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Bulls make come back on Dalal Street; Sensex reclaims 36k mark
Dec-28-2018

Passing week turned out to be a fabulous one for Indian equity benchmarks, with major averages recapturing their crucial 36,000 (Sensex) and 10,850 (Nifty) levels. The holiday truncated week started the session on pessimistic note after Finance Commission Chairman N.K. Singh has sounded a note of caution against fiscal slippage, saying it would adversely impact the country’s macroeconomic stability as well as investment climate. From the very next day of trade, 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 remained up-beat after investments in the Indian capital market through participatory notes climbed to Rs 79,247 crore in November after hitting a nine-and-a-half year low at the end of preceding month. Some comfort also came with Finance Minister and GST Council Chairman Arun Jaitley raising hopes of further pruning the peak rate 28% and merging the 12% and 18% slabs. Domestic sentiments also got boost with a private report that with global crude oil prices slumping to below $50 a barrel just months after crossing $86, the Prime Minister Narendra Modi-led government is now confident that the CAD for FY19 can be contained at about 2 per cent of GDP. Some relief also came after the government said that PSBs reported recovery of Rs 60,713 crore against NPAs in the April-September period of FY19. Markets regained their respective psychological levels after Ministry of Commerce & Industry’s report showing that the growth of manufacturing sector as measured by the Index of Industrial Production (IIP) with base year 2011-12, has been consistently increasing over the past three years and the current year. As per data report, manufacturing sector grew at the rate of 5.6% during April-October period (Provisional), while in 2017-18, the growth rate was 4.6% as against 4.4% in 2016-17.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 334.65 points or 0.94% to 36,076.72 during the week ended December 28, 2018. The BSE Midcap index gained 107.21 points or 0.70% to 15,360.21, while Smallcap index slipped 27.93 points or 0.19% to 14,605.69. On the sectoral front, S&P BSE TECK was up by 98.54 points or 1.42% to 7054.93, S&P BSE Information Technology was up by 158.26 points or 1.14% to 14052.06, S&P BSE Finance was up by 66.12 points or 1.13% to 5923.26, S&P BSE Fast Moving Consumer Goods was up by 122.75 points or 1.05% to 11835.84 and S&P BSE BANKEX was up by 306.75 points or 1.02% to 30330.38 were the top gainers on the BSE sectoral front, while S&P BSE Realty was down by 48.93 points or 2.64% to 1803.00, S&P BSE Metal was down by 159.16 points or 1.35% to 11672.63, S&P BSE Auto was down by 179.23 points or 0.85% to 20826.80 and S&P BSE Consumer Discretionary Goods & Services was down by 20.50 points or 0.54% to 3767.15 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 105.90 or 0.98% to 10,859.90. On the National Stock Exchange (NSE), Bank Nifty was up by 255.60 points or 0.95% to 27,125.25, Nifty IT was up by 177.95 points or 1.25% to 14,385.80, Nifty Mid Cap 100 increased 88.05 points or 0.50% to 17,792.85 and Nifty Next 50 gained 45.85 points or 0.16% to 28,063.20.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 15698.61 crore and gross sales of Rs 15130.79 crore, leading to a net inflow of Rs 567.82 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 3763.19 crore against gross sales of Rs 2738.18 crore, resulting in a net inflow of Rs 1025.01 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 1.38 crore and gross sales of Rs 2.74 crore, leading to a net outflow of Rs 1.36 crore.

Industry and Economy

Triggering concerns about the state of public finances, India’s fiscal deficit exceeded to Rs 7.17 lakh crore and touched 114.8% of the Budget Estimate (BE) of Rs 6.24 lakh crore at the end of November on account of lower revenue collections. At the end of November 2017, it was 112% of the BE. Besides, the government has budgeted to cut the fiscal deficit to 3.3% of Gross Domestic Product (GDP) in 2018-19, from 3.53% in the previous financial year.

Outlook for the coming week

The passing week was the last full week of the calendar year 2018 and Indian equity markets posted significant gains with Nifty and Sensex ending near their crucial levels of 10,850 and 36,000 respectively. With strong global cues, weaker crude as well as strengthening rupee were some of the primary factors behind the markets’ rally.

The coming week marks the start of new month and also the start of New Calendar Year 2019. First week of 2019 is expected to be a data heavy week. Investors would first be looking forward to the auto and cement stocks as these companies would report their monthly sales figures. Followed by Nikkei Manufacturing PMI for the month of December on January 2, 2019. A composite single-figure indicator of manufacturing performance climbed unexpectedly to an 11-month high of 54.0 in November 2018 from 53.1 in October.

Traders would also be eyeing Nikkei Services PMI for the month of December which will be released on January 04, 2019. The Nikkei India Services PMI increased to 53.7 in November of 2018 from 52.2 in the previous month.

On the global front from the US, traders in a holiday truncated week, will be eyeing some important macro-economic data, starting with PMI Manufacturing Index, Redbook and ADP Employment Report on January 2, followed by Motor Vehicle Sales, Jobless Claims, ISM Mfg Index, Construction Spending, Fed Balance Sheet and Money Supply on January 3 and finally Employment Situation, PMI Services Index, EIA Natural Gas Report, EIA Petroleum Status Report and Baker-Hughes Rig Count on January 4, 2019.

Top Gainers

  • Hindustan Petroleum Corporation (HPCL) up by 4.68% was the top gainer on Nifty for the week - Most of the oil marketing companies (OMCs) gained traction as crude oil prices fell sharply during the week amid global growth concerns. Oil prices crashed 42% from $86 a barrel touched on October 3, 2018. Crude is the key raw material for OMCs thus fall in oil prices is always beneficial for these companies. Besides, HPCL invested pre-seed capital into Tranzmeo IT Solutions. Tranzmeo raised capital for its artificial intelligence-powered product ‘T-connect OneView’.
  • Zee Entertainment Enterprises (ZEEL) up by 2.71% was another top gainer on Nifty for the week - ZEEL gained on report that it has decided to bring its popular channel Zee Classic back, albeit in a different format, with a different name. ZEEL has planned to launch the channel in video-on-demand form, tentatively naming it '&Classic'. As per the report, the channel will be available on an ad-free basis for the audiences and is expected to go on-air around March-April 2019. Launched in 2004, Zee Classic was one its kind offering that telecast films from the 1960s, 70s and even 80s.

Top Losers

  • Hero MotoCorp down by 7.10% was the top loser of the week on Nifty - Hero MotoCorp came under pressure on concerns that muted demand and rising competitive intensity will impact revenues as well as margins. Besides, Hero MotoCorp owned electric scooter startup Ather Energy is preparing to raise between Rs 200 - 300 crore in coming 10 months to expand into fresher markets such as Chennai and Pune. This investment will support Ather’s needs for a year, and company would raise more funds in the next coming years for its future expansion and product development plans.
  • Indian Oil Corporation (IOC) down by 6.53% was another top loser of the week on Nifty - IOC may quit its plan to buy 50% stake in the Mundra LNG terminal in Gujarat. Earlier, in August 2017, the company has received an in-principle approval from its board to acquire 50% stake in the 5 million tonnes per annum terminal (mtpa) for around Rs 750 crore. The Mundra LNG terminal is designed to have a berth for receiving LNG tankers and storage tank facilities for regasification and gas evacuation. Recently, the government cut its stake in IOC by 2.69%.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,893.60 on December 28 and lowest level of 10,534.55 on December 26. On the last trading day, the Nifty closed at 10,859.90 with weekly gain of 105.90 points or 0.98 percent. For the coming week, 10,631.77 followed by 10,403.63 are likely to be good support levels for the Nifty, while the index may face resistance at 10,990.82 and further at 11,121.73 levels.

US Market

The US markets ended higher during the passing week, with traders picking up stocks at reduced levels on the heels of recent weakness. Further, some support came in as the White House denied a report that Treasury Secretary Steven Mnuchin’s job was in serious jeopardy after a failed attempt to calm markets. White House economic adviser Kevin Hassett said that he was confident that President Donald Trump was happy with Mnuchin. Hassett also said Federal Reserve Chairman Jerome Powell’s job was 100% safe. Meanwhile, there were upbeat reports for global trade, with the US expected to send a delegation to hold talks with Chinese officials during the week of January 7. It would mark the first meeting since the G-20 summit in Argentina earlier this month, which yielded a 90-day tariff truce. During the week, December 26 marked the biggest post-Christmas rally for US stocks ever. The Dow Jones Industrial Average jumped more than 1,000 points - its biggest point-gain ever- rising nearly 5% as investors returned from a holiday break. The benchmark S&P 500 index also gained 5% and the technology heavy Nasdaq rose 5.8% on December 26.

On the economic front, First-time claims for US unemployment benefits edged slightly lower in the week ended December 22nd, according to a report released by the Labor Department. The report said initial jobless claims slipped to 216,000, a decrease of 1,000 from the previous week's revised level of 217,000. Street had expected jobless claims to inch up to 217,000 from the 214,000 originally reported for the previous week. The Labor Department said the less volatile four-week moving average also fell to 218,000, a decrease of 4,750 from the previous week's revised average of 222,750. Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also dipped by 4,000 to 1.701 million in the week ended December 15th. The four-week moving average of continuing claims also edged down to 1,675,750, a decrease of 1,000 from the previous week's revised average of 1,676,750.

Meanwhile, Consumer confidence in the US tumbled by much more than expected in the month of December, according to a report released by the Conference Board. The Conference Board said its consumer confidence index slumped to 128.1 in December after dipping to a revised 136.4 in November. Street had expected the consumer confidence index to edge down to 134.0 from the 135.7 originally reported for the previous month. The bigger than expected decrease by the headline index reflected a continued deterioration in consumer expectations, with the expectations index plunging to 99.1 in December after falling to 112.3 in November. Senior Director of Economic Indicators at the Conference Board, Lynn Franco said while consumers are ending 2018 on a strong note, back-to-back declines in Expectations are reflective of an increasing concern that the pace of economic growth will begin moderating in the first half of 2019.

European Market

European markets ended the passing week lower, on rising concerns about the outlook for global economic growth. The European Central Bank expects the global economy to slow next year as rising protectionism curbs trade growth. According to the ECB’s latest economic bulletin, Global inflationary pressures are expected to rise slowly as spare capacity diminishes. The start of the week was subdued, as British business investment fell for three consecutive quarters, marking its weakest period since the 2008-09 global financial crisis, as businesses reduced spending due to the Brexit chaos. Business investment decreased 1.1 percent sequentially in the third quarter, falling for a third consecutive quarter. The Office for National Statistics said that investment declined for such a long duration for the first time since the economic downturn of 2008-2009.

The mood of the markets in Europe also remained cautious amid trade war jitters. Several markets remained closed during week ahead of Christmas holiday. Traders took note of a report indicating that Germany's import price growth slowed to its lowest level in six months in November, after an acceleration in the previous month. The data from the Federal Statistical Office showed that the import price index rose 3.1 percent annually in November following a 4.8 percent increase in October. The latest gain was fastest since May, when import prices rose 2.9 percent from a year ago. Export prices increased 1.7 percent year-on year in November, but fell 0.1 percent from the previous month.

On the economic front, data from Markit showed Russian manufacturing growth to have eased in December to the third-highest rate in 2018. However, output and new business remained strong. The main PMI index dropped to 51.7 in the month, from 52.6 in November. Separately, Germany's consumer confidence is set to remain steady at the start of next year as households as the divide between expectations on overall economic situation and personal finances widened further. The market research group GfK said that the forward-looking consumer confidence indicator is set to show a reading of 10.4 in January, unchanged from December. Economists had forecast a score of 10.3 for January.

Asian market

Asian equity indices ended the weekly trade mostly in red terrain, as traders remained cautious due lingering concerns about the global economic outlook, higher interest rates and the ongoing US government shutdown.

Chinese Shanghai edged lower by around a percent, after weak Chinese industrial data highlighted the difficulties the world's second largest economy is facing. Data showed industrial profits declined 1.8 percent in November from a year earlier, the first negative reading since December 2015 and a steep fall from 3.6 percent growth in October. However, losses remained capped after the country's top policymakers signaled more support for the economy next year with tax cuts and other policy measures.

Japanese Nikkei too edged lower by over half a percent, as safe-haven yen strengthened, dragging exporters' shares lower. Sentiments remained down-beat with data showing that the jobless rate in Japan came in at a seasonally adjusted 2.5 percent in November. That was above expectations for 2.4 percent, which would have been unchanged from the October reading. Some concern also came with data indicating that industrial output in November fell 1.1 percent from the previous month after seeing a jump in October on the back of recovery from natural disasters in the summer. Retail sales in Japan too were down a seasonally adjusted 1.0 percent on month in November.

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