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Benchmarks add over a percent gain during the week
Oct-12-2018

Passing week turned out to be a roller coaster ride for Indian equity markets, where frontline gauges managed to end in green, helped by significant gains in final session of the week.  Markets started the week on optimistic note with the World Bank’s latest report stating that growth in India is firming up and projected to accelerate to 7.3% in the 2018-19 fiscal and 7.5% in the next two years. Some support also came with the Reserve Bank of India (RBI) retaining the GDP growth projection for FY19 at 7.4%, with risks broadly balanced, in the fourth Bi-monthly Monetary Policy Statement and revised the inflation projection to 3.9-4.5% for the second half of FY19, down from 4.8% earlier. Markets erased all of their gains on the very next day as traders turned pessimistic after amid credit rating agency CRISIL’s latest report that farmers’ income remain low in calendar year 2018, despite normal rainfall. Afterwards, markets got some support with the RBI’s decision to inject Rs 12,000 crore liquidity into the system through purchase of government bonds on October 11 to meet festive season demand for funds boosted the domestic sentiments. Bears back in the action once again during the week, as Indian equity indices registered sharp losses of over two percent. Markets remained under pressure, impacted by a private report stating that private equity and venture capital (PE/VC) investments in India declined 23% to $6.7 billion in the third quarter of this year as investors adopted a cautious approach. But it was the final session of trade which came out as a saving grace for Indian markets and helped them to garner a weekly gain of over a percentage point, as traders took encouragement with FICCI’s latest quarterly survey showing that India’s manufacturing sector output is expected to register robust growth in the July-September quarter on account of higher production even as the hiring outlook for the sector remains subdued.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 356.59 points or 1.04% to 34,733.58 during the week ended October 12, 2018. The BSE Midcap index gained 282.41 points or 2.02% to 14,286.22 and SmallCap index surged 319.17 points or 2.31% to 14,159.43. On the sectoral front, S&P BSE Oil & Gas was up by 1132.95 points or 9.33% to 13276.54, S&P BSE PSU was up by 296.65 points or 4.47% to 6934.89, S&P BSE BANKEX was up by 1202.15 points or 4.42% to 28429.02, S&P BSE Consumer Discretionary Goods & Services was up by 113.48 points or 3.26% to 3590.71 and S&P BSE Finance was up by 171.46 points or 3.24% to 5462.35 were the top gainers on the BSE sectoral front, while S&P BSE Information Technology was down by 1005.28 points or 6.57% to 14299.14, S&P BSE TECK was down by 394.63 points or 5.25% to 7127.81 and S&P BSE Metal was down by 58.76 points or 0.45% to 13088.54 were the few losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 156.05 or 1.51% to 10,472.50. On the National Stock Exchange (NSE), Bank Nifty gained 952.40 points or 3.90% to 25,395.85, Nifty Mid Cap 100 increased 446.25 points or 2.74% to 16,746.00 and Nifty Next 50 was up by 475.15 points or 1.83% to 26,378.40. On the other side, Nifty IT was down by 1052.45 points or 6.75% to 14,539.20.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 26074.96 crore and gross sales of Rs 36915.43 crore, leading to a net outflow of Rs 10840.47 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 4485.47 crore against gross sales of Rs 10870.37 crore, resulting in a net outflow of Rs 6384.90 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 3.73 crore and gross sales of Rs 5.15 crore, leading to a net outflow of Rs 1.42 crore.

Industry and Economy

The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) report has retained India’s economic growth forecast at 7.3% for the current year 2018. Though, it is lower than the government and the Reserve Bank of India’s (RBI) forecasts. However, IMF lowered the country’s growth projections by 0.1 percentage points to 7.4% for 2019, given the recent increase in oil prices and the tightening of global financial conditions. In 2017, India had clocked growth rate of 6.7%.

Outlook for the coming week

The previous week was a choppy one for the Indian markets but frantic buying on last day of the trading week helped Sensex and Nifty to end in green with significant gains. Optimism over September quarter earnings supported upside momentum of the markets. 

In the next week, on the economy front, market-men will keep an eye on the Wholesale price index (WPI) data for the month of September which is slated to be released on October 15. WPI eased to 4.53 percent in August from 5.09 percent in July and 3.24 percent during the corresponding month of the previous year.

Market-men will also be looking forward to a top US envoy’s visit to India this weekend. This meeting is ahead of the November 4 deadline set by the Trump administration for countries to bring down their import of Iranian oil to zero.

Moreover, market-participants would also continue to trace the momentum of rupee and FII investment.

In the next week, traders will be reacting to the important results of Avenue Supermarts, Delta Corp, Indiabulls Housing Finance, Indusind Bank, Network18 Media & Investments, South Indian Bank, Trident, Crisil, Federal Bank, Hero Motocorp, Infosys, Jammu & Kashmir Bank, ACC, Cyient, DCB Bank, Havells India, Mindtree, Reliance Industries, SBI Life Insurance Company and Ultratech Cement.

On the global front from the US, market-participants will first be eyeing Retail Sales and Business Inventories on October 15, followed by Redbook, Industrial Production, Housing Market Index, JOLTS, and Treasury International Capital on October 16, Housing Starts, and FOMC Minutes on October 17, Jobless Claims, Leading Indicators, Fed Balance Sheet and Money Supply on October 18 and finally Existing Home Sales and Baker-Hughes Rig Count on October 19.

Top Gainers

  • Yes Bank up by 14.63% was the top gainer on Nifty for the week - Yes Bank remained on buyers radar amid reports that it’s estranged promoters - Rana Kapoor and Madhu Kapur - are likely to settle their decade-old feud and strike a peace deal soon. As per report, the decision to recommend Shagun Kapur as a director may be announced by the first week of December. In a separate development, earlier, Yes bank appointed Korn Ferry to assist the committee in evaluating candidates to find successor for outgoing MD and CEO Rana Kapoor.
  • Eicher Motors up by 9.11% was another top gainer on Nifty for the week - Eicher Motors gained with its subsidiary -- VE Commercial Vehicles (VECV) deciding to set up a new manufacturing facility at Bhopal. The existing capacity is 90,000 vehicles and the proposed capacity addition is 40,000 vehicles. The Period within which the proposed capacity is to be added is 18-24 months. The investment required for setting up new manufacturing facility is Rs 400 crore. VECV is planning to set up new facility to meet the growing demand the existing capacity of 90,000 vehicles at Pithampur, near Indore.

Top Losers

  • Tata Motors down by 17.69% was the top loser of the week on Nifty - Tata Motors came under selling pressure after Jaguar Land Rover (JLR) reported a 12.3% decline in global sales at 57,114 units in September, hit by lower demand in China. The company’s sales in China declined by 46.2% during September compared to the same month last year as ongoing market uncertainty resulting from import duty changes and continued trade tensions held back consumer demand. JLR also announced two-week shutdown of its West Midlands plant to cope with weakening global demand for its luxury vehicles.
  • Bharat Petroleum Corporation (BPCL) down by 12.76% was another top loser of the week on Nifty - Oil marketing companies (OMCs) remained under pressure with Moody’s report that the recent decision of the government to reduce petrol and diesel excise duties by Rs 1.5, is credit negative for three OMCs - BPCL, IOC and HPCL. It added that the OMCs cannot fully pass on higher crude oil prices to consumers and their earnings will be negatively affected. It estimates the government’s decision will reduce the combined EBITDA of the three OMCs by Rs 6,500 crore in fiscal 2019.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,492.45 on October 12 and lowest level of 10,138.60 on October 11. On the last trading day, the Nifty closed at 10,472.50 with weekly gain of 156.05 points or 1.51 percent. For the coming week, 10,243.25 followed by 10,014.00 are likely to be good support levels for the Nifty, while the index may face resistance at 10,597.10 and further at 10,721.70 levels.

US Market

Passing week turned-out to be a horrendous one for the US markets with all the major indices settling with a huge cut of over five percentage points, as traders kept an eye on treasuries amid renewed concerns about the outlook for interest rates. Traders largely shrugged off news the International Monetary Fund lowered its forecast for U.S. and Chinese economic growth. Citing the negative effect of recent tariff actions, the IMF said economic growth in the U.S. and China is now expected to slow to 2.5 percent and 6.2 percent, respectively, next year. Meanwhile, fresh concern about the impact of the US-China trade war roiled technology and industrial shares. Besides, lingering concerns about the outlook for interest rates following a recent increase in treasury yields too weighted on market sentiments. Treasury yields moved higher on the day following the release of a Labor Department report showing a rebound in producer prices in the month of September.

The Labor Department said its producer price index for final demand increased by 0.2 percent in September after edging down by 0.1 percent in August. Street had expected prices to rise by 0.2 percent. Excluding decreases in prices for food and energy, core producer prices still rose by 0.2 percent in September after slipping by 0.1 percent in August. The uptick in core prices also matched street estimates. The report also said the annual rate of producer price growth slowed to 2.6 percent in September from 2.8 percent in August, although the annual rate of core producer price growth accelerated to 2.5 percent from 2.3 percent.

On the economic front, the Labor Department said its consumer price index inched up by 0.1% in September after rising by 0.2% in August. Street had expected prices to increase by another 0.2%. Excluding food and energy prices, core consumer prices also crept up by 0.1% in September, matching the uptick seen in the previous month. Core prices had been expected to rise by 0.2%. The report also said the annual rate of consumer price growth slowed to 2.3% in September from 2.7% in August, while the annual rate of core consumer price growth was unchanged at 2.2%. A separate report released by the Labor Department unexpectedly showed a modest increase in first-time claims for US unemployment benefits in the week ended October 6. The report said initial jobless claims rose to 214,000, an increase of 7,000 from the previous week’s unrevised level of 207,000.

European Market

European markets ended the passing week with substantial losses, as concerns over trade tensions between the US and China continue to weigh on investor sentiments. The equity indices started the first day of the week on weak note, as Eurozone investor confidence weakened in October largely due to uncertainties about the fiscal policy stance in Italy and the automobile industry in Germany. The survey data from think tank Sentix showed that the investor sentiment index fell more-than-expected to 11.4 in October from 12.0 in September. The expected reading was 11.8. Adding some anxiety, Germany's industrial production declined unexpectedly in August on a notable weakness in construction, suggesting that the economy lost some momentum in the third quarter. Data from Destatis showed that industrial output slid 0.3 percent from July, confounding expectations for an increase of 0.5 percent. This was the third consecutive decline in output. Production had decreased 1.3 percent in July.

Markets pain deepen during the week after German exports declined for a second straight month in August, defying expectations for an increase. As per preliminary data from the statistical office Destatis, merchandise exports fell a calendar and seasonally-adjusted 0.1 percent from July, when they decreased 0.8 percent. Imports dropped 2.7 percent after a 2.8 percent rise in July, while the trade surplus rose to EUR 17.2 billion in August from EUR 16.5 billion in the previous month. Domestic sentiments also got cautious, after the UK economy stagnated in August as the increase in industrial production was offset by a contraction in construction and farm sectors. The Office for National Statistics reported that gross domestic product remained unchanged after expanding 0.4 percent in July. GDP was forecast to climb 0.2 percent.

The trade remained negative throughout the week, impacted by a report stating that France's industrial production grew at the slowest pace in three months in August. As per the statistical office Insee, industrial production climbed 0.3 percent from July, the weakest since May when it remained flat. Production had increased 0.8 percent in July. Besides, the UK's merchandise trade deficit widened in August from the previous month and was bigger than economists expected. According to the preliminary data from the Office for National Statistics, the visible trade deficit widened to GBP 11.19 billion from GBP 10.38 billion in July. Economists had expected a shortfall of GBP 10.8 billion. Meanwhile, on the inflation front, France's consumer price inflation eased in September. The latest figures from statistical office INSEE revealed that the consumer price index rose 2.2 percent year-on-year following a 2.3 percent increase in August.

Asian Market

All the Asian equity indices snapped the week’s trade in the negative terrain, as renewed trade tensions between Washington and Beijing dampened the outlook for economic growth and company profits. Sentiments remained down-beat with the International Monetary Fund cutting its growth forecasts for the world economy, citing trade tensions. The IMF said the global economy is now projected to grow at 3.7 percent this year and next, down 0.2 percentage points from the prior forecast.

Chinese Shanghai remained the top loser, tumbling over seven and half percent, despite data indicating that China's exports logged a double-digit growth in September, figures from customs administration revealed. Exports grew 14.5 percent year-on-year in September, faster than the 9.8 percent increase seen in August. Imports advanced an annual 14.3 percent, resulting in higher trade surplus of around $32 billion in September.

Japanese Nikkei too edged lower by over four and half percent, as the safe-haven yen strengthened against the US dollar. Traders overlooked data showing that the total value of core machine orders in Japan jumped a seasonally adjusted 6.8 percent sequentially in August. That beat expectations for a decline of 3.9 percent following the 11.0 percent spike in July. Investors even ignored the Bank of Japan showing that overall bank lending in Japan was up 2.3 percent on year in September, coming in at 528.660 trillion yen. That exceeded expectations for an increase of 2.2 percent, which would have been unchanged from the previous month.
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