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Markets manage to end week with decent gains
Feb-08-2019

Indian equity benchmarks managed to end the passing week in green terrain despite bloodbath on final day of trade. Markets started the week on an optimistic note with Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta’s statement that the new online National Logistics Portal (NLP) and forthcoming national policy would help boost India’s export growth. Traders shrugged off Moody’s Investors Service’s statement that the government will find it difficult to meet the fiscal deficit target of 3.4% in 2019-20 on account of higher spending and low revenue growth. Key gauges extended gains during the week after the UN Conference on Trade and Development (UNCTAD) latest report said that India is among the several countries that stand to benefit from the ongoing trade tensions between the world's top two economies - the US and China. Market participants ignored report that fiscal deficit or gap between Government's expenditure and revenue exceeded to Rs 7.01 lakh crore during April-December of FY19 and touched 112.4% of the full-year Budget Estimate (BE) of Rs 6.24 lakh crore on the back of lower revenue collections. Afterwards, markets witnessed consolidation after RBI in its sixth bi-monthly monetary policy review of 2018-19, has reduced the policy repo rate under the liquidity adjustment facility by 25 basis points from 6.50% to 6.25% with immediate effect. The RBI also decided to change the monetary policy stance from calibrated tightening to neutral. However, selling on last day of trade played spoilsport for the Indian equity markets and ate most of their early gains as traders turned pessimistic on renewed concerns over US-China trade tiff. Traders shrugged off report that India has jumped eight places to 36th position on the International Intellectual Property (IP) Index, which analyses the IP climate in 50 global economies, this year.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 77.05 points or 0.21% to 36,546.48 during the week ended February 08, 2019. The BSE Midcap index losses 312.57 points or 2.13% to 14,328.81 and Smallcap index slipped 293.7 points or 2.11% to 13,656.75. On the sectoral front, S&P BSE TECK was up by 126.16 points or 1.66% to 7711.53, S&P BSE Information Technology was up by 190.09 points or 1.23% to 15624.07, S&P BSE Consumer Durables was up by 241.97 points or 1.13% to 21654.96, S&P BSE Consumer Discretionary Goods & Services was up by 20.96 points or 0.59% to 3579.80 and S&P BSE BANKEX was up by 134.43 points or 0.44% to 30546.58 were the top gainers on the BSE sectoral front, while S&P BSE Power was down by 106.24 points or 5.63% to 1781.58, S&P BSE Capital Goods was down by 616.15 points or 3.53% to 16846.83, S&P BSE Metal was down by 276.34 points or 2.62% to 10266.29, S&P BSE PSU was down by 167.58 points or 2.45% to 6678.97 and S&P BSE Realty was down by 29.10 points or 1.62% to 1768.66 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 49.95 or 0.46% to 10,943.60. On the National Stock Exchange (NSE), Bank Nifty gained 208.45 points or 0.77% to 27,294.40 and Nifty IT was up by 295.50 points or 1.88% to 16,019.80. On the other side, Nifty Mid Cap 100 decreased 393.05 points or 2.31% to 16,597.20 and Nifty Next 50 was down by 291.60 points or 1.09% to 26,536.60.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 22452.15 crore and gross sales of Rs 19934.22 crore, leading to a net inflow of Rs 2517.93 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 3063.96 crore against gross sales of Rs 5763.20 crore, resulting in a net outflow of Rs 2699.24 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 2.58 crore and gross sales of Rs 3.48 crore, leading to a net outflow of Rs 0.90 crore.

Industry and Economy

The RBI, in its sixth bi-monthly monetary policy review of 2018-19, has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.50% to 6.25% with immediate effect. Consequently, the reverse repo rate under the LAF stands adjusted to 6.00%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.50%. The RBI also decided to change the monetary policy stance from calibrated tightening to neutral.

Outlook for the coming week

In the passing week, Indian equity markets ended in green terrain with Sensex and Nifty posting gains of 0.21% and 0.46% respectively. On the economy front, Index of Industrial Production (IIP) data for the month of December will be announced on Feb 12. The November IIP growth slowed sharply to 0.50 percent year-on-year from an upwardly revised 11-month high of 8.40 percent in the previous month.

Wholesale price index (WPI) inflation data for the month of January will be released on Feb 14. The WPI rose by 3.8 percent year-on-year in December 2018 as cost increased at a softer pace for fuel and manufactured products while prices of food declined further.

In a result heavy season lots of major companies like, Atul Auto, IDFC, Berger Paints India, Eicher Motors, Hindustan Aeronautics, ITI, Jindal Drilling & Industries, Max India, Motherson Sumi Systems, Polychem, Premier, 3m India, Bata India, Coal India, NCC, Oil India, 8k Miles Software Services, Lemon Tree Hotels, Cox & Kings, Mahanagar Telephone Nigam, Page Industries, Voltas among others.

On the global front from the US, traders will be eyeing some important macro-economic data, starting with Redbook on February 12, followed by CPI, Treasury Budget on February 13, Jobless Claims, Business Inventories, Fed Balance Sheet, Money Supply on February 14 and finally Retail Sales, Import and Export Prices, Industrial Production, Business Inventories, Consumer Sentiment and Baker-Hughes Rig Count on February 15.

Top Gainers

  • Hero MotoCorp up by 12.43% was the top gainer on Nifty for the week - Hero MotoCorp gained traction with report that it has set up its new research and development (R&D) centre in Germany. The Hero Tech Centre Germany GmbH will work in collaboration with Hero’s global R&D hub - Centre of Innovation & Technology (CIT) - in Jaipur, Rajasthan. The new German R&D facility will be working with the Jaipur centre to work on new vehicle concepts and future technologies. The new facility will help Hero further strengthen its R&D capabilities with a focus on the global customer base.
  • Bajaj Auto up by 11.62% was another top gainer on Nifty for the week - Bajaj Auto gained on reporting 15% rise in its total sales to 407,150 units in January 2019 against 353,147 units in January 2018. The company’s total exports out of the above stood at 175,689 units, a gain of 16% as compared to 150,954 units sold in the corresponding month last year. The sales of the motorcycles increased by 21% and stood at 350,460 units in January 2019 against 288,936 units in January 2018. Commercial vehicles sales reported 12% fall at 56,690 units as compared to 64,211 units in month of January 2018.

Top Losers

  • Tata Motors down by 16.83% was the top loser of the week on Nifty - Tata Motors came under pressure after reporting a massive Rs 26,961 crore consolidated loss for the December quarter. The company ook one-time exceptional non-cash charge for asset impairment of 3.1 billion pounds. It had posted a profit of Rs 1,214.60 crore in the year-ago period. Besides, Tata Motors’ wholly owned subsidiary -- Jaguar Land Rover (JLR) has reported 10.9% fall in global vehicle sales to 43,733 units in January, hit by tough market conditions in China.
  • Yes Bank down by 9.79% was another top loser of the week on Nifty - Some banking sector stocks came under pressure with a report that around Rs 3.5 lakh crore or 3.9% of the stressed corporate loans continue to remain unrecognised on the books of banks, while around Rs 1.5-2 lakh crore or 40% of them may slip into NPAs by September 2020. Besides, Yes Bank’s senior group president and head - retail and business banking Pralay Mondal has tendered his resignation. Rana Kapoor reigned as the Managing Director and Chief Executive of Yes Bank on January 31.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,118.10 on February 7 and lowest level of 10,814.15 on February 4. On the last trading day, the Nifty closed at 10,943.60 with weekly gain of 49.95 points or 0.46 percent. For the coming week, 10,799.13 followed by 10,654.67 are likely to be good support levels for the Nifty, while the index may face resistance at 11,103.08 and further at 11,262.57 levels.

US Market

The US markets ended mostly in green during the passing week on reports of a meeting between Federal Reserve Chairman Jerome Powell and President Donald Trump, which eased concerns about relations between the central bank chief and the president. The Fed said Powell and Trump had an informal dinner to discuss recent economic developments and the outlook for growth, employment and inflation. Fed Vice Chairman Richard Clarida and Treasury Secretary Steven Mnuchin also attended the meeting, which came after months of Trump criticizing the central bank for raising interest rates. However, up -side remained capped as worries about the US-China trade talks added to concerns about the global economy raised by the European Commission lowering its eurozone growth forecast. The European Commission slashed its GDP growth forecast for 2019 to 1.3% from 1.9% and lowered its estimate for growth in 2020 to 1.6% from 1.7%. 

On the economic front, Consumer credit in the U.S. increased by slightly less than expected in the month of December, according to a report released by the Federal Reserve. The Fed said consumer credit climbed by $16.6 billion in December after jumping by an upwardly revised $22.4 billion in November. Street had expected credit to increase by $17.0 billion. The report said non-revolving credit such as student loans and car loans rose by $14.9 billion in December after surging up by $17.5 billion in November. Revolving credit, which largely reflects credit card debt, edged up by $1.7 billion in December after rising by $4.9 billion in the previous month. Compared to the same month a year ago, consumer credit in December was up by 5.0 percent, as revolving and non-revolving credit increased by 2.0 percent and 6.0 percent, respectively.

First-time claims for U.S. unemployment benefits pulled back in the week ended February 2nd after the jump seen in the previous week, according to a report released by the Labor Department. The report said initial jobless claims fell to 234,000, a decrease of 19,000 from the previous week's unrevised level of 253,000. Street had expected jobless claims to drop to 221,000. The smaller than expected decrease came after jobless claims rebounded to their highest level since September of 2017 in the previous week. The Labor Department said the less volatile four-week moving average rose to 224,750, an increase of 4,500 from the previous week's unrevised average of 220,250.

European Market

European markets ended the passing week mixed, as investors pondered over the prospects for U.S.-China trade talks. Markets started the week on optimistic note as MPs meet Brexit Secretary Steve Barclay to discuss an alternative arrangement to the Irish backstop. Prime Minister Theresa May is scheduled to travel to Northern Ireland on Tuesday to reassure businesses that the government is committed to maintaining an open border after Brexit. However, markets pared their gains in later part of the week after the European Union lowered its growth outlook for the Euro area for 2019 and 2020. The European Union slashed its GDP growth forecast for 2019 to 1.3% from 1.9% and lowered its estimate for growth in 2020 to 1.6% from 1.7%. The downgrade reflected external factors, such as trade tensions and the slowdown in emerging markets, notably in China. A lower projection for the U.K. economy by the Bank of England and weak economic data from Germany weighed sentiments as well.

On the economic front, growth in the euro zone almost stalled in January IHS Markit's composite final PMI dipped to 51.0 in the month from December's 51.1, its lowest reading since July 2013. A measure of Euro zone retail sales also fell as expected in December amid declines in non-food sales and online purchases. Elsewhere, U.K. service sector growth slowed more-than-expected in January, moving closer to stagnation, as new orders decreased for the first time in two-an-a-half years.

Eurozone industrial producer prices decreased for a second straight month in January and at the fastest pace in three years. Producer prices decreased 0.8% from November, when they fell 0.3%. Economists had expected a 0.5% drop. On a year-on-year basis, producer prices rose 3% in December after a 4% increase in November. Economists had expected a 3.1% rise. For the full year 2018, average annual producer price inflation was 3.2%. U.K. construction activity hit a 10-month low in January amid Brexit uncertainty. In Italy, consumer price inflation eased to its lowest level in nine months in January, data from Istat showed. The consumer price index climbed 0.9% year-over-year in January, slower than December's 1.1% increase. Meanwhile, Turkey's consumer price inflation accelerated in January. The consumer price index rose 20.35% year-on-year in January after a 20.30 percent increase in December.

Asian market

The Asian equity indices made a mixed closing during the passing week, amid growth and trade worries after the European Commission lowered its growth forecasts for euro zone and US President Donald Trump said he did not plan to meet with Chinese President Xi Jinping before the March 1 deadline for reaching a trade deal.

Japanese Nikkei remained the top looser in the Asian pack, declined by over two percent as the yen strengthened on fresh worries about the US-China trade dispute. Some concern also came after a Bank of Japan (BoJ) official said the yen could jump to 95 per US dollar in the first half of the year and the central bank is running short on ammunition. Investors paid no heed towards a survey showing that Japanese services sector activity rose in January due to a pick-up in domestic demand. The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) rose to a seasonally adjusted 51.6 in January from 51.0 in December.

However, Chinese markets were shut down during week for the Lunar New Year holidays. Meanwhile, a private report stated that China’s sprawling services sector maintained a solid pace of expansion in January even though growth moderated slightly, offering continued support for the world’s second-largest economy as manufacturing cools.

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