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Bulls tighten grip on Dalal Street; Nifty surpass 11k mark
Jul-13-2018

Bulls tightened grip on Dalal Street in the week gone by with frontline gauges snapping the week with a gain of over two percentage points. The markets’ mood remained positive almost throughout the week with Sensex hitting new lifetime high, while Nifty ending above its crucial 11,000 mark. The local markets made an optimistic start to the week as traders took encouragement from industry body Assocham’s statement that the government’s decision to hike the minimum support price (MSP) for 14 khariff crops would boost farmers’ income, resulting in a huge rural demand push to the Indian economy. Markets extended gains with rating agency Crisil’s latest report stating that India Inc will deliver the highest quarterly revenue growth in three years at 12.8% in the April-June period, but high oil prices will narrow profit margins by 0.20%. Traders also took some encouragement with NITI Aayog vice-chairman Rajiv Kumar making a case for promoting Zero Budget Natural Farming (ZBNF) in states, saying it would help in doubling farmers’ income by 2022. Later on, buying got intensified aided by report that the Global Innovation Index (GII) has ranked India as the 57th most innovative nation in the world. The country has improved its ranking from 60th position last year. Some support also came with report that India has become the world’s sixth largest economy overtaking France. However, markets witnessed consolidation on final day of the week as traders remained little concerned with weak macro-economic data where retail inflation soared to five-month high of 5% in June compared to 4.87% in May, on the back of a depreciating rupee and skyrocketing fuel prices, while India’s Industrial Production (IIP) declined to a seven-month low of 3.2% in May as compared to 4.8% in April, mainly due to slow manufacturing activity and sluggish performance of power and FMCG sector.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 883.77 points or 2.48% to 36,541.63 during the week ended July 13, 2018. The BSE Midcap index gained 39.85 points or 0.26% to 15,431.47 and Smallcap index surged 136.39 points or 0.85% to 16,196.33. On the sectoral front, S&P BSE Oil & Gas was up by 459.78 points or 3.36% to 14154.44, S&P BSE Information Technology was up by 442.47 points or 3.17% to 14385.70, S&P BSE TECK was up by 145.79 points or 2.04% to 7296.92, S&P BSE Finance was up by 104.11 points or 1.76% to 6014.70 and S&P BSE Capital Goods was up by 274.34 points or 1.57% to 17798.96 were the top gainers on the BSE sectoral front while, S&P BSE Metal was down by 149.40 points or 1.18% to 12470.90, S&P BSE Auto was down by 134.90 points or 0.55% to 24567.12 and S&P BSE PSU was down by 26.22 points or 0.36% to 7199.19 were the few losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged by 246.25 or 2.29% to 11,018.90. On the National Stock Exchange (NSE), Bank Nifty was up by 442.10 points or 1.67% to 26,935.95, Nifty IT was up by 519.00 points or 3.70% to 14,534.90, Nifty Mid Cap 100 increased by 40.95 points or 0.22% to 18,263.00 and Nifty Next 50 gained by 86.80 points or 0.31% to 28,234.85.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 23211.95 crore and gross sales of Rs 24894.73 crore, leading to a net outflow of Rs 1682.78 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 2105.45 crore against gross sales of Rs 4187.81 crore, resulting in a net outflow of Rs 2082.36 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 12.50 crore and gross sales of Rs 9.04 crore, leading to a net inflow of Rs 3.46 crore.

Industry and Economy

A day after the World Bank ranked India as sixth largest economy in the World, Union Minister Arun Jaitley has said that the country can emerge as the world’s fifth largest economy next year, if it continues to grow at current pace. He further added that Indian economy is in a stable condition but there is need to more focus on eliminating agrarian distress. Arun Jaitley further recommended a uniform set of agriculture related policies to benefit farmers and double their income, noting that government’s recent hike in the Minimum Support Price (MSP) for farmers will reduce farmer distress that was rampant last year.

Outlook for the coming week

In the passing week, Indian equity markets ended in green terrain with Sensex touching its new lifetime high on the back of World Bank’s report which stated that Indian economy has now become world’s sixth-biggest economy in 2017.

In the coming week, all eyes will be on the meeting of officials of commerce ministry and US trade representative’s office which will be held on July 16-17 in Washington to convince the US to rollback the penal import duties imposed by it and continue the generalised system of preferences (GSP) scheme. Investors will also keep an eye on the Monsoon Session of Parliament that will be held from July 18 until August 10. Triple talaq bill will be among the top priorities of the government.

On the economy front, market-men will keep an eye on the wholesale price index (WPI) data for the month of June which is slated to be announced on July 14. WPI jumped to a 14-month high of 4.43 percent in May on the back of higher fuel and food articles prices.

The April-June quarter earnings season has started and traders in the up-coming week will also be eyeing result announcements of Hindustan Unilever, Ashok Leyland, Crisil, Federal Bank, ZEEL, Bandhan Bank, JK Tyre & Industries, JM Financial, Mindtree, NIIT Technologies, Reliance Communications, Ultratech Cement, ABB India, Bajaj Finserv, Bajaj Finance, Kotak Mahindra Bank, RBL Bank, Bajaj Auto, Bata India, Havells India, Wipro, Zee Media Corporation along with many others.

On the global front, market-participants would watch key macro-economic data from US starting from Retail Sales and Business Inventories on July 16, followed by Redbook, Industrial Production and Housing Market Index on July 17, Housing Starts and Beige Book on July 18, Jobless Claims, Fed Balance Sheet and Money Supply on July 19 and finally Baker-Hughes Rig Count on July 20. The global investors will also look forward to the World Trade Organization (WTO) meeting on July 20, where the US will hold the consultations with all the countries that have filed disputes on the issue in Geneva.

Top Gainers

  • Reliance Industries up by 14.03% was the top gainer on Nifty for the week - Reliance Industries gained traction after Mukesh Ambani, the chairman of the company announced the launch of JioGigaFiber at the 41st AGM of the company. JioGigaFiber is a fiber-based broadband service that marks Reliance Industries’ entry in the broadband sector. Reliance Jio Infocomm, the subsidiary of Reliance Industries that is responsible for bringing Reliance Jio to the market which took the Indian telecom industry by storm, is planning to launch GigaFiber in a staged manner. Besides, Mukesh Ambani exuded confidence that the company will more than double in the next seven years.
  • Yes Bank up by 7.84% was another top gainer on Nifty for the week - Yes Bank gained after it received approval from capital markets regulator Securities and Exchange Board of India (SEBI) to start mutual fund business. This approval is subsequent to the Reserve Bank of India’s (RBI) approval granted to Yes Bank to sponsor a Mutual Fund followed by SEBI’s in-principle approval received subsequently. This approval marks another significant milestone in Yes Bank’s growing presence in the Indian financial markets. The Bank has also recently received the final license from SEBI to launch its Custodian of Securities business.

Top Losers

  • Zee Entertainment down by 7.81% was the top loser of the week on Nifty - Zee Network , Zenith and Nestle have teamed up to launch Maggi Kitchen Journeys, which will be telecast on two channels of the network - the Hindi GEC Zee TV and the lifestyle channel Living Foodz. Besides, Indian Broadcasting Foundation, the apex body of television broadcasters in India, approached the Union information and broadcasting ministry for the removal of the processing fee for the live telecast of sporting events.  As per the report ‘regressive’ processing fee regime introduced by the then I&B minister is not in line with the Prime Minister’s vision of promoting sports and ease of doing business in the country.
  • Lupin down by 6.18% was another top loser of the week on Nifty - Lupin came under pressure despite receiving final approval for its Nitrofurantoin Capsules USP (Macrocrystals), 50 mg and 100 mg from the United States Food and Drug Administration (FDA) to market a generic version of Alvogen Malta Operations Macrodantin Capsules, 50 mg and 100 mg. the company also received final approval for its Hydroxychloroquine Sulfate Tablets USP, 200 mg from the USFDA to market a generic version of Concordia Pharmaceuticals, Inc.'s Plaquenil Tablets, 200 mg. Besides, Lupin and Boehringer Ingelheim have expanded their partnership with plans to market two new oral anti-diabetics.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,078.30 on July 12 and lowest level of 10,807.15 on July 9. On the last trading day, the Nifty closed at 11,018.90 with weekly gain of 246.25 points or 2.29 percent. For the coming week, 10,857.93 followed by 10,696.97 are likely to be good support levels for the Nifty, while the index may face resistance at 11,129.08 and further at 11,239.27 levels.

US Market

The US markets ended in green terrain during the passing week on account of optimism about the upcoming earnings season, with several leading financial companies due to report their quarterly results on Friday. Earnings are expected to show growth of more than 20% year-over-year for the second quarter. Further, easing trade concerns contributed to the rally following report of US threats of a new 10% tariff on $200 billion worth of Chinese imports. Trump ordered U.S. Trade Representative to begin the process of imposing tariffs of 10 percent on an additional $200 billion of Chinese imports. The move came after the U.S. imposed a 25 percent tariff on $34 billion worth of Chinese imports, leading China to retaliate by imposing tariffs on $34 billion worth of U.S. exports.  China vowed to take countermeasures in response to the new tariffs, although the markets responded positively to the lack of an announcement of specific retaliation by the Chinese. Traders also seem optimistic the continued tariff threats will eventually bring the US and China to the table for talks that could result in a long-term trade agreement.

Meanwhile, the Labor Department released a report showing consumer prices edged slightly higher in the month of June. The Labor Department said its consumer price index inched up by 0.1% in June after rising by 0.2% in May. Street had expected consumer prices to increase by 0.2%. Excluding food and energy prices, core consumer prices rose by 0.2% for the second consecutive month, matching street estimates. While consumer prices showed only a modest monthly increase, the annual rate of growth still accelerated to a more than six-year high of 2.9% in June from 2.8% in May. Core consumer price growth also edged up to 2.3% in June from 2.2% in May, reaching its highest level since January of 2017.

Besides, reflecting notable increases in both revolving and non-revolving credit, the Federal Reserve released a report showing a much bigger than expected jump in U.S. consumer credit in the month of May. The Fed said consumer credit surged up by $24.6 billion in May after climbing by an upwardly revised $10.3 billion in April. Street had expected consumer credit to rise by $12.5 billion compared to the $9.2 billion increase originally reported for the previous month. Additionally, the Labor Department released a report showing producer prices increased by slightly more than expected in the month of June.

European Market

European markets ended the passing week mostly in green, as investors brushed aside trade worries and looked ahead to a strong quarterly earnings season. The bourses started the week on firm note, aided by encouraging data reports from Germany and France.  According to a monthly survey from Bank of France, France's economy is set to expand as previously estimated in the second quarter. The central bank forecast 0.3 percent growth for the second quarter, the same rate as estimated previously. Further, German exports rebounded from April despite trade war disputes, but imports growth weakened in May. Exports grew by a more-than-expected 1.8 percent on a monthly basis in May, reversing a 0.3 percent drop in April. Adding some optimism, Eurozone investor sentiment improved in July after a sharp slide in June. As per survey data from think tank Sentix, the investor confidence index rose unexpectedly to 12.1 in July from 9.3 in June.

Domestic sentiments were also positive, as UK economic growth increased in May, led by services, while production declined. The first ever monthly GDP estimate from ONS revealed that Gross domestic product rose 0.3 percent month-on-month in May after 0.2 percent increase in April and a flat reading in March. Optimism remained among the traders after Euro zone industrial production increased at a faster-than-expected pace in May, after falling in the previous month. As per data from Eurostat, industrial output climbed a seasonally adjusted 1.3 percent month-over-month in May, reversing a 0.8 percent fall in April, revised from a 0.9 percent decline reported earlier. Besides, Germany's consumer price inflation slowed as initially estimated in June. The final data from Destatis showed that consumer prices climbed 2.1 percent year-over-year in June, just below the 2.2 percent rise in May.

However, the key indices trimmed their earlier gains later during the week, as the European Commission trimmed its growth forecast for euro area this year to 2.1 percent from 2.3 percent estimated previously, as economic momentum moderated in the first half of 2018 after five straight quarters of vigorous expansion. Some concerns also came after German investor confidence fell to its lowest level in nearly six years in July, as sentiment was hurt by political uncertainty. The ZEW Indicator of Economic Sentiment for Germany dropped 8.6 points to minus 24.7 points, which was the lowest reading since August 2012. Moreover, France's industrial production declined for the third straight month in May. As per the statistical office Insee, industrial output dropped a seasonally adjusted 0.2 percent month-over-month in May, slower than the 0.5 percent fall in April. Also, UK industrial production decreased for the third straight month in May. The figures from the Office for National Statistics showed that industrial production fell 0.4 percent month-over-month in May, slower than April's revised 1.0 percent decline.

Asian market

All the Asian equity indices rallied during the passing week, following the rebound on Wall Street as investors shifted focus to the upcoming corporate earnings season amid a lack of escalation in US-China trade tensions. Better-than-expected Chinese exports data too aided to the optimistic milieu. Malaysia's KLSE Composite index ended higher despite a government report showing that Malaysia's industrial production growth pace decelerated in May as output eased across all sectors, reinforcing market expectations that economic expansion is likely to slow in the quarters ahead.

Japanese Nikkei remained the top gainer in the region, surging by over three and half percent, after the dollar hit a six-month high against the yen on the back of strong producer price inflation data. The Bank of Japan said that producer prices in Japan were up 0.2 percent on month in June, in line with expectations and down from 0.6 percent in May. Investors also shrugged off data showing that Japan's core private-sector machinery orders fell 3.7 percent in May from the previous month due partly to weak demand in such sectors as nonferrous metal products.

Chinese Shanghai too edged higher by over three percent, after official data showed consumer prices in China grew an annual 1.9 percent in June, matching expectations and up from 1.8 percent in May. While, the producer prices index jumped an annual 4.7 percent versus expectations for 4.5 percent and up from 4.1 percent a month earlier. Some optimism also came with data showing that Chinese exports climbed 11.3 percent year-over-year in dollar terms in June, faster than the expected rise of 9.5 percent, while Imports advanced 14.1 percent from a year ago, well below economists' forecast for a growth of 21.3 percent.
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