After settling lower in first week of New Year, Indian equity benchmarks made strong comeback in second week of the Calendar Year 2019, garnering a gain of over half a percent with Sensex ending above its crucial 36,000 mark, while nifty ending just shy of 10,800 level. Markets started the week on optimistic note on report that revenue from direct tax grew 13.6% to Rs 7.43 lakh crore in the first nine months of the current financial year 2018-19 (April-March). Traders also took encouragement with the FICCI president Sandip Somany’s statement that agricultural reforms, interest rate cut and credit availability to MSME will drive India’s economic growth to 7.5-7.6% in 2019-20. Markets extended northward journey for two more day after the CSO in its First Advance Estimates of National Income, 2018-19, showed that India’s economic growth is expected to grow at 7.2% in the current FY19 from 6.7% in the previous fiscal, mainly due to improvement in the performance of agriculture and manufacturing sectors. World Bank forecast that Indian economy is expected to grow at 7.3% in the current FY19 and will grow further at average 7.5% in the following two years, too boosted investors’ sentiments. Adding some optimism, the finance ministry said that the recovery of evaded indirect taxes shot up in 2018-19, after a low in 2017-18, the year when the GST was implemented. However, traders booked some of their profit in last two sessions of the week with EEPC’s statement that there was a sharp annualised drop of over 54% in the gross bank credit deployment in the export sector. Adding more worries, the Annual Survey of Industries (ASI) showed that in 2016-17-the year in which high-value currency was scrapped-gross value added (GVA) by the industry grew at the slowest pace since the Narendra Modi government took over. GVA grew by 7.2 per cent at current prices in FY17, down from 9.3 per cent in FY16 and 9.4 per cent in FY15. BSE movement for the week The Bombay Stock Exchange (BSE) Sensex surged 314.74 points or 0.88% to 36,009.84 during the week ended January 11, 2019. The BSE Midcap index gained 29.43 points or 0.19% to 15,177.03 and Smallcap index surged 7.96 points or 0.05% to 14,600.37. On the sectoral front, S&P BSE Fast Moving Consumer Goods was up by 248.01 points or 2.12% to 11958.51, S&P BSE Consumer Durables was up by 352.82 points or 1.72% to 20921.72, S&P BSE Healthcare was up by 196.30 points or 1.42% to 14019.19, S&P BSE BANKEX was up by 362.87 points or 1.19% to 30800.99 and S&P BSE Information Technology was up by 153.42 points or 1.10% to 14048.26 were the top gainers on the BSE sectoral front, while S&P BSE Oil & Gas was down by 324.06 points or 2.40% to 13186.61, S&P BSE Metal was down by 106.81 points or 0.95% to 11133.37, S&P BSE Capital Goods was down by 149.98 points or 0.82% to 18233.78 and S&P BSE PSU was down by 55.55 points or 0.77% to 7114.37 were the top losers on the BSE sectoral front. NSE movement for the week The Nifty surged 67.60 or 0.63% to 10,794.95. On the National Stock Exchange (NSE), Bank Nifty was up by 258.90 points or 0.95% to 27,453.90, Nifty IT was up by 160.95 points or 1.14% to 14,307.10 and Nifty Mid Cap 100 increased 19.05 points or 0.11% to 17,655.65. On the other side, Nifty Next 50 lost 11.95 points or 0.04% to 27,707.55. FII transactions during the week Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 19354.52 crore and gross sales of Rs 20006.40 crore, leading to a net outflow of Rs 651.88 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 6386.57 crore against gross sales of Rs 8036.40 crore, resulting in a net outflow of Rs 1649.83 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 1.04 crore and gross sales of Rs 0.85 crore, leading to a net inflow of Rs 0.19 crore. Industry and Economy Economic Affairs Secretary Subhash Chandra Garg has described the 7.2% GDP growth projection for 2018-19 as very healthy and noted that India remains to be the fastest growing economy in the world. Garg highlighted that increase in gross fixed capital formation (GFCF) indicates a pickup in investment activities. He pointed towards impressive GVA growth seen in several industry segments during 2018-19 compared to 2017-18. Outlook for the coming week In the passing week, Indian markets ended in green terrain with Nifty and Sensex posting gains of more than 60 and 300 points, respectively as optimism over December quarter earnings supported upside momentum of the markets. In the next week traders will react the Inflation Rate and wholesale price inflation (WPI) data for the month of December which is scheduled to be released on January 14. WPI rose by 4.64 percent year-on-year in November 2018, slowing from a 5.28 percent gain in the prior month and slightly below than market estimates of 4.7 percent. Steel sector stocks will be in action, as India may hold informal talks with nine countries, including Saudi Arabia and China, to expand bilateral flying foreign rights during the Global Aviation Summit, the meeting could take place on January 14. Meanwhile, investors would also be eyeing Reserve Bank of India’s (RBI) governor Shaktikanta Das meeting with Officials from the Indian Banks’ Association (IBA) on January 17 to discuss issues concerning the banking sector In the next week, traders will be reacting to the important results of Avenue Supermarts, Jammu & Kashmir Bank, Tata Sponge Iron, Prakash Industries, Den Networks, KPIT Technologies, Multi Commodity Exchange of India, Network18 Media & Investments, Trident, TV18 Broadcast, ZEE Entertainment Enterprises, DCB Bank, Mindtree, AU Small Finance Bank, Aditya Birla Money, Cyient, Federal Bank, Hindustan Unilever, Mastek, Rallis India, Reliance Industries, Dhanlaxmi Bank, ICICI Lombard General Insurance Company, Larsen & Toubro Infotech, MPS, Muthoot Capital Services, SBI Life Insurance Company, Wipro. On the global front from the US, traders will first be eyeing Empire State Mfg Survey on January 15, followed by Retail Sales, Import and Export Prices, Redbook, Housing Market Index, Beige Book, Treasury International Capital on January 16, Housing Starts, Jobless Claims, Philadelphia Fed Business Outlook Survey, Fed Balance Sheet, Money Supply on January 17 and finally Industrial Production, Consumer Sentiment and Baker-Hughes Rig Count on January 18. Top Gainers Axis Bank up by 9.63% was the top gainer on Nifty for the week - Axis Bank gained traction on report that Essar group repaid all its dues to Indian banks including Axis Bank and ICICI Bank. Essar Group's holding company Essar Global Fund said it has repaid all overseas debt after it paid back the last tranche of Rs 12,000 crore to its various lenders. In 2008, Indian banks like Axis Bank, ICICI Bank and Standard Chartered Bank had given a loan facility of Rs 31,500 crore to Essar group for its greenfield investment into sectors including mining, infrastructure and services.
Tata Motors up by 8.58% was another top gainer on Nifty for the week - Tata Motors gained with its wholly owned subsidiary -- Jaguar Land Rover (JLR) reporting 16.23% rise in its sales in India at 4,596 units in 2018. The company had sold 3,954 units in 2017. Besides, JLR reported 14,079 units US sales for the month of December 2018, a 24% increase from 11,394 units in December 2017. Land Rover reported its best ever December sales month with 10,617 units, an increase of 33% from 7,980, while Jaguar sales were 3,462 units, a slight increase from 3,414 units.
Top Losers Hindustan Petroleum Corporation (HPCL) down by 5.96% was the top loser of the week on Nifty - Oil Marketing Companies (OMCs) came under pressure as oil prices continuing their gaining streak for entire week. Brent, the international benchmark for crude oil, spurted around 1% and breached the key level of $60/barrel. The gain in crude oil prices was on the back of optimism regarding the truce in the trade war between the US and China. Generally, higher crude oil price is negative for OMCs as it impacts their refining and marketing margins.
Bharat Petroleum Corporation (BPCL) down by 4.31% was another top loser of the week on Nifty - OMCs witnesses selling pressure after crude oil prices extended their gains for ninth straight session. Supply cuts started at the end of 2018 by the Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC member Russia kept crude oil prices elevated. Besides, BPCL may revive its plan to build a terminal for imported liquified natural gas (LNG) amid rising domestic demand for the clean fuel. It is exploring locations on both the east and west coasts.
Technical viewpoints During the week, CNX Nifty touched the highest level of 10,870.40 on January 9 and lowest level of 10,733.25 on January 8. On the last trading day, the Nifty closed at 10,794.95 with weekly gain of 67.60 points or 0.63 percent. For the coming week, 10,728.67 followed by 10,662.38 are likely to be good support levels for the Nifty, while the index may face resistance at 10,865.82 and further at 10,936.68 levels. US Market The US markets ended higher during the passing week as traders remain optimistic the U.S. and China will eventually reach a long-term trade deal. Delegations from Washington and Beijing ended three days of trade negotiations in China on Wednesday. China's commerce ministry said the negotiations were extensive and helped set up a foundation for further talks. This week’s face-to-face meetings were the first to take place since US President Donald Trump and Chinese President Xi Jinping agreed to a 90-day truce last month. If both sides are unable to secure a comprehensive trade agreement by March 2, Trump has said he plans to raise tariffs to 25% from 10% on $200 billion worth of Chinese imports. Meanwhile, Minutes from the Federal Open Market Committee's latest meeting confirmed Federal Reserve Chairman Jerome Powell's recent remarks suggesting the central bank will take a patient approach to further interest rate increases. On the economic front, adding to the positive picture of the labor market painted by last week's monthly jobs report, the Labor Department released a report showing a bigger than expected drop in first-time claims for U.S. unemployment benefits in the week ended January 5th. The report said initial jobless claims fell to 216,000, a decrease of 17,000 from the previous week's revised level of 233,000. Street had expected jobless claims to dip to 225,000 from the 231.000 originally reported for the previous week. Meanwhile, the Labor Department said the less volatile four-week moving average rose to 221,750, an increase of 2,500 from the previous week's revised average of 219,250. The report also said continuing claims, a reading on the number of people receiving ongoing unemployment assistance, slid by 28,000 to 1.722 million in the week ended December 29th. Besides, a report released by the Institute for Supply Management (ISM) showed growth in U.S. service sector activity slowed by more than anticipated in the month of December. The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November. While a reading above 50 still indicates service sector growth, Street had expected the index to dip to 59.0. The bigger than expected decrease by the headline index was partly due to notably slower growth in business activity, with the business activity index tumbling to 59.9 in December from 65.2 in November. The employment index also slid to 56.3 in December from 58.4 in November, indicating a slowdown in the pace of job growth in the service sector. European Market European markets recovered losses to end the passing week in green terrain, as investors closely monitored US politics and kept an eye on Brexit developments ahead of the House of Commons vote. The start of the week was subdued, as Eurozone's investor confidence deteriorated for a fifth straight month in January to its lowest level in over four years, but the easing was less severe than expected. The survey data from the behavioral research institute Sentix showed that the Sentix investor confidence index dropped to -1.5 from -0.3, marking the lowest level since December 2014. Sentiments also got hit, after Germany's manufacturing new orders decreased for the first time in four months in November and the fall was worse than expected. As per preliminary data from Destatis, factory orders decreased a calendar and seasonally adjusted 1 percent from October, when they grew 0.2 percent, revised from 0.3 percent reported earlier. However, the markets managed to erase losses occurred during week, after Eurozone retail sales grew for a second straight month in November and at a faster-than-expected pace, supported by lower oil prices and rising wages. The figures from Eurostat showed that retail sales rose a seasonally adjusted 0.6 percent from October, when sales increased at the same pace. October sales growth was earlier reported as 0.3 percent. Besides, Germany's retail sales grew at the fastest pace in seven months in November, exceeding economists' expectations. As per preliminary data from Destatis, retail sales rose a calendar and seasonally adjusted 1.4 percent from October, when they edged up 0.1 percent, revised from a 0.3 percent fall. Adding optimism among the market participants, Germany's construction sector expanded at the fastest pace in seven months in December, led by strong growth in housing activity. Traders paid no heed towards reports that French industrial production declined in November, defying expectations for a modest increase. The preliminary data from the statistical office INSEE showed that industrial production decreased a seasonally and working-day adjusted 1.3 percent, reversing a similar size increase in the previous month. Besides, France's consumer confidence fell sharply in December to its lowest level since late 2014. As per survey data from INSEE, the consumer confidence dropped to 87 from 91 in November. The latest reading was the lowest since November 2014. Meanwhile, Germany's industrial production unexpectedly decreased for a third straight month in November, amid a sharp fall in consumer goods and energy output, worsening fears of a technical recession in the biggest euro area economy.
Asian market All the Asian equity indices rallied during the passing week, following the rebound on Wall Street, after China's commerce ministry said trade talks with the United States in Beijing were extensive and helped to establish a ‘foundation’ to resolve differences. Prospects for more Chinese stimulus to arrest the slowdown in growth and growing expectations that the US Federal Reserve will pause its rate tightening cycle this year also supported sentiment. Chinese Shanghai surged by over one and half percent, after the country's central bank slashed the amount of cash that banks must hold in reserve in an attempt to avoid a sharp economic slowdown. Sentiments also remained up-beat on report showing that China's inflation for December came in below expectations. Consumer prices in China were up just 1.9 percent year on year in December. That was shy of expectations for an increase of 2.1 percent year on year and down from 2.2 percent in November. Also, producer prices were up an annual 0.9 percent - well shy of forecasts for 1.6 percent and down sharply from 2.7 percent in the previous month. Japanese Nikkei too edged higher by over four percent, as the yen's fall against the dollar lifted export-oriented shares. Some support also came with report showing that the average of household spending in Japan rose 0.3 percent year on year in November. Traders overlooked the latest survey from Nikkei revealed that the services sector in Japan continued to expand in December, albeit at a slower pace, with a PMI score of 51.0. That's down from 52.3 in November, although it remains above the boom-of-bust line of 50 that separates expansion from contraction.
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