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Bulls tighten grip on Dalal Street during the week
Aug-24-2018

Bulls tightened grip on Dalal Street in the week gone by with frontline gauges settling with a gain of over three fourth of a percent, surpassing their crucial 11,550 (Nifty) and 38,200 (Sensex) levels. Markets started the holiday truncated week on an optimistic note, as sentiments remained jubilant with traders taking encouragement from former chief economic advisor Arvind Virmani’s statement that India’s economic growth seems to be back on a recovery path and the country will be on a firm 7.5% plus growth track this fiscal. Adding to the optimism, the Central Board of Direct Taxes (CBDT) said that income Tax collection in the country stood at a record Rs 10.03 lakh crore during 2017-18. It also said during 2017-18, a record number of 6.92 crore I-T returns were filed, which was 1.31 crore more than 5.61 crore returns filed in 2016-17. Key gauges extended northward journey for next two sessions with SBI’s latest report ‘Ecowrap’ stating that the country’s GDP is expected to grow by 7.7 percent in the April-June quarter on the back of pick up in leading indicators like cement production, sale of vehicles and bank credit. Some support also came with Moody’s Investors Service’s report that the Indian economy is expected to grow by around 7.5 per cent in 2018 and 2019 as it is largely resilient to external pressures like those from higher oil prices. Traders got some solace with the finance ministry’s statement that the government will meet the fiscal deficit target for the current fiscal although there could be some slippages in the current account deficit (CAD) because of high crude oil prices. However, markets trimmed some of their gains in final day of trade as market participants remain concerned about a report that the government has imposed standard conditions for as many as 25 sectors like steel, coal and oil, seeking environment clearance for expansion of existing projects or new projects.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 303.92 points or 0.80% to 38,251.80 during the week ended August 24, 2018. The BSE Mid-cap index gained 246.30 points or 1.51% to 16,552.74, while Small-cap index slipped 1.78 points or 0.01% to 16,864.43. On the sectoral front, S&P BSE Capital Goods was up by 857.97 points or 4.80% to 18713.95, S&P BSE Power was up by 64.28 points or 3.25% to 2041.67, S&P BSE Healthcare was up by 467.24 points or 3.11% to 15480.86, S&P BSE Metal was up by 324.94 points or 2.52% to 13204.34 and S&P BSE Oil & Gas was up by 273.24 points or 1.85% to 15039.04 were the top gainers on the BSE sectoral front, while S&P BSE Consumer Durables was down by 402.40 points or 1.83% to 21645.90, S&P BSE BANKEX was down by 422.44 points or 1.33% to 31444.02, S&P BSE Finance was down by 31.11 points or 0.50% to 6227.84, S&P BSE Information Technology was down by 38.53 points or 0.26% to 15053.31 and S&P BSE Realty was down by 4.73 points or 0.22% to 2128.09 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 86.35 or 0.75% to 11,557.10. On the National Stock Exchange (NSE), Nifty IT was up by 133.65 points or 0.88% to 15,260.05, Nifty Mid Cap 100 increased 99.05 points or 0.51% to 19,542.05 and Nifty Next 50 gained 606.45 points or 2.03% to 30,547.15. On the other side, Bank Nifty was down by 293.85 points or 1.04% to 27,834.70.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 27390.71 crore and gross sales of Rs 27751.60 crore, leading to a net outflow of Rs 360.89 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 3288.22 crore against gross sales of Rs 3794.53 crore, resulting in a net outflow of Rs 506.31 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 0.19 crore and gross sales of Rs 5.92 crore, leading to a net outflow of Rs 5.73 crore.

Industry and Economy

Expressing optimism on the growth of India, former chief economic advisor Arvind Virmani has said that the country’s economic growth seems to be back on a recovery path and India will be on a firm 7.5 percent plus growth track this fiscal. He also said the US-China tariff war provides an opportunity to increase the country’s exports to the US.

Outlook for the coming week

In the passing week, key gauges ended in positive zone, with Sensex and Nifty gaining more than three fourth of a percent. The coming week is going be a volatile one with the scheduled monthly F&O series expiry on August 30.

Market-participants in the coming data heavy week would be eagerly awaiting the release of Q2GDP data and index of eight core industries data on August 31.

Investors will look also forward to the meet of RCEP member countries’ trade ministers, including India and China. This meeting will be held on August 30-31 in Singapore.

The telecom sector will be in focus in the next week, as the Telecom Commission is likely to meet on August 31 to discuss TRAI’s recommendation on spectrum allocation.

On the global front, market-participants would watch key macro-economic data from US starting from Chicago national activity index on August 27, followed by, Advance trade in goods, Consumer confidence index and Case-Shiller home price index on August 28, Pending home sales on August 29, Weekly jobless claims, Personal income, Consumer spending and Core inflation on August 30 and finally, Chicago PMI and Consumer sentiment index on August 31.

Top Gainers

  • Larsen & Toubro up by 9.03% was the top gainer on Nifty for the week - Larsen & Toubro gained with a report that a long deadlock between monorail contractor - a consortium of Larsen & Toubro-Scomi Engineering (LTSE) - and the Mumbai Metropolitan Region Development Authority (MMRDA) over trip rates is likely to be resolved soon. LTSE has suggested increasing the trip rate. In a separate development, Larsen & Toubro board approved the proposal to buy back six crore shares at a maximum price of Rs 1,500 apiece, amounting to Rs 9,000 crore to reward its shareholders.
  • Tech Mahindra up by 7.46% was another top gainer on Nifty for the week - Tech Mahindra will acquire 100% stake in Czech-based engineering services firm Inter-Informatics for 5.4 million euro through a wholly-owned subsidiary. The acquisition could also provide Tech Mahindra access to the East European markets. Besides, most of the information & technology (IT) sector stocks traded higher as Indian rupee fall against the US dollar during the week. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion’s share of revenue from exports.

Top Losers

  • BPCL down by 5.64% was the top loser of the week on Nifty - Oil marketing companies (OMCs) remained under pressure as oil prices jump on a drop in US crude inventories and a weaker dollar, while concerns about a potential shortfall in Iranian supply from November due to US sanctions also buoyed prices. US crude inventories fell by 5.2 million barrels in the week to August 17 to 405.6 million barrels, ahead of street forecasts for a fall of 1.5 million barrels. Generally, higher crude oil prices are negative for OMCs as it impacts their refining and marketing margins.
  • Titan Company down by 3.71% was another top loser of the week on Nifty - Titan Company came under pressure as the company’s CFO S Subramaniam said demand in southern states has been hit badly to due to monsoons. Titan reported a growth of 31% in profit before tax at Rs 487 crore. The sales income Rs 4,269 crore in the quarter ended June. He said the problem is that the rupee has been weakening and internationally gold prices have fallen, the rupee weakening is in a way keeping it at similar levels as it was in the past.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,620.70 on August 23 and lowest level of 11,499.65 on August 20. On the last trading day, the Nifty closed at 11,557.10 with weekly gain of 86.35 points or 0.75 percent. For the coming week, 11,497.60 followed by 11,438.10 are likely to be good support levels for the Nifty, while the index may face resistance at 11,618.65 and further at 11,680.20 levels.

US Market

The US markets ended mostly in green terrain during the passing week as a pair of billion-dollar deals reaffirmed confidence that the U.S. economy continues its steady expansion. Further, the most recent surge has been supported by strong corporate profits, helped by tax cuts and higher consumer spending. At the same time, corporations are spending more to buy back their own shares. So far, US companies have bought back $4.8 billion of their own shares each day this year, far above the previous record of $3.2 billion per day in 2007. Share buybacks help boost stock prices by reducing the number of outstanding shares traded in the market, which boosts per-share earnings and increases the ownership stake of current shareholders. Meanwhile, The Fed minutes indicated broad-based support for another interest-rate hike in September with many officials stating that as long as economic data remain strong, it would likely soon be appropriate to take another step in removing policy accommodation.

However, gains remained capped as an ongoing trade war between the U.S. and China and worries of renewed legal issues for President Donald Trump dampened investor sentiment. Michael Cohen, Trump's former personal lawyer, pleaded guilty to eight counts related to tax fraud, campaign contributions, making false statements to a financial institution and unlawful corporate contributions. Cohen also admitted to making payments to two women at the direction of Trump. Meanwhile, former Trump campaign manager Paul Manafort was found guilty on eight counts in a separate case.  Meanwhile, The US imposed tariffs on $16 billion of Chinese goods on top of the $34 billion in Chinese imports already targeted.

On the economic front, new home sales in the U.S. unexpectedly decreased in the month of July. The report said new home sales dropped by 1.7 percent to an annual rate of 627,000 in July after tumbling by 2.4 percent to a revised rate of 638,000 in June. Street had expected new home sales to climb by 2.2 percent. The unexpected decline new home sales was partly due to a sharp drop in new home sales in the Northeast, which plunged by 52.3 percent to a rate of 21,000. Besides, a report released by the Labor Department showed a modest decrease in first-time claims for U.S. unemployment benefits in the week ended August 18th. The report said initial jobless claims edged down to 210,000, a decrease of 2,000 from the previous week's unrevised level of 212,000.   

European Market

European markets ended the passing week on an optimistic note, as Eurozone growth continued to be solid and broad-based. However, gains remained capped as trade talks between the U.S. and China ended without progress, raising concerns that a prolonged trade spat could hurt global growth. Market participants also bracing for a speech by U.S. Federal Reserve Chairman Jerome Powell later in the day that could bring a dovish surprise. The Fed has penciled in two more interest rate hikes this year despite risks from trade conflicts and emerging market turmoil. Meanwhile, Brexit talks also remained in focus as the EU and U.K. enter the final stages of talks over foreign policy, security and economic relationship.

On economic front, Eurozone consumer confidence weakened sharply in August to its lowest level in more than a year, preliminary data from the European Commission showed Thursday. The flash consumer confidence indicator dropped to -1.9 from -0.5 in July, which was revised from -0.6. Economists had forecast a score of -0.7. The euro area private sector continued to expand in August, albeit with the rate of expansion remaining one of the weakest seen over the past year-and-a-half. The composite output index rose marginally to 54.4 in August from 54.3 in July. But the score was slightly below the forecast of 54.5. Germany’s private sector activity grew at the fastest pace in six months in August. The composite output index improved to 55.7 in August from 55.0 in July. This was the highest reading since February and above the forecast of 55.1.

France’s private sector growth accelerated to a four-month high in August, thanks to stronger expansions in both the services and manufacturing sectors. The composite output index rose to 55.1 in August from 54.4 in July. Moreover, the index remained above the neutral 50.0 mark for a twenty-sixth month in a row and the expected level of 54.6. France’s manufacturing confidence improved marginally in August after falling in the previous month. The manufacturing confidence index rose to 110 in August from 109 in July, which was revised up from 108. The street had expected the index to remain stable at 108.0.

Asian market

All the Asian equity indices snapped the week’s trade in the positive terrain, despite U.S. and Chinese officials ended two days of meetings without reaching a breakthrough in a trade dispute. Market focus shifted to a speech by the Federal Reserve chairman for fresh clues on the direction of US monetary policy. Malaysia's KLSE Composite index ended higher despite data showing that the country's consumer price inflation edged up to 0.9 percent in July from 0.8 percent in June on transport and utility charges.

Chinese Shanghai remained the top gainer in the region, higher by over two percent, aided by strength in banking shares. Some support also came with a report that China’s securities regulators summoned brokerage analysts for views on the market improved investors’ sentiments.

Japanese Nikkei too edged higher by around one and half percent, as the yen remained weak and a government report showed the country's annual inflation stalled in July, raising speculation the Bank of Japan may delay its exit from ultra-loose policy. Sentiments remained up-beat with the latest survey from Nikkei revealing that activity in Japan’s manufacturing sector continued to expand in August, and at a faster rate, with a manufacturing PMI score of 52.5, up from 52.3 in July.

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