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NIFTY TECHNICAL VIEW: Short term uptrend continues
Nifty has continued its uptrend after taking support at 7600. It may rise to near 8000 if the trend is maintained for few days. And if Nifty sustains above 8000, it has potential to rise further to near 8400.
On downside, if 7600 is breached, Nifty may drop to 7200.
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NIFTY TECHNICAL VIEW: Markets at crucial support
Upward momentum of Nifty was stopped near 8000 and it is again approaching near its crucial support of 7700.
If Nifty again takes support at this level, it may rise to near 8000. If Nifty sustains above 8000, it has potential to rise further to near 8400.
On downside, it has another crucial support near 7600. If 7600 is also breached, Nifty may drop to 7200.
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NIFTY TECHNICAL VIEW: Bearish trend to continue
Nifty could not break above 8000 psychological level this whole week and now 7600 is a crucial support near its previous bottom. If Nifty breaks below this, it may further drop to near 7200.
For any meaningful uptrend, Nifty has to cross and stay above 8000. If Nifty sustains above this level, it may rise to near 8400. A long term bull phase starts only above 8600.
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MARKETS: Sectors with high risks
a.       REAL ESTATE – Excess supply compared to demand is the main reason real estate prices will continue to be under pressure. Rate cut will not be able to boost demand as its impact on cost is very little (last rate cut of 0.50% would reduce EMI by about Rs 20 per lakh). Builders are also under pressure as the banks have started giving lesser loans, the credit growth rate to real estate was almost half that of the previous year. Prices of prime properties have stabilized and deals have started to happen. This may indicate bottoming out. However pressure will remain in under construction and mass production real estate and hence real estate sector on the whole. This sector is expected to remain under pressure for 1-2 years.
b.      BANKING: Major part of bank loans are given to infrastructure, power, and real estate sectors and all these sectors are suffering from various problems that affects their profitability and repayment ability. This is clearly visible in the rising and high levels of bank NPAs. Since these sectors will take time to come out of this difficult phase, banking is expected to remain under pressure.
c.       METALS: Since metal prices are closely related to economy of China, they may continue to be bearish as Chinese economy slows down.  
d.      OIL AND GAS: Due to global supply glut and slowing down of major economies, the oil and gas prices are expected to remain low affecting the producing companies.
e.      TEXTILE: Slowdown in China, EU and US will continue to affect this sector which exports a large part of its production.
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NIFTY TECHNICAL VIEW: Short term uptrend
Nifty has broken 8000 resistance and now the critical level is 8200. A break above this may take it to near 8400. Nifty is now in short term uptrend and if it crosses above 8600, it will again resume its long term uptrend.
Failure to break above 8200 may again cause a downward move in Nifty. On downside, 7600 is a crucial support and if Nifty breaks this and sustains below this, it may further drop to near 7200.
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MARKETS: Benefits of GST
GST is believed to be the most far-reaching tax reforms since independence. Its key benefits are outlined below –
Higher Tax Collection, Boost for Government – GST will subsume a variety of central and state taxes like central excise duty, octroi, service tax and VAT which will lower tax burden and will simplify tax collection. This will lead to improvement in tax compliance and will boost total tax collection. It will help government in reducing its fiscal deficit and it will have more funds available for developmental works.
Benefits for Companies, No Cascading Taxes & Free Movement of Products Across States – GST is a value added tax in nature, it will levy taxes at and only every additional stage of production. It will remove the cascading effect of tax where tax is levied on already paid tax. Simplification of tax procedures will save a lot of time and efforts of companies and the removal of cascading effect will lead to a reduction in prices.  After GST, there will be a single tax rate for each product and service, so in effect there will be a single market for every product – the whole nation. Also, there will be no check-point queues at interstate borders, as there will be no taxes such as octroi.
Benefits for Consumers, Lower Inflation – a low effective tax rate of GST and elimination of cascading taxes will lead to lowering of prices for several goods and services bringing down the inflation.
Higher Growth for the Country – The combination of the above mentioned factors will lead to higher growth for the country. Experts believe that 1-2% additional growth can come from GST implementation.
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MARKETS: GDP grows but recovery may remain weak
Latest GDP data showed a growth of 7.4%, surpassing China’s 6.9% and the fastest in world’s large economies. Some part of this growth may be attributed to a modified GDP calculation approach adopted after NDA came to power and to a lower base effect.
In contrast to the GDP growth figures, the ground realities are still indicating weakness in economy. Bank lending is shrinking, bad loans are rising, last quarter’s corporate results were not bright, exports are continuously falling, real estate is still in despair, monsoons are successively weak, rural demand remains weak, and job creation is way below the required level.
In addition to these woes, BJP is giving indications that coming budget in February would be focusing more on social welfare. Different types of subsidies and non-plan expenditures are expected to weigh heavily on the deficit burden. There would be little scope to allocate any reasonably higher sum for the much needed infrastructure and other developmental activities. The gains made from oil and commodities may not find their way to any productive use.  
Existing weakness in economy and recent developments both indicate that recovery may still take more time.
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MARKETS: Focus on winter session & reforms
Month long winter session has started and now the market trend will be guided by development on GST and other key pending reforms.
The GST bill and the Land bill are now becoming the prime focus of investors because they can trigger a big wave of investments in infrastructure and will substantially improve business conditions. These bills along with other reforms are crucial for providing a much needed boost to the industrial sector. These reforms also become important because a revival in manufacturing sector will lead to more job creation compared to the service sector and creation of employment is a necessity as more and more youth enter into India’s working pool of population. 
Markets may again resume its bull phase if these bills are passed in the winter session. The developments will be closely watched by investors and any hope of a positive outcome will drive the markets higher. A failure in this regard will be strongly negative for the markets.
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MARKETS: Bearish trend to continue, absence of positive triggers
Markets may sideways till 16th December when Fed takes a decision on rate hike. There are increased possibilities of a rate hike either in December itself or in February 2016. The key reasons supporting a rate hike are that there is some indication of a stable economy in US and the fear that prolonged zero Fed rate is fuelling asset bubbles across the globe. The Fed’s policy of zero rate for last seven years has not been able to achieve its intention of improving credit growth leading to industrial growth.
If Fed hikes rate, the direct impact on India will be through its currency. A rate hike strengthens US Dollar and hence weakens INR. It may also lead to flight of foreign capital from country. In anticipation, the currency has already depreciated, FIIs are still withdrawing funds, and stock markets are getting edgy.
In case the US does not hike rates, markets may see a temporary liquidity based rally but since that also indicates that US economy is not strong enough to support a rate hike. When markets realize this, coupled with a rising fear of global slowdown, the rally may end soon.
On economy front in India, there is no positive news, bank credit growth has slowed down again and the exports have fallen for the 11th consecutive month.
Investors need to wait before they plan any long term investment in equities.    
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MARKETS: Recovery?
There were quite a few positive data in this week, IIP grew at fastest pace in the last three years, WPI is still negative, CPI is stable, indirect tax recovery saw a strong 35.8% rise, and car sales rose for the 11th straight month.
These data indicate beginning of a recovery, but, there are issues that undermine this view. One major contributor in IIP rise was Capital Goods which is a highly volatile category and it is doubtful that it will be able to sustain a good growth rate under the current global low growth scenario. In contrast, a more stable category – consumer non-durables, grew by just 0.4%, indicating that consumers have low optimism level about economy. A more confidence building data can be the Q2 corporate results which are not encouraging so far.
Coming festival season may keep the car sales strong and may keep markets also bullish but most of the major issue that have been mentioned previously like banking sector stress, real estate over supply, corporate debt burden, infrastructure hurdles, power sector problems and poor job growth are still in the same situation. Unless these core issues begin to come out of problems, investors should remain skeptical of a recovery.
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NIFTY TECHNICAL VIEW: Resistance at 8200
Nifty is near critical level of 8200. A break above this may take it to near 8400. Nifty is now in short term uptrend and if it crosses above 8600, it will again resume its long term uptrend.
Failure to break above 8200 may again cause a downward move in Nifty. On downside, 7600 is a crucial support and if Nifty breaks this and sustains below this, it may further drop to near 7200.
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MARKETS: Impact of rate cut on economy
Rate cut is expected to revive growth by increasing credit growth that should lead to a higher GDP. During times when businesses are more certain about a positive future, lower rates definitely result in more loans for production and growth. But in current scenario, the future outlook is clouded by several issues where a rate cut alone may not help. As mentioned in our previous research notes, the major core sectors face problems of huge debt burden, lack of demand, lack of inputs, high levels of NPAs, delays in government approvals, and problems of land acquisition. High interest rates or poor liquidity was not the main issue.
It is expected by investors that rate cut will boost demand for housing, auto, and other consumption goods. But again, as mentioned earlier, interest rate cut does boost consumption demand in periods of high positive certainty but may not do so when income and job growth is poor. And we have been going through a phase where GDP is rising but jobs and incomes are rising very slowly. A person planning to buy a house will not buy it just because EMI is going down, he has to be first of all certain about his income, its growth, and job security. And consider the fact that a 0.5% rate cut means a reduction of about Rs 20 per lakh in EMI! Will someone buy a house or a car for this reason?       
We reiterate that pickup in growth is still away and even a rate cut by RBI does not address all of our problems.
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