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Benchmarks extend winning streak for third straight week
Aug-10-2018

Extending their northward journey for third straight week, Indian equity benchmarks ended the passing week with a gain of over half a percent, with frontline gauges settling above their crucial 37,800 (Sensex) and 11,400 (Nifty) levels. Markets started the week on an optimistic note, as sentiments remained up-beat with the Confederation of Indian Industry’s (CII) statement that with the US imposing an additional 25% duty on imports worth $34 billion from China, certain Indian products may become more competitive. Key gauges witnessed consolidation on the very next day, as market participants remained cautious with president of the International Economic Association, and former chief economist at the World Bank, Kaushik Basu’s statement that in the event of US-China currency war there will be a sideline effect on India and a depreciation of the rupee, which, if managed well by policymakers, will be good for the country. Afterwards, sentiments once again turned upbeat and domestic bourses rallied for next two days to surpass their crucial 38,000 (Sensex) and 11,450 (Nifty) levels. Sentiments remained buoyed with International Monetary Fund’s (IMF) statement that India is on track to hold its position as one of the world’s fastest-growing economies as reforms start to pay off. The $2.6 trillion economy was described by Ranil Salgado, the IMF’s mission chief for India, as an elephant starting to run, with growth forecast at 7.3% in the fiscal year through March 2019 and 7.5% in the year after that. However, markets trim some of their early gains on last day of trade to end off week’s high, as investors remained cautious after data released by the India Meteorological Department (IMD) showed that 39 percent of the 681 districts in India have received less than normal rainfall in the week ended August 8.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 313.07 points or 0.83% to 37,869.23 during the week ended August 10, 2018. The BSE Midcap index gained 3.89 points or 0.02% to 16,210.78, while Smallcap index slipped 49.32 points or 0.29% to 16,784.20. On the sectoral front, S&P BSE Consumer Durables was up by 575.76 points or 2.69% to 21947.80, S&P BSE BANKEX was up by 668.89 points or 2.15% to 31748.18, S&P BSE Metal was up by 214.26 points or 1.67% to 13017.54, S&P BSE Realty was up by 22.59 points or 1.08% to 2104.87 and S&P BSE Finance was up by 63.20 points or 1.01% to 6307.53 were the top gainers on the BSE sectoral front, while S&P BSE Healthcare was down by 421.06 points or 2.87% to 14253.90, S&P BSE Capital Goods was down by 215.16 points or 1.18% to 18089.72, S&P BSE Oil & Gas was down by 110.61 points or 0.73% to 15095.54, S&P BSE PSU was down by 23.63 points or 0.30% to 7810.01 and S&P BSE Power was down by 3.30 points or 0.17% to 1988.43 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged by 68.70 or 0.60% to 11,429.50. On the National Stock Exchange (NSE), Bank Nifty was up by 428.75 points or 1.55% to 28,124.25, Nifty IT was up by 30.20 points or 0.21% to 14,679.25, Nifty Mid Cap 100 increased by 23.25 points or 0.12% to 19,135.95. On the other side, Nifty Next 50 lost 36.10 points or 0.12% to 29,867.75.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 17384.40 crore and gross sales of Rs 15500.50 crore, leading to a net inflow of Rs 1883.90 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 3814.99 crore against gross sales of Rs 2045.72 crore, resulting in a net inflow of Rs 1769.27 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 7.11 crore and gross sales of Rs 18.38 crore, leading to a net outflow of Rs 11.27 crore.

Industry and Economy

The International Monetary Fund (IMF) has said that India is a source of growth for the global economy for the next few decades and it could be what China was for the world economy. It noted that the country now contributes, in purchasing power parity measures, 15% of the growth in the global economy, which is substantial. It added that spillovers from India are not that big because it is not a very open economy. The IMF views India as a ‘long run source of global growth’.

Outlook for the coming week

In the passing week, Indian benchmarks ended in green terrain with Nifty and Sensex touching all-time highs but heavy selling in the last day of the trading week forced benchmarks to come-off their high levels. 

In the next holiday truncated week, on the economy front, market-men will keep an eye on the Consumer price index (CPI) data and Wholesale price index (WPI) data for the month of July which is slated to be released on August 13 and August 14 respectively.

Besides, investors would also keep a close watch on lingering trade-war concerns between the US and China in the coming week and would continue to trace the momentum of rupee.

In the last leg of earning season, markets would be eyeing earnings from big-wigs, including Coal India, Corporation Bank, Crest Ventures Dalmia Bharat, DCM Shriram Industries, IOC, NBCC, V.S.T.Tillers Tractors, Vikas Wsp, Abbott India, Auro Laboratories, Binani Industries, Cadila Healthcare, Care Ratings, Eros International Media, IL&FS Transportation Networks, Oil India, Sadbhav Engineering, Cox & Kings, D B Realty, Fortis Healthcare, GMR Infrastructure, IDBI Bank, J.R.Foods, NLC India, SSWL, Sun Pharmaceutical Industries, Suven Life Sciences among others.

On the global front, market-participants would watch key macro-economic data from US starting from Import and Export Prices and Redbook on August 14, followed by Retail Sales, Productivity and Costs, Industrial Production, Business Inventories and Housing Market Index on August 15, Housing Starts, Jobless Claims, Fed Balance Sheet and Money Supply on August 14, and finally Consumer Sentiment, Leading Indicators and Baker-Hughes Rig Count on August 16.

Top Gainers

  • Axis Bank up by 12.47% was the top gainer on Nifty for the week - Axis Bank gained traction on report that the Bank is planning to add about 350-400 branches to existing network in current fiscal year as part of its expansion strategy. The Bank currently operates 3,800 branch offices across the country. In a separate development, Axis Bank recorded growth in its mobile banking segment with overall mobile banking spends at Rs 71,444 crore in the first quarter of the financial year. This is a 90% increase from the first quarter of the previous financial year.
  • ICICI Bank up by 10.07% was another top gainer on Nifty for the week - ICICI Bank is aiming to disburse retail loan to the tune of Rs 10,000 crore in Punjab and Haryana by the end of the current financial year. The Bank is expanding its network across tier 2-3 towns. The Bank also targeted to double its home loan disbursement to Rs 800 crore this fiscal in Odisha to focus affordable housing for rapid growth. Besides, as per a report, ICICI Bank management wrote off unsecured portions of doubtful corporate loans totaling Rs 5,000-5,600 crore for fiscal year 2016-17.

Top Losers

  • Lupin down by 6.41% was the top loser of the week on Nifty - Lupin came under pressure on reporting lower-than-expected profit for the first quarter of fiscal year 2018-19, mainly due to drop in sales in the US and Japan. The company’s consolidated net profit declined 43.37% to Rs 202.76 crore for the quarter ended June 30, 2018, as compared to Rs 358.06 crore for the quarter ended June 30, 2017. However, total income of the company increased by 3.55% at Rs 4,040.13 crore for the quarter under review, as compared Rs 3,901.55 crore for the corresponding quarter previous year.
  • Sun Pharma down by 4.55% was another top loser of the week on Nifty - Sun Pharma’ subsidiary Taro’s sales declined 4.2% Y-o-Y to $154.6 million in Q1FY19. The company’s volumes grew 11.1%, despite it witnessed a decline in its revenue due to a challenging pricing environment. Gross profit for Q1FY19 stood at $100.1 million. Besides, Sun Pharma is recalling 5,215 units of 10 mL vials testosterone cypionate injections in the strength of 200 mg/mL from US, on account of presence of particulate matter: organic and inorganic compounds detected in vials of product.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,495.20 on August 9 and lowest level of 11,359.70 on August 7. On the last trading day, the Nifty closed at 11,429.50 with weekly gain of 68.70 points or 0.60 percent. For the coming week, 11,361.07 followed by 11,292.63 are likely to be good support levels for the Nifty, while the index may face resistance at 11,496.57 and further at 11,563.63 levels.

US Market

The US markets ended the passing week in green terrain as investors continued to weigh solid earnings against repercussions of retaliatory tariffs from trading partners and their impact on markets. The positive surprises in the earnings season are strong and that’s helping the overall sentiment in the market. The biggest take away from this earnings season is that ‘tax cuts were clearly a positive for the bottom line but the top line has also been good.’ As per some private reports, second-quarter results so far have been stellar, with S&P 500 companies reporting earnings growth of 24% and sales gains of 9.8%. Strong earnings have helped to bolster the belief that steady U.S. economic growth will continue to support corporate bottom lines and keep stocks buoyant.

Though, there was some cautiousness in the market after the Chinese Ministry of Commerce's announcement of 25 percent tariff on $16 billion worth of U.S. goods. The goods being targeted by China include large passenger cars and motorcycles as well as various fuels and fiber optical cables. The announcement by China came after the U.S. finalized a list of approximately $16 billion worth of Chinese imports that will be subject to a 25 percent tariff. The second tranche of tariffs, which are due to take effect on August 23rd, follows the first tranche of tariffs on approximately $34 billion of Chinese imports that went into effect on July 6th. The Trump administration has maintained that the tariffs are necessary to force China into changing economic behavior it says harms the US. For instance, the major complaint is about the theft of US intellectual property by Chinese firms.

On the economic front, the Labor Department released a report showing first-time claims for unemployment benefits unexpectedly edged lower in the week ended August 4th. The report said initial jobless claims dipped to 213,000, a decrease of 6,000 from the previous week's revised level of 219,000. Street had expected jobless claims to inch up to 220,000 from the 218,000 originally reported for the previous week. Besides, a separate report released by the Labor Department showed producer prices unexpectedly came in unchanged in the month of July. The Labor Department said its producer price index was unchanged in July after rising by 0.3 percent in June. Street had expected producer prices to increase by 0.2 percent. Excluding food and energy prices, the core producer price index inched up by 0.1 percent in July after climbing by 0.3 percent in the previous month.

European Market

European markets ended the passing week on positive note, even though the European Central Bank said uncertainties related to global factors, notably the threat of protectionism remain prominent. Nonetheless, the bank said risks surrounding the euro area growth outlook were broadly balanced. The key indices started the week cautiously, as Euro area private sector growth eased in July, ceding most of the momentum gained in the prior survey month. The data from IHS Markit showed that the composite output index fell to 54.3 in July, in line with flash estimate, from 54.9 in June. Some concerns also came after British service sector grew at the weakest pace in three months as greater risk aversion in response to Brexit uncertainty held back new business growth in July. The IHS Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index dropped more-than-expected to 53.5 in July from 55.1 in June. Adding some worries, German factory orders declined 4 percent month-on-month in June, reversing a 2.6 percent increase in May.

However, the markets soon managed to recover their losses to end mostly in green, as optimism spread among the traders after  Euro zone confidence among investors improved to a 3-month high in August as they see signs of relief in the EU's trade dispute with the US. The survey data published by think tank Sentix showed that the investor sentiment index climbed to 14.7 in August from 12.1 in July. This was the highest score since June. Domestic sentiments also got boost, as France's economic growth is set to improve in the third quarter. As per survey data from Bank of France, gross domestic product is forecast to expand 0.4 percent in the third quarter, compared to 0.2 percent growth seen in the second quarter. Separately, Euro zone retail sales increased for the second straight month in June. The data from Eurostat showed that retail sales grew at a steady pace of 0.3 percent on month in June driven by food sales.

On the economic front, UK house prices increased at a faster pace in July to hit a record high level. As per data from the Lloyds bank subsidiary Halifax and IHS Markit, house prices grew 1.4 percent month-on-month in July, faster than the 0.9 percent rise in June. Further, Germany's exports remained flat amid trade wars and industrial production declined more-than-expected in June. As per Destatis, exports registered nil growth in June from May after rising 1.7 percent. On the other hand, monthly growth in imports accelerated to 1.2 percent from 0.7 percent in May. As a result, the trade surplus fell to a seasonally adjusted EUR 19.3 billion from EUR 20.4 billion in May. Separately, France's foreign trade gap widened in June, as imports grew faster than exports. The figures from the Customs Office showed that the trade deficit rose to EUR 6.25 billion in June from EUR 6.02 billion in the previous month.

Asian market

Asian equity indices ended the weekly trade mostly in green terrain, as investors cheered upbeat corporate earnings results. Besides, expectations of increased Chinese government spending on infrastructure also boosted sentiments. However, gains remained capped as investors worried about rising trade tensions between the US and China as well as the new set of US sanctions on Russia.

Chinese Shanghai edged higher by around two percent, after private report showed China's exports surged more than expected in July despite U.S. duties and its closely watched surplus with the United States remained near record highs, as the world's two major economic powers ramp up a bitter dispute that some fear could derail global growth. Investors also shrugged off data showing that China's factory price inflation cooled in July but not as much as expected, amid a wider slowdown in economic growth as Beijing remains locked in a heated trade dispute with Washington. However, consumer inflation picked up from the previous month, largely due to a rise in non-food prices.

However, Japanese Nikkei edged lower by over a percent, as the yen's strength pressured exporters. Sentiments remained subdued with data showing that Japan's core private-sector machinery orders fell for a second straight month in June, suggesting capital expenditure could weaken in coming months. Traders even overlooked data showing that Japan's GDP expanded a seasonally adjusted 0.5 percent sequentially in the second quarter of 2018. That exceeded expectations for an increase of 0.3 percent following the 0.2 percent loss in the three months prior.
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