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Bulls make come back on Dalal Street after a week break
Dec-14-2018

Indian equity benchmarks ended the passing week with a gain of around a percentage point, settling above their crucial 35,900 (Sensex) and 10,800 (Nifty) levels on the back of better-than-expected macro-economic data. Markets started the session on pessimistic note after the Reserve Bank of India’s (RBI) data showed that India’s current account deficit (CAD) widened to 2.9% of the Gross Domestic Product (GDP) in the second quarter of the fiscal compared to 1.1% in the year-ago period, mainly due to a large trade deficit. Sentiments also remained dampened after assembly poll results for five states showed that Prime Minister Narendra Modi’s popularity is in doubt going into 2019 election. However, markets staged a remarkable recovery and never looked back throughout the week gaining strength to strength as investors continued hunt for fundamentally strong stocks. Sentiments turned positive after Commerce and Industry Minister Suresh Prabhu’s statement that the New Industrial Policy, which will replace the 27-year-old existing policy, has been sent for the Union Cabinet’s consideration. The markets participants remained encouraged, as Asian Development Bank (ADB) retained Indian growth forecast at 7.3 percent for the current fiscal and 7.6 percent for the next financial year 2019-20, amid rebounding exports and higher industrial & agricultural output. On the economic front, India’s industrial production measured by Index of Industrial Production (IIP) surged to 11-month high of 8.1% in the month of October 2018 as against 4.5% in September 2018 and 1.8 percent in October 2017. Adding to the optimism, India’s retail inflation based on CPI cooled down to a 17-month low of 2.33% in the month of November 2018, as compared to 4.88% in the same month of previous year. Traders also took support with report that WPI slowed down to 4.64 percent in November from 5.28 percent in October.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 289.68 points or 0.81% to 35,962.93 during the week ended December 14, 2018. The BSE Midcap index gained 475.35 points or 3.23% to 15,192.84 and Smallcap index surged 397.11 points or 2.82% to 14,501.76. On the sectoral front, S&P BSE Auto was up by 901.73 points or 4.51% to 20882.29, S&P BSE PSU was up by 263.84 points or 3.94% to 6967.31, S&P BSE Consumer Discretionary Goods & Services was up by 138.87 points or 3.82% to 3776.01, S&P BSE Oil & Gas was up by 443.99 points or 3.42% to 13412.01 and S&P BSE Consumer Durables was up by 686.01 points or 3.39% to 20929.91 were the top gainers on the BSE sectoral front, while there were no losers.

NSE movement for the week

The Nifty surged 111.75 or 1.05% to 10,805.45. On the National Stock Exchange (NSE), Bank Nifty was up by 231.70 points or 0.87% to 26,826.00, Nifty IT was up by 188.50 points or 1.29% to 14,851.40, Nifty Mid Cap 100 increased 537.10 points or 3.15% to 17,591.60 and Nifty Next 50 gained 898.40 points or 3.34% to 27,814.05.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 27954.49 crore and gross sales of Rs 25370.96 crore, leading to a net inflow of Rs 2583.53 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 7763.85 crore against gross sales of Rs 8847.53 crore, resulting in a net outflow of Rs 1083.68 crore. In hybrid segment, FIIs stood as net buyers , with gross purchases of Rs 1.73 crore and gross sales of Rs 1.15 crore, leading to a net inflow of Rs 0.58 crore.

Industry and Economy

S&P Global has said that India’s rapid economic growth will be enough to offset worries about the independence of its central bank and keep its credit rating in the coveted investment grade bracket. It also said ‘we always like to see a central bank that is independent because if you do not, it can have very negative consequences on your capacity to contain inflation and foster growth’. It added at the moment the high growth is enough to keep the rating stable.

Outlook for the coming week

In the passing week, Indian markets displayed a strong performance with Nifty and Sensex ending above their respective psychological levels of 10,800 and 35,900, on the back of better-than-expected macro-economic data.

In the coming week on the economy front, investors will keep an eye on Foreign Exchange Reserves on December 21. Additionally, traders will also be looking for Indian banks' loan growth data slated to be released on December 21.

Market-participants would continue to trace the momentum of rupee and FII investment. Traders will be awaiting job data which will be released by Employees’ Provident Fund Organisation (EPFO) on December 20.

Investors will looking forward to the South Korean Minister of Foreign Affairs Kang Kyung-wha visit to India on December 18-19, during which she will hold talks with her counterpart Sushma Swaraj on the progress in multifaceted cooperation between the two countries.

On the global front from the US, traders in will first be eyeing the Empire State Mfg Survey, Housing Market Index and Treasury International Capital on December 17, followed by Housing Starts and Redbook on December 18, MBA Mortgage Applications, Current Account, Existing Home Sales, FOMC Forecasts and Fed Chair Press Conference on December 18, Jobless Claims, Philadelphia Fed Business Outlook Survey, Leading Indicators, Fed Balance Sheet and Money Supply on December 20 and finally Durable Goods Orders, GDP, Corporate Profits, Personal Income and Outlays, Consumer Sentiment on December 21. Next on the radar for gold traders is Fed’s next move at its December 18-19 meeting. The US central bank is widely expected to raise rates at the meet but investors focus would be on how much further it might lift rates next year.

Top Gainers

  • Hero MotoCorp up by 9.51% was the top gainer on Nifty for the week - Hero MotoCorp gained traction on planning to launch a new fully faired motorcycle. This upcoming motorcycle will be powered by the 200cc motor seen on the Hero Xtreme 200R. This will be Hero’s fourth motorcycle based on its 200cc engine platform. Of the four, the Xtreme 200R has already been launched while the XPulse 200 and the XPulse 200T adventure bikes will be launched in early 2019. Moreover, in an interesting possibility, the new bike might carry the Karizma tag.
  • Bajaj Finserv up by 9.00% was another top gainer on Nifty for the week - Most of the banking and nonbanking financial companies (NBFCs) stocks rallied on expectations that the new Reserve Bank of India (RBI) governor would announce steps to ease liquidity, amid worries that shrinking liquidity will hurt their earnings. As per the report, the new governor could adopt a more lenient stance on liquidity issues the NBFC sector is facing. Besides, possible interest rate cuts and softer monetary policy, both will benefit NBFCs.

Top Losers

  • HCL Technologies down by 5.07% was the top loser of the week on Nifty - HCL Technologies came under pressure despite acquiring select IBM software products for a whopping $1.8 billion. The acquisition is expected to close by mid-2019. The deal, which is the biggest ever by an Indian IT services provider, seeks to capitalise on HCL's customer base and the over 5,000 customers these IBM products have. The company’s CEO, C Vijayakumar said ‘The products that we are acquiring are in large growing market areas like Security, Marketing and Commerce’.
  • JSW Steel down by 4.03% was another top loser of the week on Nifty - JSW Steel has cut prices of its Neosteel brand 500-D steel bars for the third time in the December quarter. JSW Steel has cut prices of its steel bars by more than 2%. With the company having cut prices every month in the current quarter, prices of these steel bars are now down more than 5% compared with the previous quarter. TMT or thermo-mechanically treated bars, priced in the range of Rs 293-4,543 per piece, are a part of the company’s long products portfolio.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,838.60 on December 13 and lowest level of 10,333.85 on December 11. On the last trading day, the Nifty closed at 10,805.45 with weekly gain of 111.75 points or 1.05 percent. For the coming week, 10,480.00 followed by 10,154.55 are likely to be good support levels for the Nifty, while the index may face resistance at 10,984.75 and further at 11,164.05 levels.

US Market

The US markets ended in green territory during the passing week as traders keep up hope that the US and China will make progress on resolving their trade dispute. President Donald Trump expressed optimism about striking a trade deal with Chinese President Xi Jinping. Trump noted that trade talks between US and Chinese officials were underway by telephone and suggested more meetings are likely. Moreover, he said ‘If it is necessary, I will have another meeting with President Xi, who I like a lot and get along with very well’. A report that China is moving toward cutting tariffs on imported US-made cars added to the positive sentiment. A proposal to reduce tariffs on cars made in the US to 15 percent from the current 40 percent has been submitted to China's Cabinet. Further, Trump stated that he could potentially intervene in the arrest of Huawei Technologies Company's chief financial officer Meng Wanzhou, offsetting concerns her detention could hurt trade negotiations.

On the economic front, a report released by the Labor Department showed first-time claims for US unemployment benefits fell by much more than anticipated in the week ended December 8th. The report said initial jobless claims dropped to 206,000, a decrease of 27,000 from the previous week's revised level of 233,000. Street had expected jobless claims to slip to 225,000 from the 231,000 originally reported for the previous week. Jobless claims pulled back further off the nearly eight-month high reached two weeks ago to hit their lowest level in almost three months. The Labor Department said the less volatile four-week moving average also slid to 224,750, a decrease of 3,750 from the previous week's revised average of 228,500.

Besides, with a sharp pullback in gasoline prices offsetting increases in other prices, the Labor Department released a report showing consumer prices came in flat in the month of November. The report said the Labor Department's consumer price index was unchanged in November after rising by 0.3 percent in October. The unchanged reading matched street estimates. The report said energy prices tumbled by 2.2 percent in November after jumping by 2.4 percent in October, as gasoline prices plunged by 4.2 percent after surging up by 3.0 percent in the previous month. Meanwhile, Producer prices in the US unexpectedly showed a modest uptick in the month of November, according to a report released by the Labor Department. The Labor Department said its producer price index for final demand inched up by 0.1 percent in November after climbing by 0.6 percent in October.

European Market

European markets ended the passing week with gains, amidst some major European Central Bank (ECB) developments. The ECB left its interest rates unchanged but ECB President Mario Draghi unveiled the latest set of ECB Staff macroeconomic projections for Eurozone, which revealed a further downgrade to the growth projection for next year. The euro area growth forecast for next year was trimmed to 1.7 percent from 1.8 percent. The outlook for this year was cut to 1.9 percent from 2 percent. The markets made a lower opening, as Eurozone's investor confidence eased sharply in December and declined for a fourth month in a row, marking the lowest level since the same month in 2014. The survey data from Sentix showed that the investor confidence index dropped to -0.3 from 8.8 in November. The latest reading was the lowest since December 2014.

However, the key indices staged smart recovery during the week, after German investor confidence rose strongly in December, defying expectations for a modest weakening, but caution prevailed as financial analysts' assessment of the current economic situation again deteriorated sharply due to sluggish economic growth and uncertainties linked to global trade and Brexit. The results of a survey by the Centre for European Economic Research, or ZEW, showed that the ZEW Indicator of Economic Sentiment for Germany rose 6.6 points to reach minus 17.5 points in December. Some relief also came with a report of Eurostat showing that Eurozone's industrial production grew in October after a slump in the previous month, suggesting that economic growth may gain some steam towards the end of the year, yet remain sluggish. Industrial production rose 0.2 percent from September, when it declined 0.6 percent, which was revised from 0.3 percent. The growth was in line with economists' expectations.

Meanwhile, UK wages rose at the fastest pace in a decade in the three months to October, suggesting that real pay growth is turning sustainable and contribute to economic growth if a no-deal Brexit is avoided. The Office for National Statistics reported that average wages including bonuses rose 3.3 percent year-on-year, which was the biggest increase since the May to July period of 2008. The street had forecast a 3 percent increase. Besides, Germany's merchandise exports grew more-than-expected in October and at the fastest pace in five months. As per the preliminary figures from Destatis, exports increased a calendar ad seasonally adjusted 0.7 percent from September, when they declined 0.4 percent. Imports rose 1.3 percent monthly after stagnation in the previous month.

Asian market

All the Asian equity indices, barring Hang Seng Composite Index, ended in red during the passing week, followed by the weaker than expected economic data from China. Worries about slowing global economic growth and skepticism about a trade deal between US and China anytime soon weighed as well on Asian markets. 

Japanese Nikkei remained the top looser in the Asian pack, declining by around one and half percent, as the yen strengthened against the US dollar. Traders overlooked a fairly decent Tankan survey report showing that the Bank of Japan said in its quarterly Tankan Survey that the index of business and manufacturing sentiment in Japan was steady in the fourth quarter of 2018. The large manufacturing index was unchanged with a score of +19, beating expectations for +18. The outlook came in at +15, shy of forecasts for +17 and down from +19 in the previous three months. 

Chinese Shanghai too edged lower by around half a percent, after data showed China's industrial output grew at its slowest pace in nearly three years, increasing by 5.4 percent in November, after growing by 5.9 percent a month earlier. Meanwhile, retail sales in China grew 8.1 percent in November, the weakest growth since 2003. In October, retail sales were up 8.6 percent. The slower pace of industrial output and retail sales growth was due to the impact of the ongoing trade disputes with the US.
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