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Bulls back on Dalal Street after a week’s break; Sensex reclaims 35K mark
Nov-02-2018

Bulls made strong comeback on Dalal Street after a week’s halt, with frontline gauges settling above their crucial 10,550 (Nifty) and 35,000 (Sensex) levels, on easing global trade war worries. Markets started the week on optimistic note with RBI’s statement that it will inject Rs 400 billion into the system in November through a purchase of government securities as it looks to meet festive season demand for funds. Markets trimmed some of their gains in the very next session, impacted by the RBI’s latest data report stating that investment of Indian companies in their overseas ventures declined by 47.08% to $1.54 billion in September 2018. Domestic sentiments remained under pressure, as with private report indicated that high oil prices are hurting consumers and could also have adverse implications for producers. Bulls once again made come back on Dalal Street, as Commerce and Industry Minister Suresh Prabhu hinted at improvement in India’s ranking in the World Bank’s ease of doing business report, to be released on Wednesday. India jumped 30 places to rank 100th among 190 nations in the last year’s World Bank’s ease of doing business index. The markets participants also got relief with SBI study report showed that inflation is likely to remain below 4% in the coming months, notwithstanding possible increase in onion prices. On the economic front, growth of eight core infrastructure industries slowed to four-month low of 4.3% in September 2018, as production of crude oil and natural gas declined. However, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance - improved to 53.1 in October from 52.2 in September. It was the final session of trade which took markets above their respective crucial levels, with the Finance Ministry’s statement that GST collections in October 2018 crossed the Rs 1 lakh crore mark, after a gap of 5 months.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 1662.34 points or 4.98% to 35,011.65 during the week ended November 02, 2018. The BSE Midcap index gained 1018.58 points or 7.34% to 14,888.73 and Smallcap index surged 867.04 points or 6.38% to 14,464.68. On the sectoral front, S&P BSE Capital Goods was up by 1719.81 points or 10.48% to 18129.41, S&P BSE Consumer Durables was up by 1465.57 points or 8.04% to 19698.69, S&P BSE Realty was up by 123.66 points or 7.75% to 1719.93, S&P BSE Auto was up by 1399.11 points or 7.25% to 20695.37 and S&P BSE Bankex was up by 1857.13 points or 6.84% to 29016.40 were the top gainers on the BSE sectoral front, while there were no losers.

NSE movement for the week

The Nifty surged 523.00 or 5.21% to 10,553.00. On the National Stock Exchange (NSE), Bank Nifty was soared 1280.60 points or 5.24% to 25,701.65, Nifty IT surged 598.10 points or 4.33% to 14,396.70, Nifty Mid Cap 100 increased 1174.35 points or 7.22% to 17,430.95 and Nifty Next 50 was up by 1765.65 points or 6.96% to 27,134.90.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 28193.08 crore and gross sales of Rs 32388.16 crore, leading to a net outflow of Rs 4195.08 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 5784.63 crore against gross sales of Rs 4496.13 crore, resulting in a net inflow of Rs 1288.50 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 4.35 crore and gross sales of Rs 0.83 crore, leading to a net inflow of Rs 3.52 crore.

Industry and Economy

India has improved its ranking on the World Bank’s ‘ease of doing business’ report for the second straight year. In its annual 'Doing Business' 2019 report, World Bank (WB) said India jumped 23 places to rank 77th position on the back of reforms related to insolvency, taxation and other areas. Last year, India was ranked 100th in the World Bank's Doing Business report. As per the report, India improved its rank on 6 out of the 10 parameters relating to starting and doing business in a country.

Outlook for the coming week

In the passing week, Indian stock markets staged a strong comeback with Nifty and Sensex gathering massive gains of around 5 percent on the back of fresh foreign fund inflows, rupee appreciation and fall in global crude oil prices.

In the next holiday truncated week, on the economy front, traders would be awaiting for the release of the Nikkei Services PMI data, after reacting to Nikkei Manufacturing PMI data and core sector data. Nikkei Services PMI data for the month of October will be released on November 5.

Market-participants would continue to trace the momentum of rupee and FII investment. Additionally, investors will also be eyeing the Federal Reserve’s two-day meeting which starts on November 7 in order to discuss rate changes.

In the next week, traders will be reacting to the important results of Adani Transmission, Andhra Bank, BEML, Cadila Healthcare, J.K. Cement, JSW Holdings, ONGC, Reliance Communications, Reliance Infrastructure, Ajmera Realty & Infra India, Atul Auto, Bosch, Fortis Healthcare, GAIL India, Inox Wind, Natco Pharma, NDTV, Orient Cement, Dr. Lal PathLabs, Manappuram Finance, E.I.D.-Parry (India), Indian Bank, India Cements, Mold-Tek Technologies among others.

On the global front from the US, market-participants will first be eyeing PMI Services Index and ISM Non-Mfg Index on November 5, followed by Redbook, and JOLTS on November 6, FOMC Meeting Begins and Consumer Credit on November 7, Jobless Claims, FOMC Meeting Announcement, Fed Balance Sheet and Money Supply on November 8 and finally PPI-FD, Consumer Sentiment, Wholesale Trade and Baker-Hughes Rig Count on November 9.

Moreover, global investors will be reacting to China's Premier Li Keqiang meeting with the heads of IMF, World Bank and World Trade Organization in Beijing as part of an annual meeting on November 6.

Top Gainers

  • Tata Motors up by 15.09% was the top gainer on Nifty for the week - Tata Motors gained traction on reporting a net profit of Rs 109.14 crore for second quarter ended September 30, 2018 as against net loss of Rs 283.37 crore for the same quarter in the previous year. Total income of the company increased by 33.77% at Rs 18,102.56 crore for Q2FY19 as compared Rs 13,532.64 crore for Q2FY18. Besides, the company also registered an impressive growth of 18% in its domestic sales at 57,710 units in October 2018, as against 48,886 units over last year. 
  • State Bank of India (SBI) up by 14.35% was another top gainer on Nifty for the week - SBI gained on signing definitive agreement with Hitachi Payment Services, India - a Wholly owned subsidiary of Hitachi group, Japan, to enter into a joint venture for the establishment of a state-of-the-art card acceptance and future ready digital payment platform for India. Besides, the Bank received board’s approval to raise equity capital up to an amount of Rs 20,000 crore during FY19 from the market by way of FPO/QIP/Preferential allotment/Rights Issue/any other mode.

Top Losers

  • Coal India down by 7.32% was the top loser of the week on Nifty - Coal India came under pressure amid report that the government sold 3.18% stake in the company in the two day offer for sale (OFS). The government had planned to sell over 18.62 crore shares or 3% in Coal India at a floor price of Rs266 apiece. Meanwhile, Coal India reported provisional coal production of 49.77 million tonnes (MT) in October 2018, as against 46.15 MT reported in October 2017. The company’s total off-take for the month of October stood at 50.00 MT, as against 48.28 MT in October 2017.
  • Kotak Mahindra Bank  down by 4.44% was another top loser of the week on Nifty - Kotak Mahindra Bank edged lower during the passing week as investors booked some of their previous week profit after the Bank reported better than expected Q2 numbers. The Bank reported 21.29% rise in its consolidated net profit at Rs 1,747.37 crore for Q2FY19 as compared to Rs 1,440.68 crore for the same quarter in the previous year. Total consolidated income of the Bank increased by 18.47% at Rs 10,829.08 crore for Q2FY19 as compared Rs 9,140.40 crore for the corresponding quarter previous year.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,606.95 on November 2 and lowest level of 10,020.35 on October 29. On the last trading day, the Nifty closed at 10,553.00 with weekly gain of 523.00 points or 5.21 percent. For the coming week, 10,179.92 followed by 9,806.83 are likely to be good support levels for the Nifty, while the index may face resistance at 10,766.52 and further at 10,980.03 levels.

US Market

The US markets ended higher during the passing week after comments from President Donald Trump indicated potential progress in US-China trade relations. President Donald Trump said he had a very good conversation with Chinese President Xi Jinping about trade. He also said meetings between the two at the upcoming G-20 summit are being scheduled. The comment from Trump comes following recent reports the US will impose tariffs on all remaining Chinese imports if the talks on the sidelines of the G20 summit fail to ease the trade war. Moreover, Trump added that he had good discussion on North Korea. Besides, support also came in as investors applauded quarterly results from companies and an upbeat jobs report. Buying interest was also generated in reaction to a report from payroll processor ADP showing stronger than expected private sector job growth in the month of October.

ADP said private employment jumped by 227,000 jobs in October after surging up by a downwardly revised 218,000 jobs in September. Street had expected an increase of about 189,000 jobs compared to the addition of 230,000 jobs originally reported for the previous month. The stronger than expected job growth in October reflected the biggest increase in private sector employment since a jump of 241,000 jobs in February. The Labor Department released a report showing a slight drop in first-time claims for US unemployment benefits in the week ended October 27.  The report said initial jobless claims edged down to 214,000, a decrease of 2,000 from the previous week’s revised level of 216,000. Street had expected jobless claims to come in unchanged compared to the 215,000 originally reported for the previous week.
 
A separate report from the Labor Department showed a slowdown in the pace of labor productivity growth in the third quarter. The Labor Department said labor productivity climbed by 2.2 percent in the third quarter after jumping by 3.0 percent in the second quarter. Street had expected productivity to increase by about 2.0 percent. Meanwhile, the report said unit labor costs surged up by 1.2 percent in the third quarter after slumping by 1.0 percent in the second quarter. The rebound in labor costs matched street estimates. The Institute for Supply Management (ISM) also released a report showing a bigger than expected slowdown in the pace of growth in manufacturing activity in the month of October. The ISM said its purchasing managers index dropped to 57.7 in October from 59.8 in September, although a reading above 50 still indicates growth in the manufacturing sector. Street had expected the index to edge down to 59.0.

European Market

European markets closed the passing week with notable gains, as the UK and the European Union have reportedly reached a tentative deal that would grant UK companies continued access to European markets after Brexit. The start of the trading week was positive, as France's economy expanded at a faster pace in the third quarter largely driven by domestic demand and exports. The first estimate from the statistical office Insee showed that gross domestic product advanced 0.4 percent sequentially, in line with expectations, following second quarter's 0.2 percent expansion. Adding some relief, Germany's jobless claims decreased in October from the previous month. The data from the Federal Labor Agency showed that jobless claims decreased by adjusted 11,000 in October from the previous month compared to the expected fall of 12,000. The unemployment rate held steady at 5.1 percent, in line with expectations, and also the lowest since German reunification in 1990. Meanwhile, the euro area jobless rate remained unchanged at its lowest level in almost a decade in September.

The indices traded in fine fettle during the week, even though the euro area economy grew at a slower pace in the third quarter. As per preliminary flash estimate from Eurostat, Gross domestic product expanded only 0.2 percent sequentially after rising 0.4 percent in the second quarter. The rate was forecast to remain at 0.4 percent. Elsewhere, survey data revealed further deterioration in economic confidence in Eurozone. The economic sentiment index slid to 109.8 in October from 110.9 a month ago. The street paid no heed towards a report that UK consumer confidence weakened as expected in October. The market research firm GfK reportedly said that the consumer sentiment index dropped to -10 in October from -9 in September. The market participants also overlooked another report showing that the UK manufacturing sector grew at the slowest pace in more than two years in October. The survey results from IHS Markit and Chartered Institute of Procurement & Supply showed that the manufacturing Purchasing Managers' Index fell to a 27-month low of 51.1 in October from revised 53.6 in September. The score was forecast to drop moderately to 53.0.

On the inflation front, Eurozone inflation accelerated to a near six-year high in October largely on energy prices and the unemployment rate was at its lowest since 2008, despite the economy growing at the slowest pace in four years. Inflation rose to 2.2 percent in October from 2.1 percent in September. As per flash data from Eurostat, a similar higher rate was last seen in December 2012. The rate came in line with expectations. Besides, Germany's consumer price inflation reached its highest level since late 2008. The preliminary data from Destatis showed that consumer prices advanced 2.5 percent annually in October, following September's 2.3 percent increase. This was the highest rate since September 2008 and above the expected rate of 2.4 percent.

Asian market

All the Asian equity indices rallied during the passing week, following the rebound on Wall Street, after reports that US President Donald Trump has asked officials in his administration to start drafting a potential trade deal with Beijing. Investors also looked ahead to the US Labor Department's closely-watched employment report for October. Seoul stocks ended higher despite data showing the country's industrial output fell a seasonally adjusted 2.5 percent sequentially in September.

Japanese Nikkei surged by five percent, as the yen edged lower against the dollar after the Bank of Japan left interest rates steady, cut its inflation forecasts and signaled it was a long way off from exiting its massive stimulus program. Investors shrugged off weak data showing that industrial production in the country fell 1.1 percent in September from the previous month, missing expectations for a decline of 0.3 percent. Investors also paid no heed towards data indicating that Japan’s retail sales dropped for the first time in four months in September. Retail sales fell 0.2 percent month-on-month, in line with expectations but reversed a 0.9 percent rise in August.

Chinese Shanghai too edged higher by around three percent, after the securities regulator said it would enhance market liquidity, and encourage share buybacks and mergers and acquisitions by listed firms. Traders overlooked data from IHS Markit showing that China's manufacturing sector expanded only slightly in October. The Caixin Purchasing Managers' Index came in at 50.1 in October versus 50.0 in September, as output remained broadly unchanged amid marginal increase in new business.
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