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Bulls roar on Dalal Street; Markets end at all-time highs
Jul-27-2018

It turned out to be a fabulous week of trade for the Indian equity benchmarks with frontline gauges garnering gain of over two percentage points. Bulls looked in full control during the week with key benchmarks snapping four times in green out of five and ended at all-time high levels, surpassing their crucial 11,250 (Nifty) and 37,300 (Sensex) marks for the first time ever. Markets started off on optimistic note, as traders took encouragement with a private report that the 10 major economies of Asia, including India, are expected to see robust growth and amount to over $28 trillion in real GDP terms on aggregate, more than the US by 2030. Markets extended its rally on report that the overall exports from India to BRICS saw an upswing of 7.5% in Q1 2018 Y-o-Y in terms of total volumes, while the country’s imports from BRICS nations is reduced by 3.5%. Traders also took some encouragement with report that the commerce ministry is working on an export promotion strategy to boost shipments of chemicals, plastics and allied products sector to push the growth of the country’s overall exports. Afterwards, markets witnessed consolidation as traders remained concerned with report that the IMF has cautioned India it should not rely on global financial markets to finance its current account deficit (CAD) when it goes above 3% of GDP. But, rally in final two days of trade took markets at their all-time peak as sentiments remained up-beat with Commerce and Industry Minister Suresh Prabhu’s statement that India’s exports would register healthy growth rates in the coming months and are expected to touch $350 billion in 2018-19. Adding to the optimism, FDI from nations widely regarded as tax havens such as Cayman Islands and Hong Kong jumped in 2017-18, even as overall India-bound investments showed a slower rise on Y-o-Y basis.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 840.48 points or 2.30% to 37,336.85 during the week ended July 27, 2018. The BSE Midcap index gained 716.16 points or 4.71% to 15,912.62 and Smallcap index was up by 728.77 points or 4.64% to 16,450.20. On the sectoral front, S&P BSE Metal was up by 780.53 points or 6.65% to 12511.06, S&P BSE Fast Moving Consumer Goods was up by 551.91 points or 4.87% to 11892.60, S&P BSE PSU was up by 350.71 points or 4.87% to 7557.69, S&P BSE Realty was up by 92.78 points or 4.70% to 2068.32 and S&P BSE Capital Goods was up by 670.00 points or 3.83% to 18164.60 were the top gainers on the BSE sectoral front, while S&P BSE Information Technology was down by 55.19 points or 0.38% to 14516.97 and S&P BSE TECK was down by 2.82 points or 0.04% to 7352.97 were the only losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged by 268.15 or 2.44% to 11,278.35. On the National Stock Exchange (NSE), Nifty Next 50 gained by 1664.80 points or 6.03% to 29,258.45, Nifty Mid Cap 100 increased by 726.30 points or 4.02% to 18,781.45 and Bank Nifty was up by 761.20 points or 2.83% to 27,634.40, while Nifty IT was down by 183.50 points or 1.25% to 14,517.90.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 27974.72 crore and gross sales of Rs 25267.85 crore, leading to a net inflow of Rs 2706.87 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 5838.32 crore against gross sales of Rs 5146.29 crore, resulting in a net inflow of Rs 692.03 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 16.14 crore and gross sales of Rs 31.63 crore, leading to a net outflow of Rs 15.49 crore.

Industry and Economy

Expressing hopes on good growth in exports, Commerce and Industry Minister Suresh Prabhu has said that India may register healthy growth rates in exports in the coming months, despite increasing global protectionism. He added that the country’s exports are expected to touch $350 billion in the current fiscal year (FY19). Prabhu also said that services sector is set to become a dominant driver of the Indian economy and will contribute $3 trillion to the Gross Domestic Product (GDP) by 2025. The services sector contributes significantly to India’s increased productivity and competitiveness.

Outlook for the coming week

The passing week was a marvelous one for the Indian equity markets with Nifty and Sensex conquering their fresh all time record high levels as June-quarter earnings buoyed investors’ sentiments.

The coming week marks the start of a fresh month and is expected to be a data heavy week starting with release of Core Sector growth data for the month of June. Market-men would also be eyeing Nikkei Manufacturing PMI and Nikkei services PMI data for the month of July on August 1 and August 3, respectively.

Traders would also be awaiting the RBI’s third Bi-monthly monetary policy statement, which will be announced on August 1. Market-participants would also trace monthly Auto and Cement sales numbers for the month of July.

Additionally in the earnings season, traders will be eyeing important result announcements of JK Cement, NTPC, Persistent Systems, Unichem Laboratories, Axis Bank, Central Bank Of India, Century Textiles & Industries, Avenue Supermarts, Escorts, Gujarat Gas, HDFC, IDEA, IDFC, IDFC Bank, Interglobe Aviation, Oberoi Realty, Bank Of India, BASF India, Bharat Electronics, Blue Dart Express, Dabur India, JK Paper, Power Grid Corporation Of India, Raymond, Subex, Tata Motors, Apollo Tyres, Reliance Infrastructure, along with many others in the coming week.

On the global front, market-participants would watch key macro-economic data from US starting from Pending Home Sales Index on July 30, followed by FOMC Meeting Begins, Personal Income and Outlays, Employment Cost Index, Chicago PMI and Consumer Confidence on July 31, Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg Index, Construction Spending and FOMC Meeting Announcement on August 1, Jobless Claims, Factory Orders, Fed Balance Sheet and Money Supply on August 2, and finally Employment Situation, International Trade, PMI Services Index and Baker-Hughes Rig Count on August 3.

Top Gainers

  • ICICI Bank up by 12.25% was the top gainer on Nifty for the week - ICICI Bank gained traction on acquiring 9.9% stake in fintech firm Arthashastra Fintech for a cash consideration of Rs 8.27 crore. Arthashastra Fintech provides a deferred payment option for purchasing goods and services with third-party merchants. In a separate development, the bank will buy a 9.91% stake in ePayLater. The transaction, expected to be completed by the end of July, amounts to Rs 8.72 crore. Besides, ICICI Bank will announce its financial results for the April-June quarter of FY19, on July 27, 2018.
  • ITC up by 10.70% was another top gainer on Nifty for the week - ITC gained on reporting better-than-expected 10% rise in first-quarter profit, as the company paid a significantly lower excise duty, a tax on manufactured goods. The net profit of the company stood at Rs 2,818.68 crore for Q1FY19 as compared to Rs 2,560.50 crore for Q1FY18. However, total income of the company decreased by 21% at Rs 11278.44 crore for Q1FY19 as compared Rs 14277.19 crore for the corresponding quarter previous year. Excise duty paid during the quarter fell to Rs 168 crore from Rs 3,846 crore a year ago.

Top Losers

  • Bajaj Auto down by 13.75% was the top loser of the week on Nifty - Bajaj Auto remained under pressure on reporting lower-than-expected profit growth as well as disappointing operating margin in Q1FY19. The company posted a rise of 24.50% in its consolidated net profit at Rs 1,041.78 crore for the quarter ended June 30, 2018, as compared to Rs 836.74 crore for the same quarter in the previous year. Total consolidated income of the company increased by 25.12% at Rs 7,729.34 crore for Q1FY19 as compared Rs 6,177.66 crore for the corresponding quarter previous year.
  • Hero MotoCorp down by 7.16% was another top loser of the week on Nifty - Hero MotoCorp came under pressure after reporting lower-than-expected numbers for the first quarter ended June 30, 2018, due to higher raw material expenses. The company posted a marginal fall of 0.53% in its net profit at Rs 909.17 crore for the quarter under review as compared to Rs 914.04 crore for the same quarter in the previous year. However, total income of the company increased marginally by 1.97% at Rs 8925.55 crore for Q1FY19 as compared Rs 8753.53 crore for the corresponding quarter previous year.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,283.40 on July 27 and lowest level of 11,010.95 on July 23. On the last trading day, the Nifty closed at 11,278.35 with weekly gain of 268.15 points or 2.44 percent. For the coming week, 11,098.40 followed by 10,918.45 are likely to be good support levels for the Nifty, while the index may face resistance at 11,370.85 and further at 11,463.35 levels.

US Market

The US markets ended in green terrain during the passing week following the announcement of a pact to ease trade tensions between the US and the European Union after an important tete-a-tete between President Donald Trump and the EU’s Jean-Claude Juncker in Washington. Trump said that the US and the EU will maintain a close relationship with strong trade relations. He further said Washington and Europe would work together toward zero tariffs, zero non-tariff barriers, zero subsidies on non-auto-industrial goods. The eurozone and Washington also agreed to lower industrial tariffs on both sides and increase liquefied natural gas and soybean exports to Europe, with an agreement to avoid tariffs on European auto makers in the works. Easing trade tensions on an important sector like autos is positive for both counterparts. Besides, investors welcomed strong corporate earnings reports from Google parent Alphabet and other companies.

On the economic front, a report released by the Commerce Department showed a notable increase in new orders for U.S. manufactured durable goods in the month of June. The Commerce Department said durable goods orders jumped by 1.0 percent in June after falling by a revised 0.3 percent in May. Street had expected durable goods orders to spike by 3.0 percent. The increase in durable goods orders was partly on account of a rebound in orders for transportation equipment, which surged up by 2.2 percent in June following a 1.4 percent slump in May. Besides, First-time claims for unemployment benefits in the U.S. showed a modest increase in the week ended July 21st, according to a report released by the Labor Department. The report said initial jobless claims rose to 217,000, an increase of 9,000 from the previous week's revised level of 208,000.

Additionally, a report released by the Commerce Department on showed a bigger than expected drop in new home sales in the U.S. in the month of June. The report said new home sales plunged by 5.3 percent to an annual rate of 631,000 in June after jumping by 3.9 percent to a rate of 666,000 in May. Street had expected new home sales to fall by 2.8 percent. The bigger than expected decrease in new home sales came as sales in the Mid-west plummeted by 13.4 percent to a rate of 71,000.  New home sales in the South and West also tumbled by 7.7 percent and 5.2 percent, respectively, while new home sales in the Northeast spiked by 36.8 percent.

European Market

European markets ended the passing week mostly in green, as the US and the EU agreed to work on lowering trade barriers. The bourses started the week on pessimistic note, as Investors kept an eye on the ECB's monetary policy meeting. The street also got hit, after Eurozone consumer confidence fell in July to its lowest level in nine months. A flash estimate from European Commission showed that the consumer confidence index eased to -0.6 from -0.5 in June. Economists had forecast a score of -0.7. Further, the key indices fluctuated between gains and losses over the course of trading week, as France's manufacturing confidence weakened for the second straight month in July. As per survey data from the statistical office Insee, the manufacturing confidence dropped to 108.0 in July from 109.0 in June, which was revised down from 110. Also, France's private sector expanded at a slower pace in July. The flash data from IHS Markit showed that the composite output index dropped to 54.5 from 55.0 in June. Anxiety also spread among the investors, after Eurozone private sector activity growth weakened in July. As per flash survey results from IHS Markit, the composite output index dropped to 54.3 in July from 54.9 in June. The score was expected to fall slightly to 54.8.

However, the markets held onto gains at the close of week, as The European Central Bank left its interest rates unchanged on Thursday and maintained the forward guidance on monetary stimulus, following the Governing Council's June decision to halve the monthly asset purchases after September, and to eventually end them in December. Adding some optimism, European Central Bank President Mario Draghi said the euro area economic recovery is proceeding along its solid and broad-based path despite prominent uncertainties linked to the global trade. Besides, French consumer confidence remained stable in July. As per survey data from the statistical office Insee, the consumer sentiment index held steady at 97 in July. The indicator remained below its long-term average of 100 for the third consecutive month.  Meanwhile, Germany's private sector activity expanded at the fastest pace in five months in July driven by a stronger increase in manufacturing output. As per flash data from IHS Markit, the composite output index climbed to 55.2 from 54.8 in June. The score was expected to remain at 54.8. The pace of expansion was the fastest since February.

Meanwhile, Germany's business sentiment weakened for the second straight month in July as escalating trade tensions with the US weighed on firms' expectations. The survey data from the Munich-based Ifo Institute revealed that the business confidence index fell to 101.7 in July from 101.8 in June. Moreover, French producer prices in the domestic market rose marginally in June. As per the statistical office Insee, producer prices edged up 0.1 percent month-over-month in June, slower than the 0.7 percent rise in May. Germany's consumer confidence is set to weaken slightly in August. The survey data from market research group GfK showed that the forward-looking consumer sentiment index fell to 10.6 in August from 10.7 in July. The score was forecast to remain unchanged at 10.7.

Asian market

All the Asian equity indices snapped the week’s trade in the positive terrain, as US President Donald Trump and European Commission president Jean-Claude Juncker agreeing to work towards eliminating trade barriers on industrial goods. The US and the EU have agreed to work for zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto goods. They also agreed to increase trade in services and agriculture, including greater US soybean exports to the EU. However, upside remained limited as investors awaited US GDP data and the outcome of Bank of Japan policy meeting for directional cues.

Chinese Shanghai surged by over one and half percent, after the country's central bank injected record liquidity into the banking system via medium-term lending facility to alleviate funding pressure. Market sentiment also got a boost after the State Council, China's cabinet, said the country would adopt a more vigorous fiscal policy to help tackle external uncertainties without resorting to strong policy stimulus. In another development, Beijing said it has no intention to devalue the yuan to help exports.

Japanese Nikkei edged marginally higher, as the yen's fall against the dollar lifted export-oriented shares. Traders also took some support with the Bank of Japan stating that producer prices in Japan were up 1.2 percent on year in June, following two months at 1.0 percent. However, gains were limited with data indicating that the manufacturing sector in Japan continued to expand in July, albeit at a slower pace, with a 20-month low manufacturing PMI score of 51.6. Investors also remained cautious on speculation that the Bank of Japan might hint at signal to unwind its massive stimulus program.
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