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Bulls tighten grip on Dalal Street during the week
Nov-30-2018

Bulls tightened grip on Dalal Street in the week gone by with frontline gauges snapping the week with a massive gain of over three percent on the back of tumbling oil prices and fresh gains in the rupee. The markets’ mood remained up-beat throughout the week and there appeared not even an iota of profit booking, as the benchmarks fervently gained from strength to strength, as investors continued hunt for fundamentally strong stocks. Markets made an optimistic start of the week buoyed by the Organization for Economic Cooperation and Development’s statement that India’s economy will grow close to 7.5% in 2019 and 2020. India’s gross domestic product (GDP) grew 6.7% in 2017-18. Sentiments also got some support with CRISIL Research expecting 2018-19 to be a good one for India’s small and medium enterprise (SME) leather exporters, given a pick-up in demand from the US and expectations of the Donald Trump administration imposing tariffs on Chinese leather footwear - not in the tariff list currently - early next calendar year. Traders took some encouragement with report that the Reserve Bank of India (RBI) Governor Urjit Patel told law makers that the note ban’s impact was transient and the economy is robust. Final two days of trade helped markets to end nearly their crucial 36,200 (Sensex) and 10,900 (Nifty) levels, as sentiments remained optimistic after Commerce and Industry Minister Suresh Prabhu said that the government is taking several steps, such as reducing regulatory burden and ensuring availability of adequate funds, for budding entrepreneurs to promote startup ecosystem in the country. Expressing optimism over India’s growth, economic policy think-tank, the NCAER in its Mid-Year Review of the Economy projected that Indian economy is likely to grow at 7-7.4% in the current fiscal (FY19).

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 1213.28 points or 3.47% to 36,194.30 during the week ended November 30, 2018. The BSE Midcap index gained 159.01 points or 1.07% to 15,039.35 and Smallcap index surged 76.33 points or 0.53% to 14,427.16. On the sectoral front, S&P BSE Information Technology was up by 853.20 points or 6.35% to 14296.74, S&P BSE TECK was up by 361.26 points or 5.31% to 7170.23, S&P BSE Finance was up by 171.88 points or 3.05% to 5807.71, S&P BSE Fast Moving Consumer Goods was up by 310.06 points or 2.73% to 11647.29 and S&P BSE Consumer Discretionary Goods & Services was up by 94.47 points or 2.59% to 3736.48 were the top gainers on the BSE sectoral front, while S&P BSE PSU was down by 185.24 points or 2.64% to 6840.02, S&P BSE Metal was down by 199.66 points or 1.66% to 11831.86 and S&P BSE Oil & Gas was down by 175.22 points or 1.31% to 13246.20 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 350.00 or 3.32% to 10,876.75. On the National Stock Exchange (NSE), Bank Nifty was up by 863.50 points or 3.32% to 26,862.95, Nifty IT was up by 802.35 points or 5.80% to 14,638.05, Nifty Mid Cap 100 increased 156.40 points or 0.90% to 17,503.60 and Nifty Next 50 gained 406.25 points or 1.49% to 27,593.70.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 31590.07 crore and gross sales of Rs 25599.11 crore, leading to a net inflow of Rs 5990.96 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 6982.94 crore against gross sales of Rs 7022.40 crore, resulting in a net outflow of Rs 39.46 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 7.86 crore and gross sales of Rs 6.30 crore, leading to a net inflow of Rs 1.56 crore.

Industry and Economy

With an aim to help Indian companies, the Reserve Bank of India (RBI) has relaxed norms for external commercial borrowings (ECBs). The RBI has reduced hedging requirements for ECBs to 70% from 100%. The relaxed norms will apply to the ECBs with a maturity period between 3 and 5 years. The RBI also clarified that the ECBs raised prior to this circular will be required to mandatorily roll over their existing hedge only to the extent of 70% of outstanding ECB exposure.

Outlook for the coming week

In the passing F&O expiry week, Indian markets displayed an outstanding performance with Nifty and Sensex gathering massive gains of around 3.50 percent as global crude oil prices dropped and rupee appreciated.

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 Nikkei Manufacturing PMI data on December 3 followed by Nikkei Services PMI on December 5. Traders will also be reacting to Core sector and Q2GDP data next week which will be released on Friday after market hours.

In the next week, market-participants will also be keenly eyeing RBI’s fifth bi-monthly monetary policy review, which is scheduled from December 3-5, 2018. The investors expect that the central bank would exercise ‘pause’ in the upcoming bi-monthly policy review amid easing global crude oil prices and robust agriculture production.

On the sectoral front, auto and cement stocks are expected to remain in limelight for the next week as these companies would report their monthly sales figures.

On the global front, market-participants would watch key macro-economic data from US starting from PMI Manufacturing Index, and Construction Spending on December 3, followed by Motor Vehicle Sales and Redbook on December 4, ADP Employment Report, PMI Services Index, Productivity and Costs and ISM Non-Mfg Index on December 5, International Trade, Jobless Claims, Factory Orders, Fed Balance Sheet and Money Supply on December 6 and finally Consumer Sentiment, Wholesale Trade, Baker-Hughes Rig Count, Consumer Credit and Employment Situation on December 7.

Additionally, global investors will also be eyeing the OPEC general meeting which is scheduled in Vienna in the next week, the board room would seek ways to reduce the oil supply which should help stabilise a market that has seen prices plummet in the past two months.

Top Gainers

  • Tata Consultancy Services (TCS) up by 8.59% was the top gainer on Nifty for the week - TCS gained traction with report that a jury in California rejected claims that the company discriminated against American workers in favour of staffing its US offices with Indians. The verdict is a major victory for TCS, whose business model depends heavily on exporting engineers to the US. In a separate development, TCS has acquired the business of BridgePoint Group, LLC, US management consulting firm, through the purchase of select company assets.
  • Infosys up by 7.52% was another top gainer on Nifty for the week - Infosys gained after the company bagged a deal from Citizens Energy Group to enhance its customer service experience. As part of the deal, Citizens will transform its customer service by leveraging ‘Infosys Preconfigured Accelerator for Customer Experience', an industry leading framework tuned for Oracle Utilities C2M platform. This implementation will modernise Citizens’ customer services, self-service and meter data management processes. Infosys will deliver this transformation through its innovation hub in Indianapolis.

Top Losers

  • Yes Bank down by 13.17% was the top loser of the week on Nifty - Yes Bank remained under pressure during the passing week after Moody's Investors Service downgraded the Bank’s foreign currency issuer ratings to ‘Ba1’ from ‘Baa3’. The outlook, where applicable, has been changed to negative from stable. Besides, ICRA downgraded Yes Bank’s domestic long term ratings of Senior Debt Instruments to ‘AA’ and Subordinate Debt Instruments to ‘AA-’. CARE Ratings has also downgraded the bank’s domestic ratings of Senior Debt Instruments to ‘AA+’ and Subordinate Debt Instruments to ‘AA’.
  • Oil and Natural Gas Corporation (ONGC) down by 7.85% was another top loser of the week on Nifty - The upstream companies like ONGC witnessed selling pressure as US crude oil briefly fell below $50 a barrel in the passing week, touching the lowest level in nearly 14 months, on growing fears over a global supply glut that is been exacerbated by American waivers to Iranian crude buyers. Besides, uncertainty over the US-China trade war also weighted down on sentiments. As the crude oil is the final product of the upstream companies fall in oil prices is negative for these companies.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,922.45 on November 30 and lowest level of 10,489.75 on November 26. On the last trading day, the Nifty closed at 10,876.75 with weekly gain of 350.00 points or 3.32 percent. For the coming week, 10,603.52 followed by 10,330.28 are likely to be good support levels for the Nifty, while the index may face resistance at 11,036.22 and further at 11,195.68 levels.

US Market

The US markets ended higher during the passing week as Federal Reserve Chairman Jerome Powell said interest rates are close to neutral, a change in tone from remarks the central bank chief made nearly two months ago. Powell stated that interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy - that is, neither speeding up nor slowing down growth. Further, easing worries on US-China trade also boosted the markets. Trump was worried about the impact of a long trade war with China on markets and the economy. This could lead Trump to seek a compromise with China on trade. Trump and Chinese President Xi Jinping are scheduled to meet on Saturday at the G-20 summit in Argentina.

Personal income and spending in the US both increased by more than anticipated in the month of October, according to a report released by the Commerce Department. The Commerce Department said personal income climbed by 0.5 percent in October after edging up by 0.2 percent in September. Street had expected income to rise by 0.4 percent. The report said personal spending advanced by 0.6 percent in October after rising by a revised 0.2 percent in the previous month. Spending had also been expected to climb by 0.4 percent, matching the increase originally reported for September. However, new home sales in the US showed a substantial decrease from an upwardly revised level in the month of October, according to a report released by the Commerce Department. The Commerce Department said new home sales plummeted by 8.9 percent to an annual rate of 533,000 in October from an upwardly revised rate of 597,000 in September.

Meanwhile, pending home sales in the US unexpectedly showed a substantial decrease in the month of October, according to a report released by the National Association of Realtors (NAR). NAR said its pending home sales index plunged by 2.6 percent to 102.1 in October after climbing by 0.7 percent to an upwardly revised 104.8 in September. Pending home sales in October were down by 6.7 percent compared to the same month a year ago, reflecting the tenth straight month of annual decreases. Besides, after reporting an unexpected uptick in first-time claims for US unemployment benefits in the previous week, the Labor Department released a report showing another unexpected increase in initial jobless claims in the week ended November, 24. The report said initial jobless claims climbed to 234,000, an increase of 10,000 from the previous week's unrevised level of 224,000. Street had expected jobless claims to edge down to 220,000.

European Market

European markets ended the passing week on cautious note, due to weak economic data. The key indices made a firm start of the week, as France's manufacturing confidence increase in November after easing in the previous two months. The figures from the statistical office INSEE showed that the manufacturing confidence index rose to 105 from 104 in October. But, the street failed to hold the momentum, as Eurozone private sector grew at the slowest pace in nearly four years in November, with slower expansions in both manufacturing and services. The flash estimates from IHS Markit showed that the composite purchasing managers' index, or PMI, which combines manufacturing and services, fell to 52.4 from 53.1 in October. Adding more worries, Germany's private sector growth slowed more-than-expected in November to its lowest level in almost four years. As per survey data from IHS Markit, the composite purchasing managers' index, or PMI, which combines manufacturing and services, dropped to 52.2 from 53.4 in October.

The trade was lackluster during the week, impacted after German business confidence eased for a third consecutive month in November as the economy is cooling down. The results of the survey by the Ifo Institute showed that the Ifo business confidence indicator fell to 102 from 102.9 in October, which was revised from 102.8.  Besides, Germany's economy shrunk for the first time since early 2015 and at the fastest pace in nearly six years, mainly due to weak exports and car sales. The latest figures from the Federal Statistical Office confirmed that gross domestic product declined a seasonally and calendar-adjusted 0.2 percent quarter-on-quarter in the three months to September, after expanding 0.5 percent in the second quarter. Domestic sentiments also got hit after France's consumer confidence dropped in November to its lowest level since early 2015. As per survey data from the statistical office INSEE, the consumer confidence index fell to 92 from 95 in October.

Meanwhile, Eurozone's economic sentiment weakened for an eleventh straight month in November, but the pace of decline was less than expected, helped by an improvement in morale in the industrial sector. The survey data from the European Commission showed that the economic sentiment indicator fell to 109.5, which was the weakest reading since May 2017, when the score was 109. The October reading was revised to 109.7 from 109.8. Separately, Germany's consumer confidence is set to slightly weaken at the end of the year as high inflation rates and global economic uncertainty weigh on households' sentiment. The survey results from the GfK showed that the forward-looking consumer confidence indicator is set to drop to 10.4 from 10.6 in November. The street had forecast a reading of 10.5.

Asian market

Asian equity indices ended the weekly trade mostly in green terrain, on the back of positive cues from Wall Street after US Federal Reserve Chairman Jerome Powell suggested the pace of interest rate increases might slow. However, gains remained capped as investors remained cautious ahead of the highly-anticipated meeting between US President Donald Trump and his Chinese counterpart Xi Jinping at the G-20 summit in Argentina.

Japanese Nikkei remained the top gainer in the region, surging by over three percent, despite the dollar weakening against the yen on expectations of a slowdown in the pace of rate hikes by the Federal Reserve. Traders took support with data indicating that Japan's industrial output rose a seasonally adjusted 2.9 percent month on month in October. That exceeded forecasts for an increase of 1.1 percent following the 0.4 percent decline in September. Investors paid no heed towards government data showing that availability of jobs in Japan dropped in October for the first time in eight months, although the country is experiencing the tightest labor crunch in decades.

However, Chinese Shanghai edged lower by over two percent during the week, on disappointing data indicating that China's manufacturing activity continued to worsen in November. The manufacturing PMI stood at 50.0 in November, missing expectations for a score of 50.2, which would have been unchanged from the October reading. The non-manufacturing PMI came in with a score of 53.4 - also shy of expectations for 53.8 and down from 53.9 in the previous month. The composite index posted a score of 52.8, down from 53.1 a month earlier.
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