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Bulls tighten grip on Dalal Street during the week
Jan-18-2019

Bulls tightened grip on Dalal Street in the week gone by with frontline gauges recapturing their crucial 10,900 (Nifty) and 36,800 (Sensex) levels. Markets started the week on pessimistic note after Industrial growth measured by Index of Industrial Production (IIP) slipped to a 17-month low of 0.5% in November 2018, as compared to 8.5% in November 2017, on account of contraction in manufacturing sector, particularly consumer and capital goods. Traders shrugged off report that WPI slowed down to 3.80 percent in December from 4.64 percent in November. Domestic sentiments also got hit with private report stating that meeting the fiscal deficit target of 3.3 per cent of GDP for the current fiscal could be a challenge for the government, given the shortfall in GST collections, rising expenditure and slowing factory output. Key gauges took U-turn after India’s retail inflation based on CPI continued its easing trend for third straight month in December mainly on account of sliding prices of fruits, vegetables and fuel. CPI softened to an 18-month low of 2.19% in December 2018 as compared to 2.33% in November and 5.21% in December 2017. Adding to the optimism, India’s exports grew by a 0.34 percent to $27.93 billion in December, continuing growth momentum for the third straight month. The trade deficit narrowed to ten-month low of $13.08 billion in December 2018 as against $14.20 billion in the same month previous year. Traders also got encouragement after a working group of the Commerce and Industry Ministry came out with a blueprint suggesting a host of long and short-term measures to increase the size of India's economy to $5 trillion by 2025. Some support also came with India Ratings and Research in its latest report stating that India’s GDP growth is likely to grow a tad higher at 7.5% in FY20 on account of steady improvement in major sectors -- industry and services.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 376.77 points or 1.05% to 36,386.61 during the week ended January 18, 2019. The BSE Midcap index losses 153.64 points or 1.01% to 15,023.39 and Smallcap index slipped 95.77 points or 0.66% to 14,504.60. On the sectoral front, S&P BSE Information Technology was up by 622.61 points or 4.43% to 14670.87, S&P BSE TECK was up by 219.11 points or 3.09% to 7303.68, S&P BSE Oil & Gas was up by 391.98 points or 2.97% to 13578.59, S&P BSE Realty was up by 13.80 points or 0.75% to 1847.26 and S&P BSE Consumer Durables was up by 28.10 points or 0.13% to 20949.82 were the top gainers on the BSE sectoral front, while S&P BSE Capital Goods was down by 530.41 points or 2.91% to 17703.37, S&P BSE Healthcare was down by 217.59 points or 1.55% to 13801.60, S&P BSE Power was down by 21.86 points or 1.11% to 1954.53, S&P BSE PSU was down by 53.38 points or 0.75% to 7060.99 and S&P BSE Fast Moving Consumer Goods was down by 85.78 points or 0.72% to 11872.73 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 112.00 points or 1.04% to 10,906.95. On the National Stock Exchange (NSE), Bank Nifty was up by 2.80 points or 0.01% to 27,456.70 and Nifty IT was up by 585.85 points or 4.09% to 14,892.95. On the other side, Nifty Mid Cap 100 decreased 138.45 points or 0.78% to 17,517.20 and Nifty Next 50 was down by 297.00 points or 1.07% to 27,410.55.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 18979.89 crore and gross sales of Rs 19290.58 crore, leading to a net outflow of Rs 310.69 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 5458.32 crore against gross sales of Rs 7382.72 crore, resulting in a net outflow of Rs 1924.40 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 8.76 crore and gross sales of Rs 6.39 crore, leading to a net inflow of Rs 2.37 crore.

Industry and Economy

With an aim to further improve the ease of doing business in India, the Reserve Bank of India (RBI) has come out with a new policy for overseas borrowings, allowing all eligible entities to raise foreign funding under the automatic route and removing sectoral curbs. All eligible borrowers can now raise External Commercial Borowings (ECB) up to $750 million or equivalent per financial year under the automatic route replacing the existing sector wise limits.

Outlook for the coming week

Local equity markets traded jubilantly in the passing week, ending with gains of over a percent, which led both Sensex and Nifty to recapture their crucial 36,300 and 10,900 levels, respectively.

In the coming week, investors will be eyeing World Economic Forum (WEF) Annual Meeting to be held at Switzerland from 21 to 25 January. The sessions would focus on future of the economy to better reflect the structural changes inherent in the Fourth Industrial Revolution.

With no any major economic announcement during the week, market men will be eyeing the Foreign Exchange Reserves data to be announced on January 25, few days ahead of the budget. Foreign Exchange Reserves in India increased to $396080 million in January 4 from $393400 million in the previous week.

In the heavy third quarter earnings season, traders will be eyeing the important results of HDFC Bank, South Indian Bank, HDFC Asset Management Company, Hindustan Zinc, HUDCO, Kotak Mahindra Bank, L&T Finance Holdings, Union Bank of India, Asian Paints, Havells India, HDFC Standard Life Insurance Company, ICICI Prudential Life Insurance Company, TVS Motor, ITC, Pidilite Industries, Raymond, Vijaya Bank, Biocon, ICRA, NELCO, PNB Housing Finance, Yes Bank, Zee Media, DHFL, Larsen & Toubro, Mahindra & Mahindra Financial Services.

On the global front from the US, traders will first be eyeing the Redbook, Existing Home Sales on January 22, followed by FHFA House Price Index, Richmond Fed Manufacturing Index on January 23, Jobless Claims, PMI Composite FLASH, Kansas City Fed Manufacturing Index, Fed Balance Sheet, Money Supply on January 24, finally Durable Goods Orders, New Home Sales and Baker-Hughes Rig Count on January 25.

Top Gainers

  • Infosys up by 7.54% was the top gainer on Nifty for the week - Infosys gained traction after raising its revenue growth guidance for financial year 2018-19, even though it missed Q3 profit estimates. The company revised its FY19 revenue guidance in constant currency upward to 8.5-9.0 percent. In a separate development, Infosys bagged the new contract from the government of India, where it will develop the next-generation income tax filing system for Rs 4,241.97 crore which will cut down the processing time for returns to one day from 63 days and expedite refunds.
  • Reliance Industries up by 6.94% was another top gainer on Nifty for the week - Reliance Industries gained after its quarterly net profit crossed the Rs 10,000 crore mark in Q3FY19. The company reported a rise of 8.82% in its consolidated net profit at Rs 10,251 crore for the quarter under review as compared to Rs 9,420 crore for the same quarter in the previous year. Record earnings from petrochemical, retail and telecom business offset a dip in refinery margins. Total consolidated income increased by 55.43% at Rs 162759 crore for Q3FY19 as compared Rs 104718 crore for Q3FY18.

Top Losers

  • Sun Pharmaceutical Industries down by 12.11% was the top loser of the week on Nifty - Sun Pharma came under selling pressure after report of a complaint by a whistleblower raised fresh concerns on the company’s corporate governance. As per the report, the whistleblower complaint alleges that an Indian pharmaceutical manufacturer Aditya Medisales had transactions with Suraksha Realty, controlled by Sun Pharma’s co-promoter, Sudhir Valia. The report added that the transactions took place between 2014 and 2017, and were worth over Rs 5,800 crore.
  • Bharti Airtel down by 7.75% was another top loser of the week on Nifty - Most of the telecom sector stocks witnessed selling pressure on report that Reliance Jio Infocomm is likely to continue its pricing onslaught with rock bottom tariffs until it draws level with Bharti Airtel and Vodafone Idea on revenue share in the country’s biggest telecom markets. Besides, Bharti Airtel is planning to deploy pre 5G network technology for its customers at the world’s largest congregation Kumbh Mela which to be held between January 15 and March 4 in Allahabad.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,930.65 on January 17 and lowest level of 10,692.35 on January 14. On the last trading day, the Nifty closed at 10,906.95 with weekly gain of 112.00 points or 1.04 percent. For the coming week, 10,755.98 followed by 10,605.02 are likely to be good support levels for the Nifty, while the index may face resistance at 10,994.28 and further at 11,081.62 levels.

US Market

The US markets ended higher during the passing week on report that the U.S. is considering lifting some tariffs on Chinese products in an effort to elicit more concessions from China for a bilateral trade deal and to stabilize the financial markets.  Further, support also came in with a report which released by the Federal Reserve Bank of Philadelphia showed a significant acceleration in the pace of growth in regional manufacturing activity in the month of January. The Philly Fed said its index for current manufacturing activity in the region jumped to 17.0 in January from 9.1 in December, with a positive reading indicating growth. Street had expected the index to tick up to 10.0. The much bigger than expected increase by the headline index reflected a substantial acceleration in new orders growth, as the new orders index surged up to 21.3 in January from 13.3 in December.  On the other hand, the shipments index edged down to 11.4 in January from 12.4 in December, indicating a modest slowdown in the pace of shipment growth. Pointing to significantly slower job growth, the report also said the number of employees index tumbled to 9.6 in January from 19.1 in December.

First-time claims for U.S. unemployment benefits unexpectedly showed a modest decrease in the week ended January 12th, according to a report released by the Labor Department. The report said initial jobless claims edged down to 213,000, a decrease of 3,000 from the previous week's unrevised level of 216,000. Street had expected jobless claims to inch up to 220,000. The less volatile four-week moving average also dipped to 220,750, a decrease of 1,000 from the previous week's unrevised average of 221,750. The Labor Department said continuing claims, a reading on the number of people receiving ongoing unemployment assistance, increased by 18,000 to 1.737 million in the week ended January 5th. The four-week moving average of continuing claims also rose to 1,728,500, an increase of 8,000 from the previous week's revised average of 1,720,500.

Homebuilder confidence in the U.S. has unexpectedly improved in the month of January, according to a report released by the National Association of Home Builders. The report said the NAHB/Wells Fargo Housing Market Index rose to 58 in January after slumping to 56 in December. Street had expected the index to come in unchanged.  The notable decrease seen in the previous month dragged the housing market index down its lowest level since hitting 54 in May of 2015. NAHB said a recent gradual decline in mortgage rates helped to sustain builder sentiment and predicted low unemployment, solid job growth and favorable demographics would support housing demand in the coming months.

European Market

European markets ended the passing week on mixed note after trading volatile, as traders were seen looking for developments on the Brexit front. British Prime Minister Theresa May, after winning the confidence vote, is reportedly working on a new exit plan to try and break the current deadlock on Brexit. The start of the week was lower, as Eurozone's industrial production decreased at a faster-than-expected pace in November. Industrial production decreased a seasonally adjusted 1.7% from October, when it edged up 0.1%, revised from 0.2%. On a year-on-year basis, industrial production fell a calendar adjusted 3.3% in November after a 1.2% increase. Some concerns also came after Germany's gross domestic product rose a price-adjusted and chain-linked 1.5 percent from 2017, when it expanded 2.2 percent. Growth was the weakest since 2013, when the economy expanded 0.5 percent.

Some of the major European markets managed to recover losses during the week, amid reports that Eurozone consumer price inflation slowed in December to its lowest level in eight months. The latest figures from the statistical office Eurostat confirmed that the consumer price index rose 1.6 percent year-on-year following a 1.9 percent increase in November. Besides, Germany's wholesale prices rose at a slower pace in December. The data released by Destatis showed that wholesale price inflation slowed to 2.5% in the month, from 3.5% in November. German consumer price inflation also eased for a second straight month in December to its lowest level in eight months. The latest figures from the Federal Statistical Office confirmed that the consumer price index rose 1.7 percent year-on-year following a 2.3 percent increase in November. The latest inflation figure was the lowest since April, when price growth was 1.6 percent, same as in March.

Meanwhile, Eurozone's merchandise trade surplus decreased strongly in November, as the growth in imports outpaced that of exports. As per a report from Eurostat, the trade surplus fell to EUR 19 billion from EUR 23.4 billion in the same month last year. Exports increased 1.9 percent year-on-year and imports rose 4.7 percent. Trade within the euro area grew 1.5 percent year-on-year. Further, Eurozone construction output fell for a second month in November, albeit modestly, reflecting a contraction in civil engineering. As per data from the statistical office Eurostat, construction output declined a calendar and seasonally-adjusted 0.1 percent month-on-month in November, after a 1.6 percent contraction in October. Building construction advanced by 0.1 percent, while civil engineering fell by 0.2 percent in November.

Asian market

Extending their northward journey for second straight week, Asian equity indices ended in the green terrain during the passing week, following the firm cues from Wall Street. The market sentiments improved further as reports of progress in US-China trade talks as well as stronger than expected economic data from the US helped ease global growth worries.

Japanese Nikkei edged higher by one and half percent, as the yen weakened on improved risk appetite after reports that the US could lift trade tariffs on China. Traders overlooked report showing that Japan's core machine orders, considered a leading indicator of capital expenditure, held largely unchanged month-on-month in November, well below forecasts for an increase of 3.0 percent and down sharply from 7.6 percent in October. Besides, Japan's core consumer prices rose 0.7% in December from a year earlier pushed up by climbing energy costs.

Chinese Shanghai too surged by over one and half percent, after China said it would aim to achieve ‘a good start’ in the first quarter for the economy. Investors shrugged off the latest trade data indicated a further slowdown in the world's second-largest economy. China's exports unexpectedly fell 4.4 percent from a year earlier in the month -- the biggest monthly drop in two years, while imports also fell 7.6 percent, marking the biggest decline since July 2016.
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