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Markets extend southward journey for fourth straight week
Sep-28-2018

Extending losing streak for fourth straight week, Indian equity benchmarks ended the passing week on pessimistic note with frontline gauges ending below their crucial 10,900 (Nifty) and 36,200 (Sensex) levels. Markets started the week on dismal note with key gauges witnessing massacre on industry chamber CII’s report that over 40 per cent of Indian firms expect the Reserve Bank of India (RBI) will go in for another interest rate hike in the current fiscal. A CII release said that its quarterly Business Confidence Index (BCI), conducted during July-September 2018, covered nearly 200 firms of varying sizes. On the very next day, markets witnessed some recovery as traders took some encouragement with report that rising imports from China have taken a heavy toll on the employment-generation potential of the manufacturing sector, especially among the micro, small and medium enterprises (MSMEs). But, markets turned pessimistic and never looked confidant afterwards to continue its southward journey for rest of the days to end below their respective crucial levels. Sentiments remain dampened with a private report stating that even though India’s economy is growing at a fast pace, the ‘higher educated’ are reporting the highest rate of unemployment against the national average. Traders shrugged off report that India’s fiscal deficit during the first five months (April-August) of the current fiscal (FY19) has shown improvement. The fiscal deficit stood at 94.7% of the Budget Estimate (BE) at August-end of FY19, better than 96.1% of BE at August-end of the last financial year. Traders remained cautious with a United Nations trade report stating that the world economy remains on a shaky ground a decade after the 2008 financial crisis as the global economic growth is spasmodic and many economies are operating below potential.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 614.46 points or 1.67% to 36,227.14 during the week ended September 28, 2018. The BSE Midcap index losses 832.43 points or 5.34% to 14,763.20, while Smallcap index slipped 1332.42 points or 8.45% to 14,430.68. On the sectoral front, S&P BSE Realty was down by 237.29 points or 12.23% to 1702.94, S&P BSE Auto was down by 1798.32 points or 7.73% to 21476.52, S&P BSE Consumer Discretionary Goods & Services was down by 258.28 points or 6.53% to 3699.18, S&P BSE Capital Goods was down by 949.29 points or 5.26% to 17108.89 and S&P BSE Metal was down by 676.89 points or 4.85% to 13278.79 were the top losers on the BSE sectoral front, while S&P BSE Information Technology was up by 159.27 points or 1.03% to 15628.94 and S&P BSE TECK was up by 7.29 points or 0.09% to 7730.69 were the only gainers on the BSE sectoral front.

NSE movement for the week

The Nifty slipped 212.65 or 1.91% to 10,930.45. On the National Stock Exchange (NSE), Bank Nifty was down by 477.05 points or 1.86% to 25,119.85, Nifty Mid Cap 100 decreased 1193.15 points or 6.50% to 17,154.35 and Nifty Next 50 lost 1345.50 points or 4.70% to 27,286.50. On the other side, Nifty IT was up by 4.55 points or 0.03% to 15,838.05.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 44134.86 crore and gross sales of Rs 48127.43 crore, leading to a net outflow of Rs 3992.57 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 5741.28 crore against gross sales of Rs 7406.45 crore, resulting in a net outflow of Rs 1665.17 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 1.92 crore and gross sales of Rs 13.08 crore, leading to a net outflow of Rs 11.16 crore.

Industry and Economy

In a bid to ease a liquidity squeeze in the money markets, the Reserve Bank of India (RBI) has allowed banks to dip further into statutory liquidity reserves. It said banks could 'carve out' up to 15% of holdings under the statutory liquidity reserves to meet their liquidity coverage ratio (LCR) requirements as compared to 13% now. It added that this resulted from a rise in the facility to avail funds for LCR to 13% from 11%, effective October 1.

Outlook for the coming week

Local equity markets, slipping for four out of five trading session, posted heavy losses of over 1.50% in the passing F&O expiry week, which dragged Sensex and Nifty below psychologically crucial 36,300 and 10,950 levels respectively. Since the coming week marks the start of a fresh month, a lot of data is expected to pour in. Investors firstly will be eyeing the Nikkei Manufacturing PMI data, which is slated for release on October 1, 2018 followed by Nikkei Services PMI data, which is slated for release on October 4, 2018.

In the next week, market-participants will also be keenly eyeing RBI’s fourth bi-monthly monetary policy review, which is scheduled on October 5, 2018. The street expects the apex bank to raise interest rates in its meeting next week, despite relatively tame inflation, to prop up a retreating rupee.

Meanwhile, Commerce and industry minister Suresh Prabhu will review sector-specific strategies on October 1 to increase India’s exports 20% this year amid an uncertain global trade environment and credit availability and traders will look forward to it. Moreover, rupee momentum will also be watched by the market-men.

On the sectoral front, auto and cement stocks are expected to remain in limelight for the next week as these companies would report their monthly sales figures.

On the global front, market-participants would watch key macro-economic data from US starting from PMI Manufacturing Index, ISM Mfg Index and Construction Spending on October 1, followed by Redbook on October 2, ADP Employment Report, PMI Services Index and ISM Non-Mfg Index on October 3, Jobless Claims, Factory Orders, Fed Balance Sheet and Money Supply on October 4 and finally Employment Situation, International Trade, Baker-Hughes Rig Count and Consumer Credit on October 5.

Top Gainers

  • Tata Consultancy Services (TCS) up by 3.83% was the top gainer on Nifty for the week - Most of the information & technology (IT) sector stocks continued their upward journey as Indian rupee remained weak 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. Besides, TCS’ flagship product, TCS BaNCS for Market Infrastructure has been selected by the Kuwait Clearing Company (KCC) for Central Counter Party (CCP) Services.
  • Infosys up by 3.51% was another top gainer on Nifty for the week - Infosys gained with its subsidiary, Infosys Public Services Inc. has been awarded a CAD $80.3 million contract by Public Services and Procurement Canada to modernize and automate their procurement processes. Besides, Infosys has entered into partnership with Google Cloud to develop cloud transformation and migration services. Through this partnership, the company will offer solutions and services on GCP, creating a scalable, on-demand cloud model that will enable enterprises to easily transition and adopt a cloud-first strategy.

Top Losers

  • Yes Bank down by 18.92% was the top loser of the week on Nifty - Yes Bank remained under pressure. The Bank has denied any ‘window dressing’ of corporate loans to conceal its NPA status. The lender has also refuted allegations that it inflated its share price ahead of key fund-raising activities. It denied parallel dealings with ‘Three Sisters Family Office’, which manage personal investments of the current Chief Executive Officer and Managing Director Rana Kapoor and his family. The bank pointed out it is the subject of a comprehensive annual risk-based supervision by the banking regulator, RBI.
  • Eicher Motors down by 13.44% was another top loser of the week on Nifty - Most of the Automobile sector stocks came under pressure ahead of their sales data for September which is scheduled to be announced next week. Besides, Eicher Motors’ Royal Enfield has launched two all-new motorcycles Interceptor 650 and Continental GT 650 marking its entry into the twin cylinder mid-capacity segment. The Interceptor 650 starts at $5,799 (about Rs 4.25 lakh) and the Continental GT 650 starts at $5,999 (about Rs 4.4 lakh).

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,170.15 on September 24 and lowest level of 10,850.30 on September 28. On the last trading day, the Nifty closed at 10,930.45 with weekly loss of 212.65 points or 1.91 percent. For the coming week, 10,797.12 followed by 10,663.78 are likely to be good support levels for the Nifty, while the index may face resistance at 11,116.97 and further at 11,303.48 levels.

US Market

The US markets ended the passing week on pessimistic note amid news that China has canceled trade talks with the U.S. as tariffs on billions of dollars’ worth of goods take effect. While Wall Street has repeatedly ignored the threat of rising trade tensions, focusing instead on strong economic data and corporate fundamentals, there remained concerns that the situation could escalate into a full-blown trade war, which could have a more severe impact on global demand and growth. Sentiments remain dampened after the Federal Reserve raised interest rates and signaled a continued gradual path of increases. The Federal Reserve raised interest rates by 25 basis points, as widely anticipated. The Fed also dropped the phrase that its policy remains accommodative. However, Fed Chairman Jerome Powell emphasized that the removal of the word should be taken as an indication that the economy is performing as expected. Powell said that the US economy is in a particularly bright moment, which would point to continued increases in rates.

Traders largely shrugged off a report from the Conference Board showing an unexpected improvement in consumer confidence in the month of September. The Conference Board said its consumer confidence index climbed to 138.4 in September from an upwardly revised 134.7 in August. The street had expected the consumer confidence index to drop to 131.7 from the 133.4 originally reported for the previous month. With the unexpected increase, the consumer confidence index reached a new 18-year high and is not far from the all-time high of 144.7 reached in 2000. Meanwhile, the Commerce Department released a report showing new home sales rebounded much more than expected in the month of August. The report said new home sales soared by 3.5 percent to an annual rate of 629,000 in August after slumping by 1.6 percent to a revised rate of 608,000 in July. Street had expected new home sales to rise by 0.5 percent.

On the economic front, the Labor Department released a report showing a modest rebound in initial jobless claims in the week ended September 22. The report said initial jobless claims rose to 214,000, an increase of 12,000 from the previous week’s revised level of 202,000. Street had expected jobless claims to rise to 210,000. The slightly bigger than expected increase came after jobless claims hit their lowest level since December of 1969 in the previous week. Besides, the Commerce Department data also showed that a much bigger than expected jump in durable goods orders in the month of August. It said durable goods orders surged up by 4.5% in August after falling by a revised 1.2% in July.

European Market

European markets ended the passing week in green terrain. The markets started the week on pessimistic note, as Germany's business confidence weakened in September as companies scaled back their expectations amid deteriorating current situation. The survey data from the Mannheim-based Ifo institute showed that the business sentiment index fell less-than-expected to 103.7 in September from 103.9 in August. Economists had forecast the score to drop to 103.2 from the originally estimated 103.8 in August. The street also got cautious after UK manufacturing orders deteriorated in September as export order books faded a little. As per the Industrial Trends Survey from the Confederation of British Industry, the total order book balance fell to -1 percent in three months to September, in contrast to the forecast of +4 percent. The export order book balance stood at +5 percent.

However, the key indices gained the traction further during the week, supported by reports that German consumer confidence is set to improve in October despite political turbulence. The survey data from market research group GfK showed that the forward-looking consumer sentiment index rose 0.1 points to 10.6 in September. The score was forecast to remain unchanged at 10.5 points. Traders paid no heed towards a report stating that French manufacturing sentiment deteriorated in September. The survey results from the statistical office Insee showed that the manufacturing sentiment index fell to 107 in September from 110 in August. This was the lowest score since March 2017 and well below forecast of 109. Separately, France's consumer confidence weakened to the lowest level in more than two years in September. As per survey results from the statistical office Insee, the consumer sentiment index fell to 94 in September from revised 96 in August. This was the lowest since April 2016.

On the inflation front, Germany's consumer price inflation accelerated more-than-expected in September to its highest level in nearly seven years. As per initial estimates from the Federal Statistical Office, the consumer price index rose 2.3 percent year-on-year following a 2 percent increase, each in July and August. Besides, Germany's wholesale price inflation also accelerated in August largely driven by fuel cost. The Federal Statistical Office reported that wholesale price inflation rose to 3.8 percent in August from 3.6 percent in July. Meanwhile, Eurozone economic confidence weakened further in September. The survey data from European Commission showed that the economic sentiment index dropped to 110.9 in September from 111.6 in August. Separately, UK retailers reported a slower pace of growth in sales volumes in September and expect it to remain so again next month. The latest Distributive Trades Survey from the Confederation of British Industry showed that the retail sales balance fell to 23 percent in September from 29 percent in August. Retailers forecast sales growth to slow slightly next month, with the balance easing to 19 percent.

Asian market

Asian equity indices ended the weekly trade mostly in green terrain, followed their US peers higher as news of robust US economic growth and remarks from Federal Reserve Chairman Jerome Powell that the central bank's gradual interest-rate increases are helping sustain the economic expansion bolstered investor’ optimism about the world's largest economy.

Japanese Nikkei edged higher by over a percent, on hopes for continued corporate earnings growth. Sentiments remained up-beat with data indicating that Japan's industrial output rose in August for the first time in four months. The value of retail sales grew 0.9 percent sequentially in the month. Some support also came with report that the unemployment rate fell to 2.4 percent from 2.5 percent. Meanwhile, producer prices in Japan were up 1.3 percent on year in August, exceeding expectations for an increase of 1.1 percent, which would have been unchanged from the July reading.

Chinese Shanghai too edged higher by around a percent, amid expectations for stimulus and on hopes that more Chinese shares will be included in mainstream global benchmarks. However, gains remained capped with data showing that profit growth at China’s industrial firms slowed to a five-month low in August, fanning concerns about faltering domestic demand in the world’s second-largest economy as escalating trade frictions with the United States cloud its outlook.
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