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Bears hold grip on Dalal Street; Nifty breaches 10,750 mark
Feb-15-2019

Passing week turned out to be awful for Indian equity benchmarks with key gauges settling with a weekly loss of over two percentage points. The markets’ mood remained somber throughout the week as domestic benchmarks not even managed a single positive close. Local indices started the session on pessimistic note as the IMF warned governments to gear up for a possible economic storm as growth undershoots expectations. Traders took note of report that Net direct tax collection stood at Rs 7,88,930 crore in the April-January period of current fiscal (2018-19). Sentiments also got affected by the Agricultural & Processed Food Products Export Development Authority’s (Apeda) data showing that India’s exports of agricultural commodities nosedived by up to a staggering 46 per cent in volume terms due to supply glut in the international market. Market participants failed to get any sense of relief with positive macro-economic data. India’s industrial growth measured by IIP inched up to 2.4% in the month of December 2018, after hitting a 17-month low in November, while retail inflation based on CPI continued its southward journey for another month and eased further to 2.05% in the month of January 2019, the lowest in the last 19 months. Traders even overlooked better than expected WPI inflation data. Wholesale prices in India has eased to 2.76 percent in January, as compared to 3.80 percent in December, due to cheaper food and fuel prices. Markets extended losses to end near week’s low point with the economic research wing of SBI stating that it is erroneous to come to a conclusion of heightened economic activity using the jump in currency in circulation (CIC). Also, traders shrugged off Chief Economic Adviser K V Subramanian’s statement that the economic growth is expected to accelerate to 7.5% in FY20, from 7.2% projected for FY19.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 737.53 points or 2.02% to 35,808.95 during the week ended February 15, 2019. The BSE Midcap index losses 388.27 points or 2.71% to 13,940.54, while Smallcap index slipped 403.94 points or 2.96% to 13,252.81. On the sectoral front, S&P BSE Oil & Gas was down by 575.83 points or 4.22% to 13073.34, S&P BSE Healthcare was down by 549.96 points or 3.93% to 13432.98, S&P BSE PSU was down by 241.83 points or 3.62% to 6437.14, S&P BSE Auto was down by 680.60 points or 3.59% to 18262.97 and S&P BSE Consumer Discretionary Goods & Services was down by 104.02 points or 2.91% to 3475.78 were the top losers on the BSE sectoral front, while S&P BSE Power was up by 3.35 points or 0.19% to 1784.93 was the only gainer on the BSE sectoral front.

NSE movement for the week

The Nifty slipped 219.20 or 2.00% to 10,724.40. On the National Stock Exchange (NSE), Bank Nifty was down by 500.15 points or 1.83% to 26,794.25, Nifty IT was down by 204.20 points or 1.27% to 15,815.60, Nifty Mid Cap 100 decreased 382.55 points or 2.30% to 16,214.65 and Nifty Next 50 was down by 1036.00 points or 3.90% to 25,500.60.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 24431.12 crore and gross sales of Rs 24382.39 crore, leading to a net inflow of Rs 48.73 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 10321.69 crore against gross sales of Rs 7773.43 crore, resulting in a net inflow of Rs 2548.26 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 12.64 crore and gross sales of Rs 1.69 crore, leading to a net inflow of Rs 10.95 crore.

Industry and Economy

Chief Economic Adviser K V Subramanian has said that the economic growth is expected to accelerate to 7.5% in next financial year (FY20), from 7.2% projected for the current financial year (FY19). He mentioned ‘We have done the projections. All the external agencies and internally our estimates are also 7.5% (2019-20). The nominal rate we are expecting is 11.5% and inflation of about 4%.’

Outlook for the coming week

In the passing week, Indian markets ended in red terrain with Nifty and Sensex posting losses of two percent each, as trade tensions between the U.S. and China continued to weigh on sentiment. On economy front, market-participants would continue to trace the momentum of rupee and FII investment.

In the coming week, traders will be eyeing, meeting of the Reserve Bank of India's (RBI) central board, which was slated to take a call on interim dividend on February 18. The board will take a view based on the central bank's first six months of audited earnings and finalise interim dividend transfer.

Additionally, GST Council is likely to meet on February 20 to discuss a proposal to slash tax on cement to 18 per cent from 28 per cent and also consider a recommendation of a Group of Ministers (GoM) on housing that advocates 5 per cent GST in under-construction properties and 3 per cent GST for affordable housing.

On the global front from the US, traders will be eyeing important macro-economic data, starting with Housing Market Index on February 19, followed by Redbook, E-Commerce Retail Sales on February 20, Jobless Claims, Existing Home Sales, Leading Indicators, Fed Balance Sheet, Money Supply on February 21 and finally Baker-Hughes Rig Count on February 22.

Top Gainers

  • Yes Bank up by 23.76% was the top gainer on Nifty for the week - Yes Bank gained traction with report that it has received the Risk Assessment Report for FY2018. The report observes NIL divergences in the Bank’s asset classification and provisioning from the RBI norms. Meanwhile the bank has signed a memorandum of understanding (MoU) with MG Motor India to offer financing and banking solutions to both the MG Motor dealers as well as the end consumers.
  • Zee Entertainment Enterprises (ZEE) up by 5.53% was another top gainer on Nifty for the week -- Stocks of ZEE edged higher during the week as traders opted to buy the stocks after it tanked in recent past after a report in The Wire suggested a link between Essel Group, the promoter of ZEEL, and Nityank Infrapower, a firm being investigated for suspicious deposits after demonetisation. However, the clarified that it has no connection whatsoever with any alleged transaction(s) of Nityank Infrapower, as reported in the media. Meanwhile, Promoters of Essel Group is reportedly in talks with potential investors to sell a part of its stake in ZEE and the top management of the company including chairman Subhash Chandra is in the US to discuss the deal.

Top Losers

  • Tata Motors down by 12.58% was the top loser of the week on Nifty -Tata Motors came under pressure after its Group global wholesales in January 2019, including Jaguar Land Rover, were at 100,572 units, lower by 12%, as compared to January 2018. Global wholesales of all Tata Motors' commercial vehicles and Tata Daewoo range in January 2019 were at 40,886 units, lower by 9% over January 2018. Earlier this month, the company reported a consolidated net loss of Rs 26,992.54 crore for the quarter under review against net profit of Rs 1,198.63 crore for the same quarter in the previous year.
  • Hindalco Industries down by 10.80% was another top loser of the week on Nifty - Hindalco Industries came under pressure after the company has reported 34.39% fall in its net profit at Rs 247.46 crore for the quarter under review as compared to Rs 377.14 crore for the same quarter in the previous year. However, total income of the company increased by 7.79% at Rs 12210.39 crore for Q3FY19 as compared Rs 11327.43 crore for the corresponding quarter previous year.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,930.90 on February 11 and lowest level of 10,620.40 on February 15. On the last trading day, the Nifty closed at 10,724.40 with weekly loss of 219.20 points or 2.00 percent. For the coming week, 10,586.23 followed by 10,448.07 are likely to be good support levels for the Nifty, while the index may face resistance at 10,896.73 and further at 11,069.07 levels.

US Market

The US markets ended higher during the passing week on optimism about US-China trade talks after Trump indicated he is willing to delay raising tariffs on Chinese goods if the two sides are close to a deal. Chinese President Xi Jinping is scheduled to meet US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin during this week's talks in Beijing. The meeting with Xi as well as a banquet for the US delegation would be a sign of goodwill to cement a trade deal between the world's two biggest economies. Further, rally in the markets came amid optimism lawmakers will manage to avoid another government shutdown after negotiators reached a tentative agreement on border security. Senate Appropriations Committee Chairman Richard Shelby, R-Ala., a lead Republican negotiator, said the two sides have reached an agreement in principle.

On the economic front, retail sales in the US unexpectedly showed a significant decrease in the month of December, according to data released by the Commerce Department. The Commerce Department said retail sales tumbled by 1.2 percent in December after inching up by a revised 0.1 percent in November. Street had expected retail sales to rise by 0.2 percent, matching the uptick originally reported for the previous month. Meanwhile, government shutdown-delayed data released by the Commerce Department showed an unexpected dip in business inventories in the US in the month of November. The report said business inventories edged down by 0.1 percent in November after climbing by 0.6 percent in October. Inventories had been expected to rise by 0.3 percent. The unexpected decrease was partly due to a pullback in retail inventories, which fell by 0.4 percent in November after increasing by 0.8 percent in October.

Besides, a report released by the Labor Department showed first-time claims for US unemployment benefits unexpectedly increased in the week ended February 9th. The report said initial jobless claims rose to 239,000, an increase of 4,000 from the previous week's revised level of 235,000. Street had expected jobless claims to drop to 225,000 from the 234,000 originally reported for the previous week. The Labor Department said the less volatile four-week moving average climbed to 231,750, an increase of 6,750 from the previous week's revised average of 225,000. With the increase, the four-week moving average reached its highest level since hitting 234,000 in late January of 2018. A separate report released by the Labor Department that Consumer prices in the US were unchanged for the third straight month in January, matching the revised reading for December.

European Market

European markets ended the passing week on higher note, amid optimism that the US and China might reach an agreement in trade talks. The start of the week was firm, after the Bank of France predicted a 0.4% growth for the French economy in the first quarter of this year, which is slightly faster than the 0.3% expansion in the final quarter of 2018. Adding comfort among traders, Norway's consumer price inflation slowed to its weakest level in three months in January. The preliminary figures from Statistics Norway showed that the consumer price index rose 3.1% year-on-year after a 3.5% increase in December. Prices of clothing and footwear declined 1.1%, while the utilities logged the biggest increase of 5.9%. The core inflation was 2.1 percent, unchanged from December. Separately, Switzerland's headline consumer price inflation slowed for a third straight month in January. The preliminary data from the Federal Statistical Office showed that the consumer price index rose 0.6% year-on-year after a 0.7% increase in December.

The markets further extended their gains, with data from Eurostat showing that Gross Domestic Product in Eurozone grew 0.2% in the fourth quarter, over the preceding quarter. Compared to same quarter a year ago, GDP was up 1.2% after a 1.6% increase in the three months to September. Besides, Eurozone employment grew 0.3% sequentially in the fourth quarter, after a 0.2% rise in the previous three months. The street overlooked reports that Eurozone industrial production decreased for a second straight month and at a faster-than-expected pace in December, but the fall was less severe than the previous month's decline. Data released by Eurostat showed that eurozone industrial production fell 0.9% in December percent from November, when it decreased 1.7%. Compared to a year ago, production shrunk 4.2% last month, after a 3% decline in November. In 2018, industrial production rose an average 1.1 percent in the euro area.

Meanwhile, Germany's economy stagnated in the fourth quarter of 2018 to avoid a technical recession. The preliminary data from the Federal Statistical Office showed that GDP came in unchanged from the third quarter, when the economy contracted 0.2%. According to another report from the Statistical Office, Germany's wholesale price index climbed 1.1% year-on-year in January, after a 2.5% rise in December. The pace was the slowest since February 2017, when prices rose 1.1%. Further, the UK economy expanded at its slowest annual rate in six years in 2018, following a sharp contraction in December. According to a report from the Office of National Statistics, in 2018, the economy grew 1.4%, down from 1.8% a year earlier. Growth in October - December 2018 slowed, falling to 0.2%, from 0.6% in the preceding quarter, due to Brexit uncertainty and slowing global economy.

Asian market

All the Asian equity indices, barring Hang Seng Composite Index, ended in green during the passing week, as Chinese exports and imports data for January easily topped expectations. However, gains remained capped as grim US retail sales figures raised fresh doubts about the strength of the US economy, offsetting optimism on trade talks between the United States and China.

Japanese Nikkei remained the top gainer in the region, surging by over two and half percent, as the yen weakened against the dollar. Sentiments remained up-beat with data showed Japan's economy grew at an annualized rate of 1.4 percent in the October to December period last year, as solid domestic consumption and business investment offset weak exports. Meanwhile, the Bank of Japan said that producer prices in Japan were down 0.6 percent on month in January, unchanged from the December reading but well shy of expectations for a decline of 0.2 percent. Export prices were down 2.5 percent on month and 3.3 percent on year, while import prices sank 5.0 percent on month and 1.6 percent on year.

Shanghai Composite too surged by around two and half percent, after data showed Chinese exports grew 9.1 percent in January from a year earlier, while imports declined 1.5 percent. Traders even overlooked latest data raised deflation fears. Consumer prices in China were up 1.7 percent year on year in January, the National. That was shy of expectations for an increase of 1.9 percent, which would have been unchanged from the December reading. Factory inflation slowed for the seventh straight month on cooling demand. Producer prices were up 0.1 percent on year, shy of expectations for an increase of 0.5 percent and down from 0.9 percent in the previous month.
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