HOME > MARKETS > MARKET COMMENTARY
  MARKET COMMENTARY
EQUITY
Markets extend gains for fourth straight week
Aug-17-2018

Passing week turned out to be a roller coaster ride for Indian equity markets, where frontline gauges managed to end in green terrain, despite Turkey’s financial crisis and rupee hit its record low. Markets started the holiday truncated week on pessimistic note as sentiments remain dampened with Fitch Ratings’ latest report that its outlook on the Indian banking sector is likely to remain negative until the banks address their weak core capital positions against mounting bad loans and poor financial performance. On the very next day, markets pare all their first day losses as traders took encouragement with better-than-expected macro-economic data. The Central Statistics Office’s (CSO) data showed that India’s Retail inflation fell to nine-month low of 4.17% in July on account of slowdown in prices of vegetables and fruits. Its previous low was in October 2017 at 3.58%. Retail inflation, measured by Consumer Price Index (CPI) had hit a five-month high of 5% in June. Adding to the optimism, wholesale price index (WPI) inflation eased to 5.09% in the month of July 2018, supported by fall in the prices of minerals, crude petroleum & natural gas. However, sentiments once again turned bearish and key gauges witnessed steep cut as cautiousness crept in with report that India’s trade deficit soared to a near five-year high of $18 billion. The country’s exports rose by 14.32% to $25.77 billion in July mainly on account of better performance of gems and jewellery sector as well as petroleum products, while imports during July were valued at $43.79 billion, a growth of 28.81% compared to $33.99 billion in the year ago period. But, it was the final day of trade which helped markets to settle the week in positive trajectory, as sentiments turned jubilant with private report that India's economy is expected to grow at a healthy 7.5% in the first quarter (Q1) of 2018-19 (FY19), lower than a seven-quarter high of 7.7% in the fourth quarter (Q4) of 2017-18 (FY18).

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 78.65 points or 0.21% to 37,947.88 during the week ended August 17, 2018. The BSE Midcap index gained 95.66 points or 0.59% to 16,306.44 and Smallcap index strengthened 82.01 points or 0.49% to 16,866.21. On the sectoral front, S&P BSE Healthcare was up by 759.72 points or 5.33% to 15013.62, S&P BSE Information Technology was up by 408.31 points or 2.78% to 15091.84, S&P BSE Fast Moving Consumer Goods was up by 289.12 points or 2.37% to 12475.64, S&P BSE TECK was up by 149.50 points or 2.00% to 7605.96 and S&P BSE Realty was up by 27.95 points or 1.33% to 2132.82 were the top gainers on the BSE sectoral front while, S&P BSE Oil & Gas was down by 329.74 points or 2.18% to 14765.80, S&P BSE PSU was down by 112.52 points or 1.44% to 7697.49, S&P BSE Capital Goods was down by 233.74 points or 1.29% to 17855.98, S&P BSE Metal was down by 138.14 points or 1.06% to 12879.40 and S&P BSE Finance was down by 48.58 points or 0.77% to 6258.95 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 41.25 or 0.36% to 11,470.75. On the National Stock Exchange (NSE), Bank Nifty was up by 4.30 points or 0.02% to 28,128.55, Nifty IT gained 447.15 points or 3.05% to 15,126.40, Nifty Mid Cap 100 increased 307.05 points or 1.60% to 19,443.00 and Nifty Next 50 was up 72.95 points or 0.24% to 29,940.70.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 12941.68 crore and gross sales of Rs 12906.30 crore, leading to a net inflow of Rs 35.38 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 1675.78 crore against gross sales of Rs 2715.76 crore, resulting in a net outflow of Rs 1039.98 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 0.38 crore and gross sales of Rs 9.59 crore, leading to a net outflow of Rs 9.21 crore.

Industry and Economy

A joint survey carried out by the industry body, the Confederation of Indian Industry (CII) and ASCON has stated that India’s economic growth will improve further in the coming quarters on account of recovery in domestic demand as also the investment cycle. It highlighted that the demand and investment will be supported by better consumption patterns due to favourable monsoon, moderation in inflation and the onset of festive season.

Outlook for the coming week

Indian equity markets, in the previous holiday truncated week, ended in green with Nifty and Sensex posting decent gains on the back of better-than-expected macro-economic data.

In the next week, on the economy front, investors will be eyeing the Consumer price index inflation data for Agricultural Labourers/ Rural Labourers, which is slated to be released on August 20.

Meanwhile, traders for the coming week would be tracking progress of monsoon. Market-participants would also continue to trace the momentum of rupee and FII investment.

Investors will look also forward to a Small Business Summit hosted by the Union County Chamber of Commerce at the Indian Trail Town Hall on August 23.

On the global front, market-participants would watch key macro-economic data from US starting from Redbook on August 21, followed by Existing Home Sales and FOMC Meeting Minutes on August 22, Jobless Claims, House Price Index, Manufacturing PMI, Markit Composite PMI, Services PMI and New Home Sales on August 23 and finally, Core Durable Goods Orders and U.S. Baker Hughes Oil Rig Count on August 24.
 
In the coming week, global investors would be eyeing a meeting of German Chancellor Angela Merkel and Russia’s President Vladimir Putin. They will be meeting on August 18, 2018 in Berlin and the topics will include the civil war in Syria, the conflict in Ukraine and energy questions.

Top Gainers

  • Sun Pharmaceutical Industries up by 9.11% was the top gainer on Nifty for the week - Sun Pharma gained traction on reporting better-than-expected result for the first quarter of current year (2018-19) on the back of stronger sales in the United States. The company posted consolidated net profit of Rs 982.51 crore for Q1FY19, as against net loss of Rs 424.92 crore for Q1FY18. In separate development, the company received approval for CEQUA (cyclosporine ophthalmic solution) 0.09%, from the USFDA. CEQUA is indicated to increase tear production in patients with keratoconjunctivitis sicca (dry eye).
  • Lupin up by 7.10% was another top gainer on Nifty for the week - Most of the pharma sector stocks traded higher as Indian rupee hit all-time low of 70 per dollar mark during the week, due to sharp depreciation in Turkish lira after the United States imposed tariffs on steel and aluminum imports coupled with concerns over India’s rising trade deficit. The rupee fell more than 9 percent year-to-date and around 2 percent in August. A weak rupee boosts revenue of pharma firms in rupee terms as the sector derives a major share of revenue from exports.

Top Losers

  • State Bank of India (SBI) down by 4.82% was the top loser of the week on Nifty - SBI remained under pressure on reporting a loss for a third consecutive quarter ended June 30, 2018, as non-performing assets (NPAs) continued to mount and provisions soared. The Bank posted net loss of Rs 4,875.85 crore for Q1FY19, as compared to a net profit of Rs 2,005.53 crore for the Q1FY18. However, total income of the Bank increased by 5.96% Y-o-Y basis at Rs 74,993.41 crore. Besides, the Bank will sell two NPAs worth about Rs 2,490 crore and has invited bids for them.
  • Hindustan Petroleum Corporation (HPCL) down by 4.60% was another top loser of the week on Nifty - Oil marketing companies (OMCs) came under pressure as the Indian rupee fell below 70 per dollar for the first time. Weakness in the rupee against the dollar makes oil imports costlier for these companies. The sharp decline in the currency can be attributed to a weak external position with respect to the current account deficit as well as the unstable political environment in Turkey. Besides, HPCL sought shareholder nod to borrow as much as Rs 12,000 crore by selling debentures and bonds.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,486.45 on August 17 and lowest level of 11,340.30 on August 13. On the last trading day, the Nifty closed at 11,470.75 with weekly gain of 41.25 points or 0.36 percent. For the coming week, 11,378.55 followed by 11,286.35 are likely to be good support levels for the Nifty, while the index may face resistance at 11,524.70 and further at 11,578.65 levels.

US Market

The US markets ended mostly in green terrain during the passing week on renewed hope that a resolution to a trade dispute with China could be on the horizon. China will send a delegation to the U.S. later this month to resume trade talks, the first such meeting since July. The report comes at a period of elevated tensions between the two major trading partners who have been imposing tariffs on billions of dollars on each other’s goods over the past several months. The talks in Washington will take place on August 21 and 22, just before $16 billion in new U.S. tariffs on Chinese goods take effect, along with an equal amount of retaliatory tariffs from Beijing. The world’s two largest economies have been locked in escalating rounds of tit-for-tat tariffs, with $34 billion in goods targeted by each country and another $16 billion slated to go into effect on Aug. 23. Trump has threatened to impose duties on virtually all of the more than $500 billion of Chinese goods exported to the United States.

However, some cautiousness prevailed in the markets after Turkey slapped levies on the US imports, bringing geopolitical tensions between the US and its trading partners. Turkey raised tariffs on a number of American products, in the latest escalation in tensions between the two countries. President Donald Trump raised duties on Turkish aluminum and steel last week; the latest tariffs from Turkey were in response to those conscious attacks. Trump had announced that he has authorized the doubling on steel and aluminum tariffs on Turkey. Aluminum will now be 20% and Steel 50%.

On the economic front, a report released by the Labor Department showed first-time claims for U.S. unemployment benefits unexpectedly edged lower in the week ended August 11th. The report said initial jobless claims dipped to 212,000, a decrease of 2,000 from the previous week's revised level of 214,000. Street had expected jobless claims to inch up to 215,000 from the 213,000 originally reported for the previous week. Besides, Growth in Philadelphia-area manufacturing activity slowed by much more than anticipated in the month of August, according to a report released by the Federal Reserve Bank of Philadelphia.  The Philly Fed said its index for current general activity tumbled to 11.9 in August from 25.7 in July. 

European Market

European markets ended the week on pessimistic note, as traders remain concerned on renewed concerns about Turkey contributed to the sell-off by European stocks after the Turkish government announced an increase in tariffs on American cars, alcohol and cigarettes. The move is likely to intensify the dispute between the U.S. and Turkey, which recently dragged the Turkish lira down to a record low. Traders remained on sidelines ahead of final inflation and current account data from euro area as well as US reports on consumer sentiment and leading economic indicators. Sentiments also remain dampened on report that Euro area trade surplus decreased for a third straight month in June, albeit slightly. The seasonally adjusted trade surplus fell to EUR 16.7 billion from EUR 16.9 billion in May. The street had expected the figure to remain unchanged at May’s level.

On the economic front, Germany’s wholesale price inflation accelerated further in July to the highest level in more than a year. Wholesale prices climbed 3.5 percent year-over-year in July, just above the 3.4 percent increase in June. UK retail sales increased more than expected in July. Retail sales including auto fuel, rose 0.7 percent month-on-month in July, in contrast to a 0.5 percent fall in June. Sales were forecast to increase by 0.2 percent. Meanwhile, a separate report from the Office for National Statistics revealed that U.K. house price inflation was the lowest in nearly five years as London witnessed its worst decline in house prices since 2009. House prices rose 3 percent year-on-year after a 3.5 percent gain in May. The latest increase was the smallest since August of 2013, when prices grew 3 percent.

However, some major indices trimmed some of their initial losses on hopes for a trade agreement between China and the U.S., as China's Ministry of Commerce said that a Chinese delegation led by Vice Commerce Minister Wang Shouwen will travel to the U.S. for trade talks to be held with U.S. Under Secretary of Treasury for International Affairs David Malpass. Some solace also came in with report that, the euro area economy expanded more than initially estimated in the second quarter. Gross domestic product climbed 0.4 percent sequentially, the same pace of increase as seen in the first quarter, but revised up from the initial estimate of 0.3 percent.

Asian market

All the Asian equity indices snapped the week’s trade in the negative terrain, as Chinese data disappointed. However, losses remained capped after China said it has accepted an invitation from the U.S. for a new round of trade talks to be held in late August. Malaysia's KLSE Composite index ended lower after report indicated that Malaysia's economy expanded at a much slower annual pace of 4.5 percent in the April to June period, hit by commodity production shocks, leading the central bank to cut its full-year growth forecast for Southeast Asia's third-largest economy.

Chinese Shanghai remained the top loser, tumbling over four and half percent, after a slew of Chinese data on industrial output, retail sales and fixed asset investment came in slightly below expectations. Retail sales in China jumped an annual 8.8 percent on year in July, a tad below expectations for a 9.1 percent gain and down from 9.0 percent in June. Industrial production advanced an annual 6.0 percent - unchanged from a month earlier but again beneath forecasts for 6.3 percent. Fixed asset investment grew 5.5 percent from a year earlier - missing expectations for 6.0 percent growth.

Japanese Nikkei too edged marginally lower, as the yen's strength pressured exporters.  Sentiments also remained down-beat with a government report showing that Japan posted a merchandise trade deficit of 231.2 billion yen in July. That was shy of expectations for a shortfall of 41.2 billion yen following the downwardly revised 720.8 billion yen surplus in June. Exports were up 3.9 percent from a year earlier while imports surged an annual 14.6 percent. Meanwhile, Japanese industrial production decreased less than initially estimated in June. Industrial production dropped a seasonally adjusted 1.8 percent sequentially in June, faster than the 0.2 percent fall in the previous month. That was slower than the 2.1 percent decline in the flash data.

  RELATED NEWS >>