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Markets extend gains for the third straight week
Nov-16-2018

Extending northward journey for third straight week, Indian equity benchmarks ended the passing with a gain of around a percentage point, with frontline gauges recapturing their crucial 35,400 (Sensex) and 10,650 (Nifty) levels. Markets started the week on pessimistic note impacted by Federation of Indian Export Organisation (FIEO) President Ganesh Gupta’s statement that exports of over half of the 30 sectors closely monitored by the Commerce Ministry were in the negative zone in September. Overall exports in September were contracted by 2.15% to $27.95 billion mainly due to the base impact. Markets made strong recovery on the very next day and never looked back throughout the week gaining strength to strength as investors continued hunt for fundamentally strong stocks. Sentiments turned optimistic after India’s retail inflation based on Consumer Price Index (CPI) softened to a one-year low of 3.31% in the month of October 2018, the back of cheaper kitchen staples, fruits and protein-rich items. However, WPI inflation rose 4-month high to 5.28% in October from 5.13% in September and 3.68% during the corresponding month of the previous year. Traders shrugged off India’s industrial production measured by Index of Industrial Production (IIP) grew at the slowest pace in four months at 4.5% in September 2018, with poor performance of mining sector and lower offtake of capital goods. Final day of trade helped markets to end the week with a gain of around a percent as traders got some support with report that India’s exports rose by 17.86% to $26.98 billion in October 2018 as compared to $22.89 Billion in October 2017. Meanwhile, Fitch indicated that India’s strong growth outlook continues to stand out among peers and upgraded its real GDP growth forecast at 7.8% for the current financial year ending March 2019 (2018-19) from 7.3% forecasted earlier in April this year.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 298.61 points or 0.85% to 35,457.16 during the week ended November 16, 2018. The BSE Midcap index gained 53.61 points or 0.36% to 14,997.81, while Smallcap index slipped 185.97 points or 1.27% to 14,485.88. On the sectoral front, S&P BSE Consumer Durables was up by 614.02 points or 3.15% to 20126.05, S&P BSE Finance was up by 85.87 points or 1.53% to 5690.54, S&P BSE BANKEX was up by 421.10 points or 1.45% to 29519.42, S&P BSE Fast Moving Consumer Goods was up by 128.89 points or 1.15% to 11339.26 and S&P BSE Capital Goods was up by 165.69 points or 0.91% to 18411.97 were the top gainers on the BSE sectoral front, while S&P BSE Healthcare was down by 344.03 points or 2.34% to 14348.76, S&P BSE Metal was down by 295.99 points or 2.30% to 12567.11, S&P BSE Realty was down by 34.62 points or 1.96% to 1728.14, S&P BSE Auto was down by 328.69 points or 1.58% to 20516.51 and S&P BSE Information Technology was down by 166.07 points or 1.17% to 14019.40 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 97.00 or 0.92% to 10,682.20. On the National Stock Exchange (NSE), Bank Nifty lost 474.55 points or 1.84% to 26,245.55, Nifty IT slipped 80.10 points or 0.55% to 14,473.15 and Nifty Mid Cap 100 was down by 97.65 points or 0.55% to 17,507.85. On the other side, Nifty Next 50 was up by 8.10 points or 0.03% to 27,359.35.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 25868.37 crore and gross sales of Rs 23154.74 crore, leading to a net inflow of Rs 2713.63 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 6765.71 crore against gross sales of Rs 6636.33 crore, resulting in a net inflow of Rs 129.38 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 4.37 crore and gross sales of Rs 1.15 crore, leading to a net inflow of Rs 3.22 crore.

Industry and Economy

Citing weak fiscal position continues to constrain the ratings and there were significant risks to macroeconomic outlook, Fitch Ratings has refused to upgrade India’s credit rating for the 12th year in a row and affirmed the country’s long-term foreign-currency issuer default rating (IDR) at 'BBB-' with a Stable Outlook. The rating agency had last upgraded India's sovereign rating from BB+ to BBB- with a stable outlook on August 1, 2006.

Outlook for the coming week

In the passing week, Indian equity markets ended in positive terrain with Sensex and Nifty posting gains of around 0.90% amid continued foreign fund inflow and appreciating rupee.

In the next week, all eyes will be on the RBI central board of directors meeting which will be held on November 19. In this meeting, the finance ministry will try to seek an assurance from the banking regulator on several issues, including credit flow and liquidity and the central bank may agree to relax lending norms for the MSME sector including stringent rating standards to improve credit flow to this sector. Also, the Centre wants to push for a relaxed prompt corrective action (PCA) framework at the meeting.

There will be some buzz from the aviation sector, as in the next week, Directorate General of Civil Aviation (DGCA) may release air passenger traffic data for the month of October.

Market-participants would continue to trace the momentum of rupee and FII investment.

On the economy front, investors will be eyeing the Consumer price index inflation data for Agricultural Labourers/ Rural Labourers, which is slated to be released on November 20. Additionally, traders will also await for job data which will be released by Employees’ Provident Fund Organisation (EPFO) on November 20.

On the global front from the US, market-participants will first be eyeing Housing Market Index on November 19, followed by Housing Starts and Redbook on November 20, Durable Goods Orders, Jobless Claims, Consumer Sentiment, Existing Home Sales, Leading Indicators and Baker-Hughes Rig Count on November 21 and finally Fed Balance Sheet and Money Supply on November 23.

Top Gainers

  • Bharti Airtel up by 11.01% was the top gainer on Nifty for the week - Bharti Airtel gained traction with report that it will pre-pay $1.5 billion debt with its subsidiary Bharti Airtel International (Netherlands), using the proceeds it got from six global entities investing in its Africa unit. This offer has been made with a view to pro-actively manage its capital structure, reduce gross debt and leverage by acquiring the Notes funded out of equity proceeds. Besides, Bharti Airtel’s dollar-denominated bonds due in 2023 surged to their highest level in five years after it offered to buy back the securities at above market price.
  • Eicher Motors up by 9.96% was another top gainer on Nifty for the week - Eicher Motors gained on reporting 5.93% rise in its consolidated net profit at Rs 548.76 crore for the second quarter ended September 30, 2018, as compared to Rs 518.02 crore for the same quarter in the previous year. Total consolidated income of the company increased by 11.84% at Rs 2,502.12 crore for Q2FY19 as compared Rs 2,237.24 crore for the corresponding quarter previous year. Besides, Eicher Motors’ two-wheeler division -- Royal Enfield -- has launched its parallel twin powered 650cc motorcycles in India.

Top Losers

  • Yes Bank down by 16.19% was the top loser of the week on Nifty - Yes Bank came under selling pressure after its Non-Executive Chairman Ashok Chawla stepped down with immediate effect. As per the reports, Chawla offered to quit as controversy was being generated on his continuance on the board of directors following his name appearing in the CBI charge-sheet in the Aircel-Maxis case. Besides, the Bank said it will announce, in due course, the appointment of a chairman, post-RBI approval. The bank is already in the midst of appointing a new MD and CEO to succeed Rana Kapoor from February 01, 2019.
  • Sun Pharma Industries down by 13.01% was another top loser of the week on Nifty - Sun Pharma witnessed selling pressure on reporting weak result for the second quarter of current fiscal year, due to a one-off anti-trust litigation provision. The company reported consolidated net loss of Rs 218.82 crore for Q2FY19, as against net profit of Rs 912.12 crore for Q2FY18. The company posted a one-time loss of Rs 1,217 crore for the estimated settlement amount payable to all the remaining plaintiffs in an antitrust litigation related to sleep disorder drug modafinil in the US.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,695.15 on November 16 and lowest level of 10,440.55 on November 13. On the last trading day, the Nifty closed at 10,682.20 with weekly gain of 97.00 points or 0.92 percent. For the coming week, 10,516.78 followed by 10,351.37 are likely to be good support levels for the Nifty, while the index may face resistance at 10,771.38 and further at 10,860.57 levels.

US Market

The US markets ended lower during the passing week on concerns about the outlook for global economic growth and the impact of an anticipated increase in interest rates. Meanwhile, President Donald Trump claimed the prospect of Presidential Harassment by the Dems is causing the Stock Market big headaches. Further, a continued decline by shares of Apple (AAPL) weighed on stocks on Wall Street. The steep drop by Apple came after iPhone parts supplier Lumentum (LITE) cut its fiscal second quarter guidance. Traders also turned cautious with comments by Congresswoman Maxine Waters, D-Calif., who is expected to take over the powerful House Financial Services Committee in the next Congress. Ahead of testimony by Federal Reserve Vice Chairman for Supervision Randal Quarles, Waters suggested she would halt President Donald Trump’s efforts to roll back banking regulations. Moreover, a strong dollar pressured equities as investors worried about what it would do to overseas sales for multinationals.

On the economic front, business inventories in the US increased in line with economist estimates in the month of September, according to a report released by the Commerce Department. The Commerce Department said business inventories rose by 0.3 percent in September after climbing by 0.5 percent in August. Street had expected inventories to rise by 0.3 percent. The increase in business inventories came as manufacturing and wholesale inventories climbed by 0.5 percent and 0.4 percent, respectively, while retail inventories inched up by 0.1 percent. A report released by the Federal Reserve Bank of New York showed the pace of growth in New York manufacturing activity unexpectedly accelerated in the month of November. The New York Fed said its general business conditions index rose to 23.3 in November from 21.1 in October, with a positive reading indicating growth in regional manufacturing activity.

Meanwhile, a report released by the Labor Department showed U.S. import and export prices both rose by more than expected in the month of October. The Labor Department said import prices climbed by 0.5 percent in October after rising by a downwardly revised 0.2 in September. Street had expected import prices to inch up by 0.1 percent compared to the 0.5 percent increase originally reported for the previous month. The Commerce Department revealed in a report that Retail sales in the U.S. increased by more than anticipated in the month of October. The Commerce Department said retail sales advanced by 0.8 percent in October following a revised 0.1 percent dip in September.

European Market

European markets ended the passing week lower, as investors remained focused on the political turmoil in the UK after four ministers, including Brexit Minister Dominic Raab resigned in protest to Prime Minister Theresa May's draft Brexit agreement. The key indices made a weak start of the week, after European Central Bank Vice President Luis de Guindos cautioned that Italy's budget crisis poses concerns about public finances given high debt level and the political tensions around the Italian government's budget plans. Domestic sentiments remained weak, as Euro area economic growth halved in the third quarter. The latest estimates from the Eurostat confirmed that gross domestic product grew 0.2 percent from the second quarter, when the economy expanded 0.4 percent. Adding some worries, Germany's economy contracted at a faster-than-expected pace in the third quarter, marking the first decline since the first three months of 2015 and the worst fall since early 2013. The preliminary figures from the Federal Statistical Office showed that Gross domestic product declined a seasonally and calendar-adjusted 0.2 percent in the three months to September, after expanding 0.5 percent in the second quarter.

The trade remained lackluster during the week, amid reports that UK retail sales declined for a second straight month in October, defying expectations for an increase, amid a sharp decrease in sales of household goods. The preliminary data from the Office for National Statistics showed that sales volume including automotive fuel dropped 0.5 percent from September, when they fell 0.4 percent, revised from a 0.8 percent slump. On a year-on-year basis, retail sales volume grew 2.2 percent in October, which was the slowest pace in six months. The market participants failed to take any sense of relief with reports that the French economy likely retained its growth momentum in the fourth quarter. As per latest projection from the Bank of France, gross domestic product is set to grow 0.4 percent in the fourth quarter of this year. The pace of growth accelerated to 0.4 percent in the third quarter from 0.2 percent in the second quarter, largely underpinned by domestic demand and exports.

On the economic front, UK inflation remained unchanged in October, defying expectations for a modest increase, and allows the Bank of England to focus on the strengthening pay growth that can ultimately lead to an interest rate hike, if the Brexit deal is approved in time. The figures from the Office for National Statistics showed that the consumer price index rose 2.4 percent year-on-year, same as in September. Separately, Germany's consumer price inflation in October was the highest in over a decade. The final figures from the Federal Statistical Office showed that the consumer price index rose 2.5 percent year-on-year following a 2.3 percent increase in September. Meanwhile, Britain's unemployment increased during the three months to September. As per preliminary data from the Office for National Statistics, the UK unemployment rate rose slightly in the three months to September to 4.1 percent. In the past two months, the ILO jobless rate was steady at 4 percent, which was the lowest level since early 1975.

Asian market

Asian equity indices ended the weekly trade mostly in green terrain, on the back of positive cues from Wall Street. Though, the fresh uncertainties emerging from the UK overnight after multiple important ministers resigned from Prime Minister Theresa May's government capped some gains.

Chinese Shanghai remained the top gainer in the region, higher by over three percent, after the China Securities Regulatory Commission rolled out a series of measures over the weekend to support the private sector. Sentiments remained up-beat with data showing that industrial production in China rose an annual 5.9 percent in October, exceeding expectations for 5.8 percent, which would have been unchanged from the September reading. Also, fixed asset investment advanced an annual 5.7 percent, surpassing forecasts for 5.5 percent, while retail sales climbed 8.6 percent year-on-year - missing forecasts for a gain of 9.2 percent.

However, Japanese Nikkei edged lower by over two and half percent, as Nvidia's worse-than-expected earnings pulled down semiconductor-related stocks. Sentiments remained dampened with data showing that Japan’s economy contracted in the third quarter, hit by natural disasters and a decline in exports, a worrying sign that trade protectionism is starting to take its toll on overseas demand.
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