disney called off a deal to buy Twitter, CEO says the ‘nastiness is extraordinary’

Bob Iger, Disney’s chief executive, said in an interview with The New York Times that the media giant walked away from a deal to buy social media company Twitter. Iger said Twitter was a “compelling” way to reach consumers. However, he said the Twitter’s trouble “were greater than I wanted to take on, greater than I thought it was responsible for us to take on,” adding: “The nastiness is extraordinary.” Twitter has been trying curb harassment on its platform from so-called trolls.

Stock market news

U.S. stocks ended mixed Monday after opening lower, as solid results on domestic economic growth helped offset concerns of a global growth slowdown stoked by weak data out of Europe.

Here’s where the market settled at the end of regular equity trading:

  • S&P 500 (^GSPC): -0.01%, or 0.28 points
  • Dow (^DJI): +0.06%, or 15.19 points
  • Nasdaq (^IXIC): -0.06%, or 5.21 points
  • U.S. crude oil prices (CL=F): +0.67% to $58.48 per barrel
  • 10-year Treasury yield (^TNX): -4.2 bps to 1.711%
  • Gold (GC=F): +1.1% to $1,531.70 per ounce

Activity in Germany’s key manufacturing sector sank in September to the lowest level in more than a decade, IHS Markit said Monday in its advance report for the month. The country’s manufacturing purchasing managers’ index (PMI) fell to a reading of 41.4, well into contractionary territory below the neutral level of 50 and consensus expectations for a reading of 44.0. Germany’s composite PMI, which includes both manufacturing and services industries, fell to a near seven-year low of 49.1.

“The numbers are simply awful. All the uncertainty around trade wars, the outlook for the car industry and Brexit are paralyzing order books, with September seeing the worst performance from the sector since the depths of the financial crisis in 2009,” Phil Smith, principal economist at IHS Markit, said in a statement.

The results for the eurozone’s largest economy contributed to a weaker advance report for the entire single-currency bloc in September.

The eurozone’s composite PMI fell to a more than six-year low of 50.4 for the month, a hair above the level required to indicate expansion, from 51.9 the month prior. With a September reading of 45.6 from 47.0, the euro area’s manufacturing sector fell deeper into contraction for the month. The service-related industries expanded at a slower pace, with a reading of 52.0 in September down from 53.5 in August.

“The eurozone economy is close to stalling a a deepening manufacturing downturn shows further signs of spreading to the services sector,” Chris Williamson, chief business economist at IHS Markit, said in a statement.

In the U.S., however, manufacturing results were more in-line with expectations. IHS Markit reported in its advance reading Monday that U.S. manufacturing activity rebounded in September, with the sector’s PMI rising to 51.0 for the month from 50.3 in August. This was ahead of consensus expectations for a reading of 50.4.

Activity in the U.S. services sector came up slightly short, however. The U.S. service sector PMI came in at 50.9 for September, an improvement from August’s read of 50.7, but below consensus expectations for a rebound to 51.4.

Meanwhile, investors parsed through new developments for U.S.-China trade discussions. On Friday, stocks reversed course and ended the session lower following news that mid-level Chinese negotiators who had met with their U.S. counterparts in Washington, D.C., would not be meeting with farms in Montana and Nebraska as originally planned.

While the change in schedule was largely inferred to have been due to a cancellation on the Chinese delegation’s part, new reports suggest otherwise. The U.S. reportedly requested that Chinese negotiators not meet with farmers in the heartland due to unspecified domestic reasons, Bloomberg reported Sunday, citing unnamed people familiar with the matter.

High-level meetings between the U.S. and China are set to take place in Washington during the second week of October, the Bloomberg report added, corroborating other recent reports suggesting the two sides would meet again next month.