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Bears tighten grip on Dalal Street during the passing week
Oct-19-2018

Bears tightened their grip on Dalal Street with frontline gauges ending the passing week with a cut of around one and a half percent. Markets started the holiday truncated week on optimistic note despite weak macro-economic data. India’s industrial production measured by Index of Industrial Production (IIP) slowed down to a three-month low of 4.3% in the month of August 2018, as compared to 6.6% in the previous month and 4.8% in the same of last year, while retail inflation based on Consumer Price Index (CPI) inched up to 3.77% in the month of September 2018, as compared to a 10-month low of 3.69% recorded in August 2018 and 3.28% in September 2018. Meanwhile, India’s Wholesale price index (WPI) inflation surged to 5.13% in September from 4.53% in August and 3.14% during the corresponding month of the previous year. Domestic bourses extended gains with report that India’s trade deficit declined to a five-month low in September even as exports contracted, providing some respite from the rising gap that has sparked concern about the current account deficit (CAD). Trade deficit declined to $13.98 billion in September from $17.39 billion in August following slower growth in imports. Besides, exports were pegged at $27.95 billion in September, down 2.15% from a year ago, while imports rose 10.45% to $41.9 billion, lowest in five months. However, markets took U-turn and pared all of their initial gains on reports that the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) hit a nearly nine-and-a-half year low of Rs 79,548 crore in September 2018. Key indices extended losses with SBI’s research report - Ecowrap stating that the rupee depreciation has neither helped in improving exports nor in slowing imports, leading to an incremental trade deficit of $4 billion in the first half of the current fiscal.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 417.95 points or 1.20% to 34,315.63 during the week ended October 19, 2018. The BSE Midcap index losses 227.92 points or 1.60% to 14,058.30 and Smallcap index slipped 76.51 points or 0.54% to 14,082.92. On the sectoral front, S&P BSE Auto was down by 847.18 points or 4.15% to 19572.54, S&P BSE Finance was down by 151.80 points or 2.78% to 5310.55, S&P BSE Consumer Discretionary Goods & Services was down by 98.75 points or 2.75% to 3491.96, S&P BSE Consumer Durables was down by 487.56 points or 2.60% to 18246.22 and S&P BSE Realty was down by 35.94 points or 2.22% to 1584.34 were the top losers on the BSE sectoral front, while S&P BSE Fast Moving Consumer Goods was up by 211.07 points or 1.92% to 11184.26 and S&P BSE Healthcare was up by 94.95 points or 0.66% to 14549.60 were the only gainers on the BSE sectoral front.

NSE movement for the week

The Nifty slipped 168.95 or 1.61% to 10,303.55. On the National Stock Exchange (NSE), Bank Nifty was down by 310.05 points or 1.22% to 25,085.80, Nifty IT was down by 62.35 points or 0.43% to 14,476.85, Nifty Mid Cap 100 decreased 231.05 points or 1.38% to 16,514.95 and Nifty Next 50 lost 324.50 points or 1.23% to 26,053.90.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 17603.04 crore and gross sales of Rs 19478.86 crore, leading to a net outflow of Rs 1875.82 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 5681.98 crore against gross sales of Rs 9203.34 crore, resulting in a net outflow of Rs 3521.36 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 0.53 crore and gross sales of Rs 2.34 crore, leading to a net outflow of Rs 1.81 crore.

Industry and Economy

The United Nations Conference on Trade and Development (UNCTAD) in its 'Investment Trends Monitor' report has indicated that in South Asia, India attracted $22 billion of foreign direct investment (FDI) flows, contributing to the subregion’s 13 percent rise in FDI in the first half of 2018 (H1 2018). However, it also said that with the $22 billion FDI, India just about managed to make it to the top 10 countries that received the most FDI during the period.

Outlook for the coming week

In the passing holiday truncated week, Indian equity markets witnessed severe drubbing on the last trading day of the week, which forced Nifty and Sensex to settle with losses of over 150 and 400 points respectively.

In the coming week, traders will keep an eye on the launch of a portal for corporate social responsibility (CSR) and volunteering by Prime Minister Narendra Modi at a town hall with technology, startup and telecom chieftains on October 24. The portal is launched in an ambitious bid to consolidate such efforts to maximise their effect and help boost the government’s initiatives. 

Shipping sector will be in focus as a meeting between India and Bangladesh will be conducted in New Delhi from October 24 to 26. The 2 countries will sign three important agreements, including one allowing India to use Chittagong and Mongla ports to transport cargoes to its north-eastern states.

Additionally, there may be some buzz in the Non-Banking Financial Companies (NBFCs) sector as the NBFCs have sought a meeting in the next week with Finance Minister Arun Jaitley because they feel the measures taken by the government so far fall short of industry expectations.

In the next week, traders will be reacting to the important results of HDFC Bank, ICICI Lombard General Insurance Company, Asian Paints, Fiberweb (India), Hindustan Zinc, Inox Leisure, Jubilant Life Sciences, Oberoi Realty, Adani Ports and SEZ, Bajaj Finserv, Bajaj Finance, Escorts Finance, HCL Tech, HDFC Standard Life Insurance Company, ICICI Prudential Life Insurance Company, MCX, RBL Bank, TVS Motor Company, Bajaj Auto, Bharat Financial Inclusion, Everest Industries, Hexaware Technologies, IDFC Bank, Interglobe Aviation, Bharti Infratel, Jubilant Foodworks, Kotak Mahindra Bank, L&T Finance Holdings, Lakshmi Vilas Bank, Larsen & Toubro Infotech, Mahindra & Mahindra Financial Services, Wipro, Bharti Airtel, Biocon, Ceat, DB Corp, Dish Tv India, Force Motors, HIL, Intellect Design Arena, JM Financial, JSW Steel, Maruti Suzuki India, NIIT, Punj Lloyd, PVR, Quess Corp, Raymond, Yes Bank, Atul, DB Realty, DR.Reddy's Laboratories, ICICI Bank, ITC, Shoppers Stop, among others.

On the global front from the US, market-participants will first be eyeing Redbook on October 23, followed by PMI Composite FLASH, New Home Sales and Beige Book on October 24, Durable Goods Orders, International Trade in Goods, Jobless Claims, Retail Inventories (Advance), Wholesale Inventories (Advance), Pending Home Sales Index, Fed Balance Sheet and Money Supply on October 25 and finally GDP, Consumer Sentiment and Baker-Hughes Rig Count on October 26.

Top Gainers

  • Hindustan Petroleum Corporation (HPCL) up by 19.48% was the top gainer on Nifty for the week - Oil marketing companies (OMCs) gained traction on falling global crude oil prices. Crude oil declined following data showing a fourth straight weekly increase in US crude inventories. An OPEC internal report says rising crude oil inventories and increased production in the US could push oil prices further down in the coming weeks. The Energy Information Administration’s data showed US crude inventories rose by 6.5 million barrels in the week ended October 12.
  • Oil and Natural Gas Corporation (ONGC) up by 7.97% was another top gainer on Nifty for the week - ONGC gained on report that its Director (Finance) Subhash Kumar said the company’s finances are as sound as ever and is generating enough revenues to meet all its capital and operating expenditures as well as any additional merit-based requirement. In a separate development, ONGC Videsh sold another Russian Sokol crude cargo to load in December at a higher premium than the previous deal amid robust demand for distillates-rich grades.

Top Losers

  • Bajaj Finserv down by 9.10% was the top loser of the week on Nifty - Bajaj Finserv came under pressure ahead of second quarter (Q2FY19) result schedule to be release in next week. The company partnered with leading NGOs to enhance vision for over 4 lakh people by 2021 by conducting 570 awareness camps across 5 cities to screen over 50,000 individuals for vision impairment. Besides, Bajaj Finserv’s investment arm -- Bajaj Finance increased the rate of interest of its fixed deposits up to 9% for existing customers and up to 8.75% for new customers, with effect from October 17, 2018.
  • HCL Technologies down by 8.87% was another top loser of the week on Nifty - Most of the Information Technology (IT) sector stocks witnessed selling pressure after Washington said it was planning to ‘revise’ the definition of employment and specialty occupations under the H-1B visas by January. Such a move, which is part of the Unified Fall Agenda of the Trump administration will have a negative impact on the functioning of Indian IT companies in the US and also small and medium-sized contractual companies in the IT sector, which are mostly owned by Indian Americans.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,710.15 on October 17 and lowest level of 10,249.60 on October 19. On the last trading day, the Nifty closed at 10,303.55 with weekly loss of 168.95 points or 1.61 percent. For the coming week, 10,132.05 followed by 9,960.55 are likely to be good support levels for the Nifty, while the index may face resistance at 10,592.60 and further at 10,881.65 levels.

US Market

The US markets ended the passing week marginally in green. Major indices traded with traction as traders reacted positively to upbeat earnings news from several big-name companies, with financial giants Goldman Sachs (GS) and Morgan Stanley (MS) reporting third quarter results that beat estimates on both the top and bottom lines. Buying interest was also generated following the release of positive economic data, including a report from the Federal Reserve showing industrial production increased in line with economist estimates in September. The report said industrial production rose by 0.3 percent in September after climbing by 0.4 percent in August. The continued increase in production matched expectations.

However, gains remained capped on rising worries over US-Saudi relations after the suspected murder of journalist Jamal Khashoggi and unease over the eurozone due to Italy’s controversial budget plans. Sentiments remained under pressure after Treasury Secretary Steven Mnuchin announced he was withdrawing from a big investment summit in Saudi Arabia, the most concrete sign the Trump administration is distancing itself from Saudi Arabia since Khashoggi’s disappearance this month intensified scrutiny of the big oil exporter. Besides, European Central Bank chief Mario Draghi reportedly told EU leaders at a Brussels summit that nations should adhere to the EU’s budget rules - comments that were seen as a swipe at Italy, which plans a steep increase in deficit spending. However, investors overlooked solid earnings reports.

On the economic front, the Labor Department’s report showed a modest decrease in first-time claims for US unemployment benefits in the week ended October 13. The report said initial jobless claims slipped to 210,000, a decrease of 5,000 from the previous week’s revised level of 215,000. A separate report released by the Federal Reserve Bank of Philadelphia showed manufacturing activity in the Philadelphia area grew at a slightly slower rate in the month of October. The Philly Fed said its diffusion index for current general activity edged down to 22.2 in October from 22.9 in September, although a positive reading still indicates growth in regional manufacturing activity. Meanwhile, the Conference Board released a report showing its index of leading US economic indicators increased in line with street estimates in September. The Conference Board said its leading economic index climbed by 0.5% in September after rising by 0.4% in August.

European Market

European markets ended the passing week lower, as traders kept a close eye on Brexit developments. The markets started the week cheerfully, as Eurozone industrial production grew more-than-expected in August. The data from Eurostat revealed that industrial production climbed 1 percent on a monthly basis, reversing 0.7 percent drop each in June and July. Output was expected to rise moderately by 0.4 percent. Domestic sentiments also got boost, after German manufacturers added more employees during August compared to a year ago. According to the preliminary figures the Federal Statistical Office, the number of employees in the manufacturing units with 50 or more persons grew by about 149,000 persons or 2.7 percent from the same period last year to 5.7 million.

However, the key indices failed to hold gains and ended the week with losses, amid reports that Germany's economic confidence weakened in October. The survey data from the Centre for European Economic Research, or ZEW, showed that the economic sentiment index fell sharply by 14.1 points to -24.7 in October. The expected score was -12. Some worries also came after the UK unemployment rate remained at the lowest level seen since early 1975, in three months to August. As per the Office for National Statistics, the ILO jobless rate came in at 4 percent, in line with expectations. Anxiety also spread on the street after UK retail sales dropped more-than-expected in September reflecting the biggest decline in food store sales in almost two years. As per figures from the Office for National Statistics, retail sales including auto fuel fell 0.8 percent month-on-month in September, due mainly to a large decline of 1.5 percent in food stores, which was the largest food store sales fall since October 2015.

On the inflation front, Eurozone consumer price inflation accelerated in September to exceed the European Central Bank's target of ‘below, but close to 2 percent’, in line with initial estimates. The latest data from the Eurostat showed that the consumer price index rose 2.1 percent year-on-year following a 2 percent increase in August. Besides, Germany's import prices rose at a steady pace in August. As per figures from Destatis, import prices advanced 4.8 percent year-on-year in August, the same pace of increase as seen in July. At the same time, export price inflation rose to 2.1 percent in August from 1.7 percent in the previous month. However, UK inflation slowed more-than-expected in September on falling food prices, giving space for the Bank of England to wait-and-watch for the outcome of Brexit negotiations. The figures from the Office for National Statistics showed that, consumer price inflation eased to 2.4 percent from 2.7 percent in August, The rate was also below the expected 2.6 percent. Despite a bigger-than-expected fall, inflation still remains above the central bank's 2 percent target.

Asian market

All the Asian equity benchmarks, barring KLSE composite ended in the negative terrain during the passing week, as weak Chinese data added to investor concerns over Italy's controversial budget, rising US interest rates and US-Saudi tensions.

Chinese Shanghai remained the top loser, tumbling over two percent, as country’s real gross domestic product (GDP) grew 6.5% on the year for the July-September period, a slowdown from the previous quarter. In addition, China's industrial production also missed estimates. Sentiments also remained dampened with inflation data showing that Consumer prices in China were up 2.5 percent year-on- year in September, that was in line with expectations and up from 2.3 percent in August. Traders even ignored data indicating that retail sales climbed an annual 9.2 percent and fixed asset investment gained 5.4 percent to beat forecasts.

Japanese Nikkei too edged lower by over half a percent, as safe-haven yen strengthened, dragging exporters' shares lower. Traders remained worried with data showing that Japan’s exports unexpectedly fell in September -- the first drop in almost two years -- as natural disasters disrupted economic activity, while higher energy prices continued to feed gains in imports. Sentiments remained down-beat with the Ministry of Internal Affairs and Communication stating that consumer prices in Japan were up 1.2 percent year-on-year in September. That was shy of expectations for an increase of 1.3 percent, which would have been unchanged from the August reading.

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