“ANIMAL” SPIRITS
Vote “BANK”
NIFTY
No; it is not about the movie released last week. Chopping and carrying heads like carry bags, “Red” sea is not an option. Frozen Rates, Frozen Planes leaving for COP, forgotten bears. Talking of bears they are deemed to be earning 7% plus in FD rates, best place to hide.
For US, Best Equity Markets since 2022 and Best Bond Markets since 1980. Well best 60:40 portfolio in 9 years.
The Animal spirits I am referring to is the word coined by Keynes that suggests how financial participants take decisions in uncertain and volatile environments. It is not restricted to just equity, any financial decision or can even be extended to any decision that reflect the natural instincts of animals. One Man in different wools of Animals.
Last two decades have been one-way streets, with Ground Zero rates, that appears near end, but the hopes of it returning remains the theme. Japan might slowly and steadily move the YCC, without impacting the risk on mode. It has little relevance when BOJ holds most of the assets.
Post the FED, equity markets have moved, and we see the return of the Animal Spirits. The market now talks of six rate cuts, while Central Bank’s continuing to be Vigilant. One is hoping another is fearing, (not to commit the mistake of 1070’s).
Soft landing hopes revert, talk of at least 6 rate cuts in 2024. Dollar continues its decent, Increased focus on EM spanning from Brazil, Saudi and India add to that dash of Argentina. With stable currency, stable interest rate environment and stable political back drop, the canvass is set higher for longer for our equity. 2024 worries are now behind. What is significant, this state elections results paves the way for Rajya Sabha strength for the Ruling Party. Hard decisions time to be taken.
Pundits may filter the vote percentage and seat sharing, what if analysis, but the mood has changed. The largest conglomerate which got drubbed in the start of the year, may very well indicate the sentiment to start with.
It requires no brains to suggest the direction for the day (Gift City showing 280 points), while it requires lot of reasoning if we open large gap up. There is something called fading, discounting that happens very regularly.
Psychological disposition of humans is to celebrate the process of win, not so much when the actual win happens. There goes the profit taking beyond a particular threshold.
The attached graph the trend line extended from the previous to tops (top of the wicks), shows 19550-580 and then after a brief consolidation or interruption 20700. Large put interest around 20500 is the hope, but days like this nothing is ruled out.
This target also can be extrapolated, the previous fall and rise (the top of the two highs) is around 1.3 times, and the recent fall from the second rise, targets the above price action.
Safe to assume the new base as 20000, intra-day assuming 200 points open up the intra-day base (on extrapolation) 20330 for move towards the 20600.
NIFTYBANK
Financials are simple test of the whole economy to start with. They factor political, economic and credit events more efficiently than other sectoral indices.
Being heavy weights in most of the World Indexes they are representative of the broader economy. The so-called Semi-Final ended, and markets now look far ahead of 2024. That is a huge relief and banking would be a safe place to be in.
Best Equity Markets since 2022 For US and Best Bond Markets since 1980. Well best 60:40 in 9 years. Perma bears will argue that bear markets kill both bulls and bears. True, the world is moving on nominal returns while real returns no one is interested. Chase relativity. How does one explain when the US President tweets, last month Inflation is 0, and Growth is 5.2%. Dumb Stuck.
Lots of Job’s data ahead in the week starting from JOLTS, ADP to NFP. Markets here would surely relieve on the state election results. This clearly takes the eye of freebies and focus on the consolidation and more spending on the infrastructure. Clearly the Energy and Infra story continues. The PSU story gets bigger and better. Oil Marketing Companies remains the pack to watch.
Bank’s remain safe and sweet spot, a) they have not rallied much b) the broader visibility is much clearer than before.
You will see calls to buy list and increased targets, focus AXIS SBI PNB as the top pics, ICICI won’t be left behind. Kotak may have wait for some more consolidation. Erstwhile twins need more time to join the party.
From the margin of safety, ICICI looks better, Can Bank and BOI are other better placed counters, not to leave behind Union. The list can include all but very few exceptions. The beta of each is different. Tomorrow winner pack is the winner pack for the next year, as simple as that.
The attached graph shows the end of the recent downward move and projected towards the ATH, all set towards the 48-50K. Don’t mess with the vote “Bank”. For the day if we open above 45300 all let loose, a fall towards 45150 is an opportunity to get in stops 44850 towards 45400-500