The dark clouds have made a comeback on Dalal Street, as markets continued their bearish run for second straight week and frontline gauges settled below their crucial 33,400 (Sensex) and 10,050 (Nifty) levels. Markets started the session on pessimistic note with RBI’s report showing that India’s forex reserves declined by $5.14 billion during the week ended October 12, when the rupee slipped to 74 and beyond against the US dollar. Anxiety spread on the street after job creation slowed down by 8.39 percent to stand at 8,94,769 in August month as against the revised figure of 9,76,675 in July month. Local bourses extended losses on reports that the crude oil import bill for India is expected to increase by $37 billion to $125 billion during the current financial year (2018-19, or FY19), a 42% spike over the 2017-18 (FY18) bill of $88 billion. Traders paid no heed towards report that the net direct tax collection in India grew by 15.7% on year-on-year basis to reach Rs 4.89 lakh crore in the current fiscal till third week of October. However, markets recovered some of their early losses with report stating that government is responding well to the rising trade tensions between the world’s two largest economies, maintaining a stance that serves the cause of Indian exporters’ best. But, selloff in last two days of trade dragged benchmarks below their respective psychological levels. Traders remained cautious with private report stating that Indian financial markets’ liquidity position has worsened with cash deficit widening to about Rs 1.4 lakh crore this week compared with a small surplus in first week of October. Sentiments also remain dampened with the Controller General of Accounts’ data showing that the fiscal deficit of the Central government has widened in the first half of 2018-19 to 95.3% of the Budget Estimate (BE), mainly on account of slow growth in revenue collections. The deficit was at 91.3% of BE at September-end of the last financial year. BSE movement for the week The Bombay Stock Exchange (BSE) Sensex tumbled 966.32 points or 2.82% to 33,349.31 during the week ended October 26, 2018. The BSE Midcap index losses 188.15 points or 1.34% to 13,870.15, while Smallcap index slipped 485.28 points or 3.45% to 13,597.64. On the sectoral front, S&P BSE Information Technology was down by 818.46 points or 5.73% to 13477.25, S&P BSE TECK was down by 353.20 points or 4.97% to 6749.45, S&P BSE Healthcare was down by 674.10 points or 4.63% to 13875.50, S&P BSE BANKEX was down by 883.07 points or 3.15% to 27159.27 and S&P BSE Fast Moving Consumer Goods was down by 276.48 points or 2.47% to 10907.78 were the top losers on the BSE sectoral front, while S&P BSE Realty was up by 11.93 points or 0.75% to 1596.27 were the only gainers on the BSE sectoral front. NSE movement for the week The Nifty declined 273.55 or 2.65% to 10,030.00. On the National Stock Exchange (NSE), Bank Nifty down by 664.75 points or 2.65% to 24,421.05, Nifty IT down by 678.25 points or 4.69% to 13,798.60, Nifty Mid Cap 100 down by 258.35 points or 1.56% to 16,256.60 and Nifty Next 50 was down 684.65 points or 2.63% to 25,369.25. FII transactions during the week Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 28315.64 crore and gross sales of Rs 32691.05 crore, leading to a net outflow of Rs 4375.41 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 6296.79 crore against gross sales of Rs 5536.54 crore, resulting in a net inflow of Rs 760.25 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 4.43 crore and gross sales of Rs 7.05 crore, leading to a net outflow of Rs 2.62 crore. Industry and Economy Welcoming the Reserve Bank of India’s decision to incentivise banks to enhance their lending to non-banking finance companies (NBFCs), the industry chamber, Associated Chambers of Commerce and Industry of India (ASSOCHAM) has stated that this step will help NBFCs in tackling liquidity crunch. The RBI allowed the banks to use government securities equivalent to their incremental credit to NBFCs for a three-month period to meet their liquidity coverage ratio requirements. The provision will allow banks to free up Rs 50,000-60,000 crore of liquidity which banks can lend to NBFCs till December 31. Outlook for the coming week In the passing F&O expiry week, Indian markets slipped for four out of five trading sessions with Nifty and Sensex posting massive losses and breaching 10,050 and 33,400 marks respectively amid fears on global trade and economic growth.
Since the coming week marks the start of a fresh month, traders would see a lot of economic data pouring in, with first being the release of Core sector data, which will be released on October 31, followed by Nikkei Manufacturing PMI data on November 1, 2018. A composite single-figure indicator of manufacturing performance - rose to 52.2 in September from 51.7 in August. Auto and cement stocks would hog some light as these companies would be unveiling their monthly sales figure. Additionally, traders would keep an eye on the G20 Investment Summit which will be held in Germany on October 30. In the next week, traders will be reacting to the important results of DCM Shriram, Gruh Finance, Just Dial, Tata Power, Union Bank Of India, Vijaya Bank, ABB India, BASF India, Bharat Gears, Bhushan Steel, Birla Corporation, Dena Bank, Emami, IDFC, Bank Of Maharashtra, Pidilite Industries, Tech Mahindra, Ajanta Pharma, Adani Green Energy, Adani Power, Blue Dart Express, Dabur India, Escorts, Larsen & Toubro, Matrimony.Com, Minda Corporation, Orient Paper & Industries, Subex, Tata Motors, Tribhovandas Bhimji Zaveri, Vedanta, Adlabs Entertainment, Bajaj Electricals, Berger Paints India, Cera Sanitaryware, Godrej Properties, HDFC, Hindustan Petroleum Corporation, ICRA, Parag Milk Foods, SRF, Tata Communications, Thomas Cook (India), Timex Group India, Axis Bank, Bata India, Bharat Forge Dhanlaxmi Bank, Hindalco Industries, Indian Oil Corporation, JSW Energy, among others. On the global front from the US, market-participants will first be eyeing Personal Income and Outlays and Dallas Fed Mfg Survey on October 29, followed by Redbook, Consumer Confidence and Farm Prices on October 30, ADP Employment Report, Employment Cost Index and Chicago PMI on October 31, Jobless Claims, Productivity and Costs, PMI Manufacturing Index, Construction Spending, Fed Balance Sheet and Money Supply on November 1 and finally Motor Vehicle Sales, Employment Situation, International Trade, Factory Orders and Baker-Hughes Rig Count on November 2. Top Gainers Bajaj Finance up by 9.27% was the top gainer on Nifty for the week - Bajaj Finance gained traction on reporting 54.46% rise in its consolidated net profit at Rs 923.47 crore for the quarter ended September 30, 2018 as compared to Rs 597.87 crore for the same quarter in the previous year. Total income of the company increased by 40.13% at Rs 4,296.35 crore for Q2FY19 as compared Rs 3,065.99 crore for the corresponding quarter previous year. In a separate development, Bajaj Finance raised funds aggregating to Rs 425 crore via private placement.
Hindustan Petroleum Corporation (HPCL) up by 4.35% was another top gainer on Nifty for the week - Oil marketing companies (OMCs) gained following a sharp fall in crude oil prices in the international markets. Oil prices slumped as much as 5% after Saudi Arabia said it would make up for supply disruptions from US sanctions targeting Iran’s petroleum exports from next month. besides, HPCL, CMD MK Surana said if the crude prices and the product prices soften, OMCs should be allowed to recover their margins which are impacted by this one rupee cut.
Top Losers Yes Bank down by 17.07% was the top loser of the week on Nifty - Yes Bank remained pressure on reporting lower-than-expected result for the July-September quarter of fiscal year 2018-19, mainly due to higher provisions. The Bank posted 3.79% fall in its net profit at Rs 964.70 crore for the quarter under review as compared to Rs 1,002.73 crore for the same quarter in the previous year. However, total income of the Bank increased by 43.91% at Rs 8,704.68 crore for Q2FY19 as compared Rs 6,048.78 crore for the corresponding quarter previous year.
Grasim Industries down by 13.23% was another top loser of the week on Nifty - Grasim Industries came under pressure ahead of second quarter result. Meanwhile, UltraTech Cement has reported a fall of 10.87% in its consolidated net profit of Rs 376.82 crore for the quarter under review as compared to Rs 422.77 crore for the same quarter in the previous year. Grasim has exposure to the cement sector through its holding in UltraTech Cement.
Technical viewpoints During the week, CNX Nifty touched the highest level of 10,408.55 on October 22 and lowest level of 10,004.55 on October 26. On the last trading day, the Nifty closed at 10,030.00 with weekly loss of 273.55 points or 2.65 percent. For the coming week, 9,886.85 followed by 9,743.70 are likely to be good support levels for the Nifty, while the index may face resistance at 10,290.85 and further at 10,551.70 levels. US Market Passing week turned-out to be a dismal week of trade for the US markets with major indices settled with a cut of around two percentage points. Markets started the week on pessimistic note as lower oil prices and disappointing earnings signals from firms including Halliburton and Hasbro helping pull the market lower. Traders expressed some uncertainty about the near-term outlook for the markets following recent volatility. A lack of major US economic data also kept some traders on the sidelines ahead of the release of reports on new home sales, durable goods orders, and consumer sentiment in the coming days. Markets extended southward journey as sentiments remained under pressure with the release of a report from the Commerce Department showing a steep drop in new home sales in the month of September. The report said new home sales plunged by 5.5% to an annual rate of 553,000 from the revised August rate of 585,000. Street had expected new home sales to edge down to a rate of 625,000 from the 629,000 originally reported for the previous month. However, markets trim some of their losses later in the week after the Commerce Department data showed that an unexpected increase in durable goods orders in the month of September. The report said durable goods orders climbed by 0.8% in September after surging up by 4.6% in August. Street had expected orders to drop by 0.9%. The unexpected increase in durable goods orders was largely due to a jump in orders for transportation equipment, which shot up by 1.9% in September after spiking by 13.2% in August. Excluding orders for transportation equipment, durable goods orders inched up by just 0.1% in September after rising by 0.3% in August. Street had expected a 0.3% increase. A separate report from the Labor Department showed a modest rebound in initial jobless claims in the week ended October 20. The Labor Department said initial jobless claims crept up to 215,000, an increase of 5,000 from the previous week’s unrevised level of 210,000. Street had expected jobless claims to inch up to 214,000. Meanwhile, the National Association of Realtors (NAR) also released a report showing an unexpected rebound in pending home sales in September. NAR said its pending home sales index climbed by 0.5% to 104.6 in September after tumbling by 1.9% to a revised 104.1 in August. The rebound came as a surprise to street, who had been expecting pending home sales to edge down by 0.1%. A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. European Market European markets ended the passing week lower, as Germany's business sentiment weakened for the second straight month in October on geopolitical tensions. According to the survey data from the Mannheim-based Ifo institute, the business climate index fell more-than-expected to 102.8 in October from 103.7 in September. The expected score was 103.2. Domestic sentiments also got hit, after factory orders dropped at the fastest pace in three years in the quarter to October as manufacturers remained worried about the possibility of a disorderly Brexit. The survey among 354 manufacturers showed that a net 6 percent reported a fall in new orders in the quarter to October, which was the weakest balance since October 2015. In July, the balance was +15. The market participants got cautious, as Germany's producer prices rose the fastest pace in a year in September. The figures from Destatis showed that producer prices grew 3.2 percent year-on-year in September, after rising 3.1 percent in the previous month. Economists were looking for a 3.0 percent gain. The trade remained in negative, as Germany's private sector expanded at the slowest pace for almost three-and-a-half years in October with both the manufacturing and service sectors showing notable losses of momentum. The flash data from IHS Markit revealed that the composite output index fell to a 41-month low of 52.7 from 55.0 in September. The score below its long-run average of 53.4 reflected weaker increases in both services and manufacturing output. However, the markets recovered some of the heavy losses towards end of the week, after European Central Bank President Mario Draghi said that policymakers were confident regarding the economy and that the inflation is gradually approaching its aim of ‘below, but close to 2 percent.’ Adding some relief, France's private sector expanded at a faster pace in October despite a slowdown in factory activity. The flash data from IHS Markit showed that the composite output index rose unexpectedly to 54.3 in October from 54.0 in September. The score was forecast to drop to 53.9. Meanwhile, France's factory confidence unexpectedly dropped for a second straight month in October, as manufacturers' view on their past activity deteriorated sharply. As per survey data from the statistical office INSEE, the manufacturing confidence indicator dropped to 104 from 107 in September. The street had expected the reading to remain unchanged. Besides, UK mortgage approvals declined to a 6-month low in September. According to the monthly data from UK Finance, the number of loans approved in September fell to 38,505 from 39,241 in August. This was the lowest since March. Asian market Asian equity indices ended the weekly trade mostly in red terrain, on the back of disappointing corporate earnings results and weak economic data. Lingering geopolitical tensions, worries about the US-China trade wars and rising geopolitical tensions also dented investors’ sentiments. Japanese Nikkei edged lower by around six percent, as safe-haven yen strengthened, dragging exporters’ shares lower. Investors failed to get respite with a survey showing that activity in Japan's manufacturing sector expanded at a faster rate in October. The flash Markit/Nikkei manufacturing PMI rose to a seasonally adjusted 53.1 from a final 52.5 in September, as new export orders returned to growth. Hong Kong’s Hang Seng index too ended lower after a government report showed Hong Kong's visible trade deficit widened in September from a year ago. However, Chinese Shanghai edged higher by around two percent during the week, after the country promised to provide stimulus to stabilise its economy and offset the impact of US tariffs. Promises of tax cuts and coordinated official statements of support for stock markets in the world’s second-largest economy saw Chinese shares stage their biggest one-day surge in three years.
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