What changed for the market while you were sleeping? Top 10 things to know

Exactly two years ago, Prime Minister Narendra Modi announced demonetisation of high denomination bank notes. The announcement, whose primary purpose was to curtail the shadow economy, received a mixed response, garnering support from several bankers and international commentators alike but also getting criticised as poorly planned and unfair. While you could be on either side of the fence on this one, data reveals that several stocks have done quite well since demonetisation. Here are the top ten stocks that have rallied since November 8, 2016:

Exactly two years ago, Prime Minister Narendra Modi announced demonetisation of high denomination bank notes. The announcement, whose primary purpose was to curtail the shadow economy, received a mixed response, garnering support from several bankers and international commentators alike but also getting criticised as poorly planned and unfair. While you could be on either side of the fence on this one, data reveals that several stocks have done quite well since demonetisation. Here are the top ten stocks that have rallied since November 8, 2016:

Benchmark indices closed the last session of the truncated week ended November 22 on a negative note. Indices declined for three consecutive days until Thursday ahead of the expiry of November futures and options contracts.

The Nifty 50 lost around 250 points from its recent swing high of 10,774 to move near 10,500. The index shed 73.20 points to close at 10,526.80 and the 30-share BSE Sensex ended below 35,000, down 218.78 points at 34,981.02 despite a sharp appreciation in the rupee and the fall in crude oil prices.

The rupee gained 219 paise against the US dollar in last seven consecutive sessions while crude oil prices plunged 27 percent since October 3, 2018, to trade around $63 a barrel.

All sectoral indices closed in the red on Thursday with Nifty Bank falling a percent and metal declining 1.77 percent. The broader indices also traded in line with frontliners with the Nifty Midcap index falling 0.91 percent.


China Market Rescue Unleashes Hot Money Seeking Risky Stocks

China’s drive to support its beleaguered stock market is helping pave a high-risk road for speculators chasing unlikely targets.

Shares tagged with a high-risk warning from stock exchanges, such as companies with negative net assets or two straight years of losses, jumped an average of 31 percent over the past month through Friday. That’s around double the pace of a broader rebound in small-caps, while the Shanghai Composite Index rose 7.8 percent in that time.

Market support measures announced since late October– including easing of trading restrictions, boosting liquidity and support for small companies — have helped fuel the frenzy, analysts say. Policies to encourage mergers and acquisitions have lured bets on struggling firms on the assumption they might be targeted by companies seeking to list in the A-share market via reverse takeovers.

“The shift in attitude from regulators has fostered a preference for these small, poor- performing shells,” said Yang Ziyi, fund manager at Shenzhen Sinowise Investment Co.

China Market Rescue Unleashes Hot Money Seeking Risky Stocks

DEA General Aviation Holding Co. and Harbin Gong Da High-Tech Enterprise Development Co., for example, jumped 71 percent and 70 percent through Friday respectively since the Shanghai Composite fell to a nearly four-year low on October 18.

“It’s a good investment strategy in a downbeat market,” said Sun Jianbo, president of China Vision Capital Management in Beijing. “As long as a firm has the value of being a potential shell, people will buy into its shares,” said Sun, adding that he is considering investing in such stocks.

Abnormal surges

The number of shares traded on the ChiNext Composite Index reached a record high of 8.7 billion on Tuesday, while turnover hit the highest since July. Although a small portion compared to the main board, it is seen as a reflection of the current small-cap excitement.

“To rescue the stock market, regulators are relaxing their grip over hot money,” said Xiong Qi, Beijing-based deputy head of research at Windsor Capital Management Co. “Small funds and retail investors are following” speculators, he said.

Recent rallies in the wider market have underlined the difficult balancing act regulators have between supporting stocks while trying to curb the excesses of speculation. The Shenzhen Stock Exchange on Tuesday said it would step up monitoring the “abnormal” surge of Hengli Industrial Development Group Co.. The shares jumped the next day and it rallied 319 percent over the past month to be the best performing A share as of Friday.

This came as the Shanghai Stock Exchange said on November 2 that it was tweaking its approach in order to lower “unnecessary” barriers in stock trading. That followed a slew of measures to boost liquidity to ease share pledging risks.

“After the recent changes, as long as there is no insider trading, it’s as if all trades can proceed more freely,” said Zhang Gang, a Central China Securities Co. strategist in Shanghai.

Rising Risks

Buying struggling stocks for their shell value is fraught with risk, analysts warn. China has simplified the rules for companies to list, while a planned new stock board for high-tech companies could potentially dampen demand for potential reverse-takeover targets.

The country’s stock exchanges have issued at least 10 delisting warnings to companies found to have breached accounting regulations this year, the highest amount in at least 9 years. The Shenzhen and Shanghai exchanges issued new rules on Friday, saying companies that commit serious public safety violations would be delisted. The Shenzhen exchange said it had begun the process of delisting Changsheng Bio-technology Co Ltd. , which has been at the center of a vaccine scandal. It halted trading Monday after its shares jumped 41 percent over the previous seven trading days.

Both DEA General Aviation and Harbin Gong Da High-Tech fell by their daily limit on Monday.

“The trade only works under the premise that such stocks will never be delisted, which is unrealistic,” said Shen Zhengyang, a Shanghai-based strategist with Northeast Securities Co.. “Such gains will never last long.”


Buy or sell: Top stock trading ideas by market experts which are good short-term bets

The Nifty 50 closed higher for the second consecutive session and decisively crossed its crucial 10,650 resistance level on November 16. Positive global cues and appreciation of the rupee supported the market.

The index remained in a positive terrain throughout the session and closed 65.50 points higher at 10,682.20. On the weekly basis, the S&P BSE Sensex and Nifty 50 rose around 0.9 percent each for the week ended November 16.

The index formed a bullish candle on the daily charts and Hanging Man kind of pattern on the weekly charts.

According to Pivot charts, the key support level is placed at 10,643.87, followed by 10,605.53. If the index starts moving upwards, key resistance levels to watch out are 10,707.87 and then 10,733.53.

The Nifty Bank index closed at 26,245.55, up 90.80 points on Friday. The important Pivot level, which will act as crucial support for the index, is placed at 26,134.53, followed by 26,023.46. On the upside, key resistance levels are placed at 26,344.73, followed by 26,443.87


Market timers are on the sidelines, which means you might want to jump in

Bear-market calls are rampant these days. Paul Tudor Jones says “really scary moments” are on the way. Jim Cramer warns there’s nowhere to hide in this “very serious correction.” Steve Cohen predicts that the bull is about to die a painful death.

Get the idea? Yeah, pretty sure you do.

So perhaps it is time to consider Baron Rothschild’s famous market take: “The time to buy is when there’s blood in the streets.” That’s gospel for contrarian investors, and despite the occasional market blip to the upside, there’s very little doubt that there’s blood flowing in the streets these days.

Which brings us to our chart of the day.

Amid all the reasons for doom and gloom, there’s one indicator that is pointing to a rally, at least for the short term: Market timers are sitting this one out.

According to this chart from Erin Swenlin of the DecisionPoint blog, the National Association of Active Investment Managers (NAAIM) exposure reading hasn’t been this low since 2016, and that is typically taken as a contrarian indicator.

“They will sometimes be ‘right’ in their exposure in the very short term,” Swenlin wrote. “But in the intermediate term, price reversals nearly always occur.”

Swenlin did warn, however, that if a trend of lower and lower readings unfolds, a bear market could be coming, as was signaled before “the dam broke” in 2007.

“I would expect a small rally or bounce,” she wrote. “But we need to be cautious if these extremely low exposure readings continue lower.”

Not much of a rally or bounce taking shape yet.

The market

Futures for the Dow Jones Industrial Average YMZ8, -0.35%  and the S&P 500 ESZ8, -0.38%  are looking rather sluggish this morning, as is the Nasdaq Composite NQZ8, -0.39% Gold GCZ8, -0.18%  is also in the red, as is silver SIZ8, -0.26% Crude oil CLZ8, +0.04% was providing a glimmer of green this morning before turning mostly flat to lower.

Overseas, Asia markets ADOW, +0.30%  and Europe markets SXXP, +0.17%  are doing just fine, with most major markets in the green.

The buzz

Last week was a chart-lover’s paradise, especially if said chart-lover was looking for warning signs in this unsteady stock market. Apple AAPL, -1.80% bitcoin BTCUSD, -5.75%  and oil CLZ8, +0.04%  were all ringing alarm bells in recent sessions, and they’ll surely be closely eyed by traders in the coming sessions.

Facebook FB, -0.5[“source=cnbc”]9%  is back in the news and looks set to stay there this week. In the latest development, CEO Mark Zuckerberg reportedly has adopted a more aggressive management style in recent months, driving away many top execs amid sinking employee morale. He apparently also blamed COO Sheryl Sandberg for the fallout of the Cambridge Analytica scandal, making her wonder if her job was secure, according to The Wall Street Journal. About a dozen high-profile execs have left Facebook this year.


Stock Market Investment: Never do these 5 things when the markets are volatile

Volatility is not the cause but the manifestation of the problem. Here are some basic things that you need to avoid when you are in the midst of volatile markets.
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In a volatile market, you may find that your investment stocks are losing value more than they deserve.

How do we define volatility in the stock market? Intuitively there are some clear indications of a volatile market. For example, in a volatile market your stop losses will get triggered both on the short side and the long side. In a volatile market, you find that your investment stocks are losing value more than they deserve. You will also find that volatility makes the VIX ratio shoots up, which is why it is also called the Fear Index. It shows the amount of fear in the market and that results in volatility. What we need to understand here is that volatility is not the cause but it is the manifestation of the problem.

The chart above captures the movement of the Nifty and the Volatility index since August 01st 2018. For easier comparison, both the numbers have been indexed to the base of 100. It is clear that as volatility has gone up from the third week of September, the Nifty has drifted down. Even over longer periods of time, the Nifty and the VIX are inversely related. The question is about your investment strategy. Let us look at the five things that you must avoid when you are in the midst of a volatile market. Here are 5 things to avoid:

1. Don’t rush for the exits the moment you see volatility

You don’t need to rush for the exits the moment you see volatility. Remember that volatility is part and parcel of the market. More often than not, the volatility is caused by external factors and the volatility will quell along with that trigger. For example, in the current situation, the market volatility has been caused by the rupee weakness and the IL&FS crisis. Both are temporary. It is not like 2008 where the Lehman crisis was raising questions about the entire financial sector in the world. When you exit in a hurry, you lose out the long term potential of a stock. The Nifty may be down since the peak but since the beginning of the year it is only marginally down. When the markets turn volatile, it is time to take stock of your portfolio and stick to the winners and dilute your holdings in the stocks that are most vulnerable. Don’t just convert everything into cash.

2. Don’t be too enthusiastic about bottom fishing in volatile markets

It is normal for investors to feel that when they were willing to buy Stock A at Rs 3000, why they must not buy the same stock at Rs 2000. While this is a quality company and you may be right, there is an important point to remember here. When the markets crack over 10% in a short span of time with a rise in volatility, the markets can never show a V-shaped recovery. The recovery will be gradual and calibrated over time. Typically, markets recover when the last weak hand is exasperated and exits the market. Also markets bottom out in the midst of disinterest and not in the midst of volatility. You will surely get better prices on most stocks. Be careful of how you bottom fish in such markets.

3. Your SIP commitments must not be tampered

If you are into a monthly systematic investment plan of an equity fund, just don’t worry about the volatility. The SIP is designed to benefit from the volatility because when NAV is up you get more value and when the NAV is down you get more units. This will benefit you both ways through the power of rupee cost averaging. Most equity SIPs have done very well over longer periods of time irrespective of the volatility. The long term SIP returns of equity funds are much better than the returns on lump sum investments because the phased approach captures the benefits of volatility better.

4. Don’t jump into sectors that caused the volatility in the first place

This is a very important take-away for the investor. Look at the sectors that drove bear markets in the past, like cement, technology, real estate, capital goods etc. They were never the stocks that triggered the recovery. For example, most real estate stocks are still quoting at a fraction of the price which they quoted in 2007 or early 2008. Let us look at the present scenario. The correction was triggered by problems in the NBFC space and the mid cap space. These companies were exposed to financial risk and had lower standards of corporate governance. They have longer term problems and are unlikely to lead the recovery. At best, they can experience a short-lived burst of upward movement in a largely downward trend.

5. Don’t stretch your luck too far with futures positions

When markets are volatile, the last thing that you should be doing is leveraging yourself. There are various types of leveraging you should avoid. Avoid borrowing and investing just because the markets are looking cheap. You could take a hit both ways. Secondly, avoid too much of short trading. Your stop losses will get triggered and you will end up in losses on most occasions. Thirdly, futures may look to be a very appealing method but here again you are leveraged. Losses could really multiply in a volatile market.

These are some of the basic things that you need to avoid when you are in the midst of volatile markets. Otherwise, don’t tinker with your long-term financial plans too much.


Struggling commodity prices signal more trouble could be ahead for the stock market

Oil worker drilling rig

Stocks prices have bounced back nicely since entering a correction in October. But several commodities have failed to recover along with them, suggesting more trouble may lie ahead for investors.

The S&P 500 is up more than 6 percent since Oct. 29, when it closed down more than 10 percent from its all-time high reached in late September. But commodities like oil, gasoline, copper and platinum are still in a correction or in a bear market — down at least 20 percent from their 52-week highs.

Commodities are typically seen as leading indicators for global growth as they are used for everything from homebuilding to powering cities. A decline in commodity prices can signal slower economic growth moving forward.

“The question is does this mean the global economy is slowing? I think yes,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies. “I can’t see this continuing. When you get these signals, it’s hard to see equities continue to move up on their own.”

Commodities have been hit by a slew of factors, including higher rates, a stronger dollar, weakness in overseas markets and increasing friction in global trade relations.

The yield on the benchmark 10-year Treasury note is trading around 3.23 percent, near its highest levels since 2011. The 2-year yield, meanwhile, is trading at a level not seen in more than a decade.

Yields have risen this year as risen this year as the Federal Reserve continues to unwind historically accommodative monetary policy. The Fed has increased the overnight rate three times this year and is expected to hike once more before year-end.

Higher rates hurt commodities because they make it more expensive to store them for a prolonged period.

Meanwhile, the stronger dollar has also hit commodities which are priced in the U.S. currency. The greenback is up more than 5 percent against a basket of currencies.

Dollar index (left) and 10-year yield (right)

Source: FactSet

“A lot of that is a function of negative performance overseas relative to the U.S. and strength in the U.S. dollar,” said Ilya Feygin, senior strategist at WallachBeth Capital. “The metals especially have been suffering from that combination.”

The U.S. economy grew at a 3.5 percent annualized pace in the third quarter, topping expectations. In China — the world’s second-largest economy — economic growth slowed to 6.5 percent in the third quarter, missing estimates. Meanwhile, euro zone GDP growth decelerated to 0.2 percent in the third quarter from 0.4 percent in the second quarter.

On top of that, continuous trade tensions between the U.S. and China have also depressed commodity prices. Washington and Beijing have exchanged tariffs on billions of dollars worth of each other’s goods this year, sparking fears that tighter trading conditions could slow down global growth.

“What’s happening in the commodity markets has to do with trade,” said Tim Courtney, chief investment officer at Exencial Wealth Advisors. He added, however, that he does not think the commodity complex’s broad decline is signaling an economic contraction ahead.

The decline in commodities has been especially hard on emerging markets as most are net commodity exporters. The iShares MSCI Emerging Markets ETF (EEM) — which tracks a broad basket of emerging market stocks — is down nearly 14 percent for 2018 through Thursday’s close. The iShares ETFs that track Mexican and Chinese stocks are also down 13.6 percent and 11.2 percent, respectively.

Emerging markets will need to recover for the global economy to recover, Sri-Kumar said, noting: “EM now accounts for 60 percent of the global economy.”

But Matt Lloyd, chief investment strategist at Advisors Asset Management, said the sharp losses in commodities could be a buying opportunity for investors as we get closer to the end of the current economic cycle.

“We’re late into the cycle and usually value outperforms growth at these stages,” Lloyd said. “Commodities have been in a depressed market for some time and that has to do with the fact that we’ve had an anemic recovery from the global recession.”


Funding Circle Sets Its Sights On U.S. Small Business Lending Market

Funding Circle, the UK-based small business lender that went public on the London Stock Exchange in September, is setting its sights on the small business U.S. market, hoping to become the leading lender to what it sees as an underserved market.

While fintechs and traditional banks are stepping up lending to small business owners, Funding Circle is betting its longer-term loans and competitive rates with banks will bring more business its way.  Small business lending in the U.S. is “fractured across multiple competitors,” said Bernardo Martinez, U.S. managing director at Funding Circle. “Typically banks haven’t focused on the segment. It’s an unmet need from small businesses standpoints.”

Small Business Confidence Surging

Funding Circle’s push into the small business lending market in the U.S. comes at a time when traditional banks, fintechs, and credit unions are circling. The economy is booming, unemployment is low and small businesses are making money. At the same time, big banks, regional ones and credit unions are looking to diversify their businesses into new markets.  Earlier this week Biz2Credit released its small business lending index for October, which showed the approval rates for small business loans among big banks set a record in October, increasing to 26.8% from 26.7% compared to September.

It also comes as optimism is high among small businesses with the National Federation of Independent Business’ Small Business Optimism Index hitting a reading of 107.9 in September, marking the third highest reading since the NFIB began conducting it 45 years ago. “This is the longest streak of small business optimism in history, evidence that tax cuts and regulatory rollbacks are paying off for the economy as a whole,” said NFIB President and CEO Juanita D. Duggan in a press release when announcing the results. “Our members say that business is booming and prospects continue to look bright.”

When it comes to taking on the rivals, Funding Circle views the market in three segments. There are the traditional banks that are offering small business owners term loan products that range from six months to five years, providing competitive interest rates but a process that can take months and require reams of paperwork. Then there are the fintechs, which can get money in small business owners hands quickly but don’t offer terms that are longer than two or three years. Finally, there are PayPal, Amazon, and Square which are lending to their existing customers who need access to working capital.

Funding Circle Aims To Stand Out With Longer Loan Terms

Funding Circle hopes to differentiate by offering small businesses loans that have terms that are as long as five years but also have interest rates that are competitive with traditional banks.  “A lot of the learnings in the UK market have enabled us to develop technology and processes to get a better assessment of customers,” said Martinez. “We also have investors that enable us to have access to capital at an affordable rate. As a marketplace lender, we have been able to connect those good investors looking for good returns with a more affordable price for borrowers.”  The interest rate on a five-year loan at Funding Circle ranges from 8.5% to 27.79% while the rate on a two-year loan ranges from 7.6% to 25.54%.

Funding Circle is optimistic about its prospects in the U.S. market but that doesn’t mean it isn’t paying close attention to what is going on in the economy both here and abroad. The stock market is in a near decade bull run, the economy has been surging for years now and interest rates still remain low. But there are signs that we are entering the late stage of the economic cycle and if things worsen due to trade wars or other unforeseen reasons, there are some concerns small business owners will have a hard time paying back their loans. That’s not to say any of that is happening yet, but some lenders to consumers have been reigning in the amount they are willing to lend. Take credit card issuers Capital One Financial and Discover Financial Services, two of the nation’s biggest credit card companies. According to a recent Wall Street Journal report the two are tightening lending standards, becoming more cautious in how they deal with credit limits. There isn’t any evidence that customers are having a hard time paying back their balances but the companies realize the party can’t last forever.  “In so many ways, one can’t help but be struck by … just how good the economy [at] this point is,” Capital One Chief Executive Richard Fairbank said on the company’s earnings call, which was covered by The Wall Street Journal. “And in some ways, it almost feels too good to be true.”

Martinez said the executives at Funding Circle pay close attention to the macroeconomic environment and have robust lending and risk management tools in place to assure investors the lending being provided to small business owners can support a recession. “We are always mindful at some point we need to adjust if we don’t think the market can sustain the lending activity,” said the executive.  Having said that, Martinez is confident the market will remain strong with opportunities to grow. “We see a lot of demand in the U.S. They are looking for opportunities to invest in their businesses and we are here to help.”


Stocks stumble as oil dives deeper into bear market

trader screen chart

Stocks stumbled Friday as worries about slowing economic growth weighed on Wall Street, with energy and high-flying technology companies among the biggest losers.

The Dow Jones Industrial Average fell 0.41%, or 108 points, and the S&P 500 was down 1.85%. The Nasdaq Composite shed 1.39% as Amazon, Facebook, and Google-parent company Alphabet all slid. Meanwhile, General Electric plummeted to its lowest point since the financial crisis.

Oil prices continued to fall sharply as rising inventories overshadowed energy sanctions against Iran that took effect this week. West Texas intermediate slid deeper into a bear market, trading just over $60 a barrel, or down more than 20% from recent highs. Brent, the international benchmark, fell below $70 a barrel.

Not helping the mood, a series of disappointing economic data came out in China overnight. Its biggest auto industry association said sales were down for a fourth month, sliding a steep 11.7% in October. Meanwhile, government data showed producer inflation also fell last month as manufacturing activity slowed. The Shanghai Composite closed down 1.4% at 2,598.87.

Concerns about slowing growth came against the backdrop of an ongoing trade dispute between the US and China, which has resulted in billions of dollars worth of tariffs levied between the world’s two largest economies.

High-level delegations from the two nations met Friday in Washington to discuss a range of issues, including trade and North Korea. Separately, White House adviser Peter Navarro accused Wall Street executives he called “globalist billionaires” of trying to interfere with negotiations. President Donald Trump is expected to meet with Chinese leader Xi Jinping at a multilateral summit in Argentina later this month.

“No good can come of this. If there is a deal, if and when there is a deal, it will be on President Donald J. Trump’s terms, not Wall Street terms,” Navarro said during a speech at the Center for Strategic & International Studies, according to Reuters.

The dollar jumped 0.27% against a basket of currencies, and Treasury yields fell, with the 10-year down 4.3 basis points to 3.189%. On Thursday, the Federal Reserve kept its benchmark interest rate steady at 2.25% and signaled its fourth hike of the year could come in December.


Cramer’s game plan: Let the market fret over oil and get ready to buy high-quality stocks

Let the market fret over oil and get ready to buy high-quality stocks

Let the market fret over oil and get ready to buy high-quality stocks   5 Hours Ago | 00:59

Much of Wall Street is worried that sliding oil prices could be a sign of global economic weakness, but CNBC’s Jim Cramer offered a counter-theory on Friday as he prepared investors for the week ahead.

“I read the decline in oil as an issue of supply overwhelming demand, not demand waning,” he said on “Mad Money.” “When that happens, it’s terrific for both consumers and for business. You’re paying less at the pump; industry’s paying less on the big bill.”

Oil prices fell for their 10th consecutive trading session on Friday, cementing the longest losing streak for U.S. crude since mid-1984, according to Refinitiv data. On Thursday, Cramer said he could make a case for $40-a-barrel prices.

But considering the fact that the United States is producing 12 million barrels of oil a day, up significantly from past years, Cramer found it hard to believe that there was an issue with demand.

“I think lower oil actually creates a virtuous circle and that people are too negative. And it happened just like last time, where we learned … that cheaper fuel is actually good for 90 percent of the S&P 500 as long as it’s caused by excess supply,” he said.

“So what do you do with your portfolio? Nothing,” he continued. “Let this nonsense play out. Get ready to buy some high-quality stocks of companies that benefit from lower oil. It worked last time and it’s going to work again, provided the Fed figures out that inflation is going down, not up. There’s no hurry.”