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Markets end with losses during the passing week
Dec-07-2018

It turned out to be a daunting week of trade for Indian equity benchmarks, with major averages losing crucial 35,700 (Sensex) and 10,700 (Nifty) levels. Markets witnessed consolidation on first day of the week as traders remained cautious with reports that India’s economic growth slowed down 7.1% in Q2 FY19 after touching over a two-year high of 8.2% in Q1. Traders also remained cautious, as GST collection dropped to Rs 97,637 crore in November 2018 as compared to Rs 1 lakh crore collected previous month. Some concern also came with report that India’s core sector output also grew at a slower pace of 4.8% in October 2018, as compared to 5% in October 2017. But, sentiments got some support with the Indian manufacturing sector accelerating further in the month of November, buoyed by healthier inflows of new orders. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) improved to 54 in November from 53.1 in October. Afterwards, markets witnessed steep fall as traders failed to take any sense of relief with the Reserve Bank of India’s (RBI) policy decision to keep the repo rate unchanged. Traders shrugged off report that India’s services sector activity strengthen further in month of November, amid an upsurge in demand. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index rose to 53.7 in November from 52.2 in October. Traders also remained concerned with Fitch Ratings revising downwards India’s GDP growth forecast to 7.2% for current fiscal citing higher financing cost and reduced credit availability. However, final day of trade helped markets to pare some of their losses, as traders took some support with the Union Cabinet approving an agriculture export policy with an aim to double the shipments to $60 billion by 2022.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 521.05 points or 1.44% to 35,673.25 during the week ended December 07, 2018. The BSE Midcap index losses 321.86 points or 2.14% to 14,717.49, while Smallcap index slipped 322.51 points or 2.24% to 14,104.65. On the sectoral front, S&P BSE Healthcare was down by 674.90 points or 4.71% to 13657.75, S&P BSE Auto was down by 919.61 points or 4.40% to 19980.56, S&P BSE Metal was down by 353.02 points or 2.98% to 11478.84, S&P BSE Consumer Discretionary Goods & Services was down by 99.34 points or 2.66% to 3637.14 and S&P BSE Oil & Gas was down by 278.18 points or 2.10% to 12968.02 were the top losers on the BSE sectoral front, while S&P BSE Information Technology was up by 110.68 points or 0.77% to 14407.42 and S&P BSE TECK was up by 19.00 points or 0.26% to 7189.23 were the only gainers on the BSE sectoral front.

NSE movement for the week

The Nifty slipped 183.05 or 1.68% to 10,693.70. On the National Stock Exchange (NSE), Bank Nifty lost 268.65 points or 1.00% to 26,594.30, Nifty Mid Cap 100 decreased 449.10 points or 2.57% to 17,054.50, Nifty Next 50 was down by 678.05 points or 2.46% to 26,915.65. On the other side, Nifty IT was up by 24.85 points or 0.17% to 14,662.90.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 33314.32 crore and gross sales of Rs 33697.46 crore, leading to a net outflow of Rs 383.14 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 8825.45 crore against gross sales of Rs 6081.79 crore, resulting in a net inflow of Rs 2743.66 crore. In hybrid segment, FIIs stood as net buyers , with gross purchases of Rs 2.16 crore and gross sales of Rs 1.60 crore, leading to a net inflow of Rs 0.56 crore.

Industry and Economy

The Reserve Bank of India (RBI) retaining its Gross Domestic Product (GDP) growth forecast of 7.4% for the current fiscal year (FY19) has said that the India’s economic growth will accelerate further to 7.5% in the first half of next fiscal year (H1FY20), on the back of acceleration in investment activity. It added that the GDP growth in April-September period of FY19 has been broadly in line with RBI projection of 7.4% for full fiscal.

Outlook for the coming week

In the passing week, Indian markets displayed a weak performance with Nifty and Sensex tumbling below their respective psychological levels of 10,700 and 35,700, after concerns over US-China trade war resurfaced.

In the coming week, on the economy front, investors will keep an eye on Industrial Production (IIP) for the month of October, which is scheduled to be released on December 12. IIP increased to 4.5 percent from a year earlier in September 2018, easing from an upwardly revised 4.7 percent growth in the previous month and beating market expectations of 4.3 percent advance. Further, traders will also be looking for the WPI Manufacturing for the month of November, which is slated to be unveiled on December 14.

Investors will looking forward to the President Ram Nath Kovind visit to Myanmar from 10-14 December as part of Delhi's Indo-Pacific strategy. This visit will reaffirm India’s commitment to developing its important partnership with Myanmar.  Additionally, investors will also be eyeing the RBI’s board meeting which is scheduled on December 14, for pitching stress in the real estate sector by infusion of liquidity in the NBFC sector.

On the global front from the US, market-participants will first be eyeing JOLTS and TD Ameritrade IMX on December 10, followed by PPI-FD and Redbook on December 11, CPI, Atlanta Fed Business Inflation Expectations and Treasury Budget on December 12, Jobless Claims, Import and Export Prices, Fed Balance Sheet and Money Supply on December 13 and finally Retail Sales, Industrial Production, PMI Composite FLASH and Business Inventories on December 14. Additionally, global investors will be reacting to the meeting between President Donald Trump and Democratic leaders in Congress which is scheduled in Washington in the next week, to talk about ways to avert a partial government shutdown set to occur at midnight Friday.

Top Gainers

  • Wipro up by 5.84% was the top gainer on Nifty for the week - Wipro gained traction as its digital business unit, Wipro Digital and Alfresco has expanded global partnership to create, build and run open source based digital transformation programs for its clients, across the globe. The partnership will bring together the company’s expertise in digital transformation and Alfresco's Digital Business Platform. As a part of this alliance, the two companies will launch a series of go-to-market initiatives that includes a joint predictive service automation solution.
  • Kotak Mahindra Bank up by 5.50% was another top gainer on Nifty for the week - Kotak Mahindra Bank gained on report that billionaire investor Warren Buffett's Berkshire Hathaway Inc is planning to pick up a 10% stake in the bank. Berkshire Hathaway may invest between $4 billion and $6 billion in the lender by buying promoter stake or through a preferential allotment. Besides, Kotak Mahindra Bank denied the report in a regulatory filing, by saying it is ‘unaware of any plans by Berkshire Hathaway buying stake in the bank’.

Top Losers

  • Sun Pharmaceutical Industries down by 13.17% was the top loser of the week on Nifty - Sun Pharma came under selling pressure with report that SEBI reopening an insider trading case against the company and probing alleged lapses by some of its promoters and other entities in raising funds overseas. However, the company said it has not received any communication from the market regulator with respect to reopening of insider trading issue. It also said it was open to engaging new audit firms for subsidiaries and discontinuing domestic sales through a related party, in a bid to assuage investor concerns.
  • Tata Motors down by 7.85% was another top loser of the week on Nifty - Tata Motors witnessed selling pressure after Jaguar Land Rover (JLR) reported weak sales numbers for November. JLR reported total retail sales of 48,160 vehicles in November 2018, down 8% year-on-year reflecting continuing challenging market conditions in China. Sales in China were 50.7% lower than a year ago as market conditions remained difficult with continuing consumer uncertainty following tariff changes and trade concerns. Also, Land Rover retailed 33,251 vehicles in November, down 14.0% year-on-year.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,941.20 on December 3 and lowest level of 10,588.25 on December 6. On the last trading day, the Nifty closed at 10,693.70 with weekly loss of 183.05 points or 1.68 percent. For the coming week, 10,540.90 followed by 10,388.10 are likely to be good support levels for the Nifty, while the index may face resistance at 10,893.85 and further at 11,094.00 levels.

US Market

The US markets ended lower during the passing week as skepticism mounted over the significance of an agreement reached by the US and China to postpone new tariffs. Confusion spread when exactly the 90-day timeline would begin, after White House economic adviser Larry Kudlow mistakenly stated that the negotiating window would begin on January 1, 2019. The White House later put out a correction, stating that it began on December 1. Further, sentiments were also downbeat as investors worried about a bond-market phenomenon signaling a possible economic slowdown. The yield on the three-year Treasury note surpassed its five-year counterpart. When a so-called yield curve inversion happens - short-term yields trading above longer-term rates - a recession could follow, though it is often years away after the signal triggers.

On the economic front, a report released by the Commerce Department showed a steep drop in new orders for US manufactured goods in the month of October. The Commerce Department said factory orders tumbled by 2.1 percent in October after rising by a downwardly revised 0.2 percent in September. Street had expected factory orders to slump by 2.0 percent compared to the 0.7 percent increase originally reported for the previous month. Durable goods orders led the way lower during the month, plunging by 4.3 percent amid a 12.0 percent nosedive in orders for transportation equipment. The Commerce Department also said shipments of manufactured goods fell for the first time in sixteen months, edging down by 0.1 percent in October after climbing by 0.7 percent in September.

Meanwhile, revised data released by the Labor Department showed labor productivity in the US increased by slightly more than initially estimated in the third quarter. The report also said unit labor costs rebounded by less than previously estimated. The report said productivity surged up by 2.3 percent in the third quarter compared to the previously reported 2.2 percent spike. The upward revision to the pace of productivity growth matched street estimates. The upwardly revised jump in productivity in the third quarter compares to the 3.0 percent leap in the second quarter. The Labor Department said the increase in productivity, a measure of output per hour, was little changed from the initial estimate as both output and hours worked increased at the same rates originally reported. A separate report from the Labor Department showed first-time claims for US unemployment benefits edged down by less than expected in the week ended December 1st. The report said initial jobless claims slipped to 231,000, a decrease of 4,000 from the previous week's revised level of 235,000. Street had expected jobless claims to dip to 225,000.

European Market

European markets ended the passing week in negative territory, amid concerns over the trade tensions between the US and China. The start of the week was firm, as UK manufacturing growth improved in November, but activity remained subdued amid a second consecutive month of decline in export orders, though domestic demand increased as Brexit worries prompted clients to stock up on supplies. The survey data from IHS Markit showed that the CIPS manufacturing purchasing managers index rose to 53.1 from October's 27-month low of 51.1. Some comfort also came after British construction sector expanded at the fastest pace in four months in November, thanks to an increase in new work and consequent gains in job creation, though Brexit concerns damped expectations for the months ahead. The survey data from IHS Markit showed that the CIPS construction Purchasing Managers' Index climbed to 53.4 from 53.2 in October.

However, the key indices failed to hold momentum and traded lackluster throughout the week, after Eurozone producer price inflation accelerated further in October, defying expectations. The figures from Eurostat showed that producer prices rose 4.9 percent year-on-year after a revised 4.6 percent in September. Domestic sentiments also got hit, as Eurozone's private sector growth was the lowest in more than two years during November, led by Germany, though the pace of slowdown was less than what was estimated initially. As per survey data from IHS Markit, the final Eurozone Composite purchasing managers' index fell to 52.7 from October's 53.1. Besides, UK services sector growth slowed to its weakest level in nearly two-and-a-half years in November, amid weaker growth in both business activity and new work as Brexit concerns intensified, defying expectations for a modest improvement.

The trade remained dampened, even though Germany's manufacturing orders increased for a third straight month in October, defying expectations for a decline, led by strong foreign demand despite the global trade uncertainties. The preliminary data from the Federal Statistical Office showed that factory orders grew 0.3 percent from September, while the street had forecast a 0.4 percent fall. The market participants overlooked reports that Eurozone retail sales grew in October after decreasing in the previous month. According to the preliminary data from Eurostat, retail sales grew 0.3 percent from September, when they fell 0.5 percent, after the stagnation reported earlier was revised. Meanwhile, Eurozone's manufacturing growth slowed less-than-expected in November, amid marginal growth in output and weak business confidence, and was the lowest since August 2016. The final data from IHS Markit showed that the manufacturing purchasing managers' index fell to 51.8 from 52 in October. The flash reading was 51.5.

Asian market

Asian markets ended mostly in red during the passing week as the arrest of a senior Huawei executive over potential violation of US sanctions on Iran raised more questions about the Trump administration's overall China strategy. Japanese Nikkei tumbled over three percent during the week on growth and trade concerns. The latest survey from Nikkei showed that the services sector in Japan continued to expand in November, albeit at a fractionally slower pace with a PMI score of 52.3, down from 52.4 in October. Meanwhile, Bank of Japan Governor Haruhiko Kuroda told parliament that economic risks from abroad could be severe and the central bank would respond appropriately as needed.

South Korean benchmark KOSPI Composite too edged lower despite the country’s GDP advanced a seasonally adjusted 0.6 percent sequentially in the third quarter. That was in line with expectation and unchanged from the three months prior. Singapore's Straits Times index ended flat on global growth concern. However, traders got some support with report that the country's private sector continued to expand in November, and at a faster rate, the latest survey from Nikkei showed with a PMI score of 53.8, up from 52.6 in October.

Bucking the trend, Chinese benchmarks Shanghai Composite edged higher for the week as traders took some support with encouraging services data. The services sector in China continued to expand in November, and at an accelerated rate, the latest survey from Caixin revealed with a PMI score of 53.8. That beat expectations for 50.8, which would have been unchanged from the October reading. Meanwhile, China's central bank chief said in an article in the China Finance magazine that the central bank would keep its monetary policy flexible and adjust it appropriately according to changes in the country's economic situation.
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