Share Market Tips The year 2017 (major fall after SEBI changed the guidelines for large cap, mid cap and small cap) also brought a promising and happy time for Indian equity investors. At that time, there was a huge rise in midcap and smallcap stocks.
After tasting 15750 Nifty closed at 15700 and it is not too far from our earlier target of 15900. We already knew that after Nifty crosses 15100, many analysts will be seen giving targets of 15600, 15700, 15800 and 15900 for Nifty, but when Nifty was struggling at 14200 level, then this target was no more. was not giving All these analysts were giving cell calls with target of 13800, 12500 and 12000 and their basis was rising corona cases, lack of oxygen and lack of vaccine. In fact, many analysts, without understanding the economics, put PM Modi in the dock as if he was responsible for all these crises. This was definitely an overreaction and smart and shrewd investors always use such time to buy patiently. It is also said that the bear market is the best friend of investors.
The year 2017 (major fall after SEBI changed the guidelines for large cap, mid cap and small cap) also brought a promising and happy time for Indian equity investors. Midcap and smallcap stocks were heavily bullish and hit new highs every week. Even amateur investors made gains of more than 100% at the portfolio level. The prices of many stocks reached record highs. At that time it was very easy to earn money. The same happened in the year 2020, when Nifty fell to 7500. History repeats itself and it is becoming a trend. Traders and punters try to suppress the market for short term trading gains, thereby giving great opportunities to the investors, but only to those who are aware of this business.
At CNI we have welcomed all these declines since 2008 and made these opportunities available to our members and they have chosen these opportunities every time. But when is it possible…? If you go with the wind, rely on media news, which are mostly exaggerated and trade in chaos, you are always stuck. Instead, if you think on the positive side, including situations such as the reduction in cases of COVID infection over time, the provision of oxygen and the administration of vaccines, then you can use these declines as opportunities.
Earlier the acceptance of vaccines was low among the people. However, the government started the vaccination campaign and over time everyone realized that it was absolutely necessary. Initially, the government vaccinated 15 crore people free of cost. When he learned that people had now accepted vaccines, he quietly switched it from a free to a paid model, knowing full well that states would not spend for vaccines. It turned out to be true. Most states have not ordered vaccines, while the central government has set subsidized prices for state governments.
We assume (we may be wrong) the cost of vaccines on people in the country to be Rs 1.8 lakh crore (assuming an average rate of Rs 600 per vaccine). The media recently ran a story about how hospitals are making money. Systematically, the burden has shifted from the government to private hospitals and 7 crore people have got paid and vaccinated. The market knows that people will spend Rs 1.8 lakh crore, but when it comes to the government, it becomes difficult to manage finances. This is the reason why the market jumped from the low of 14200 to reach 15750.
The same mechanism was used in April/May 2020 as well, when the government kept petrol prices high. Back then too, we explained why the market accepted this and decided to start on its upward journey. Politically it may be wrong, but economically it is correct, because poor people don’t use cars. Those who buy a car worth Rs 10, 20, 50 and Rs 100 lakh can pay an additional Rs 10, 20 or Rs 30 per liter for petrol.
Well, it is now quite clear that by the end of December, we will have 80 to 90 percent immunization in India. Once this is done, economic activity will pick up pace, however, it is still not affected much. But the fact is that the same section of analysts and media will start painting golden pictures at that time but we are sure that at that time we will be in exit mode after Nifty crosses the 17500 mark.
Now coming back to the current scenario. Yes, there has been some buoyant activity, but this is just the beginning and no serious downside is visible. Midcap and smallcap stocks are bullish. Stocks that have not participated in the rally so far have started gaining momentum. The most important aspect that you need to pay attention to is that public participation is high but the volume is low as SEBI has now come up with 125 per cent margin. Many experienced investors are not getting the limits due to the new margin regime. It has got self support to the system. If there is no leverage, a big drawdown is not possible. Second, with the bullish rally, investors are not holding the stock for long. They are happily exiting with 5 to 10 per cent profit. This means that the fear of fall is still lingering in their mind. But keep in mind that the market never falls on someone’s wish.
Reliance (RIL), which we said will be the top pick as it is the biggest index puller. Now its AGM has been kept on 24th June, which is also the expiry day of the month of June. This also means that there may not be any major setback in June.
The government has accelerated reforms, which is a good sign. After Bad Bank, (soon to be seen operational) the issue of bad loans will get resolved. Following the Supreme Court order, several promoters, including the Anil Ambani group, have started debt repayment and debt restructuring, which is a pleasant surprise. The Rent Act is another reform that will go a long way. We can see many bold reforms in the monsoon session and with Rajya Sabha majority, it is very easy. Gone are the days when bills were shuffled between the Lok Sabha and the Rajya Sabha for years.
The market is divided into three segments. The first is large cap, which is moving with the index, second is mid cap and small cap, which are trading at a discount. Third is the issue of restructuring. We have presence in all three segments. In the first category we have a success rate of 90% over 13 years, but only positional. In the second and third categories, the CNI has research area and experience. All the small caps that were researched and shared with the members rose 40 to 100 percent, but the common feature of all these stocks is that they were bottom up stocks, which run with minimal risk of failure .
In SGX, Nifty is at 15778 and as mentioned, we believe the upward move will continue in June. The decline, if any, will be of the first level. It shall not exceed 2 per cent. A drop of the third level (ie 10%) will not be seen before 17500. However, we will review it when Nifty reaches its second target of 16600.