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Benchmarks manage to end week in green terrain
Feb-22-2019

Benchmarks managed to end the passing week in green terrain with frontline gauges garnering gain of around half a percent, settling near their crucial 35,900 (Sensex) and 10,800 (Nifty) levels. Key gauges started the session on pessimistic note with RBI data showing that the country's foreign exchange reserves declined by $2.119 billion to $398.122 billion in the week to February 8, due to fall in foreign currency assets. Traders shrugged off report that India's exports grew by 3.74 percent to $26.36 billion in January, as exports of gems and jewellery, chemicals and pharmaceuticals increased. The trade deficit narrowed to $14.73 billion in January 2019 as against $15.67 billion in the same month previous year. Markets extended losses on the S&P Global Ratings’ latest report stating that Indian corporates are likely to see slowdown in revenue growth over the next 12-24 months. However markets made smart recovery with gains in two consecutive sessions and erased all of their losses to garner profit on report that the government said the revised GDP figures for demonetisation year was not cooked up and, in fact, the growth rates are likely to go up further due to the GST. On January 31, the government revised the GDP growth rates by 110 basis points (bps) from 7.1% to 8.2% for 2016-17, the year of demonetisation, and by 50 bps from 6.7% to 7.2% for fiscal 2017-18. Some support also came with a private report stating that India will remain the fastest growing major economy, much ahead of China, in the next decade 2019-28. Traders also got some encouragement with the Finance Ministry expecting bad loan recoveries to touch Rs 1.80 lakh crore during the current fiscal with two major cases at the final stage of resolution. On the final day of the week, markets witnessed consolidation as traders remained anxious with the release of the minutes of RBI last policy meet, in which governor Shaktikanta Das argued the need to look at growth concerns.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 62.53 points or 0.17% to 35,871.48 during the week ended February 22, 2019. The BSE Midcap index gained 229.20 points or 1.64% to 14,169.74 and Smallcap index surged 264.9 points or 2.00% to 13,517.71. On the sectoral front, S&P BSE Metal was up by 655.63 points or 6.55% to 10669.97, S&P BSE Realty was up by 77.56 points or 4.46% to 1817.78, S&P BSE Oil & Gas was up by 561.22 points or 4.29% to 13634.56, S&P BSE PSU was up by 233.11 points or 3.62% to 6670.25 and S&P BSE Capital Goods was up by 403.84 points or 2.46% to 16815.07 were the top gainers on the BSE sectoral front while, S&P BSE Information Technology was down by 267.81 points or 1.74% to 15110.63, S&P BSE TECK was down by 72.43 points or 0.95% to 7528.64 and S&P BSE Fast Moving Consumer Goods was down by 14.53 points or 0.13% to 11344.28 were the few losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 67.25 or 0.63% to 10,791.65. On the National Stock Exchange (NSE), Bank Nifty gained 73.30 points or 0.27% to 26,867.55, Nifty Mid Cap 100 increased 328.50 points or 2.03% to 16,543.15 and Nifty Next 50 was up by 596.95 points or 2.34% to 26,097.55. On the other side, Nifty IT was down by 130.90 points or 0.83% to 15,684.70.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 24668.00 crore and gross sales of Rs 27951.21 crore, leading to a net outflow of Rs 3283.21 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 3232.05 crore against gross sales of Rs 4933.51 crore, resulting in a net outflow of Rs 1701.46 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 19.72 crore and gross sales of Rs 21.18 crore, leading to a net outflow of Rs 1.46 crore.

Industry and Economy

With two major cases at the final stage of resolution, the Finance Ministry is expecting Non-performing asset (NPA) recoveries to touch Rs 1.80 lakh crore by March 2019. Financial Services Secretary Rajiv Kumar has said that public sector banks (PSBs) have so far recovered Rs 1 lakh crore under Insolvency and Bankruptcy Code (IBC).

Outlook for the coming week

The passing week Indian equity markets ended in positive terrain with Nifty and Sensex gaining 0.63% and 0.17% respectively. The domestic traders may witness volatility due to F&O February series expiry slated during the week.

The upcoming week, which marks the start of fresh month, is expected to be a data heavy week. Traders will also be eyeing the Gross Domestic Product (GDP) data for the third quarter of FY19, which is slated to be released on February 28, followed by Core Sector growth data. Investors first will also be eyeing the announcement of Nikkei Manufacturing PMI data for the month of February on March 1. Additionally, Auto and Cement companies would grab some attention, as these companies will announce their monthly sales figures.

In the coming week, traders would be looking forward to the GST Council meet which slated on February 24, as GST council meeting remained inconclusive after some state finance ministers sought a physical meeting as they felt an issue as crucial as a special scheme for real estate sector should not be discussed through a video conference.

On the global front from the US, traders will be eyeing important macro-economic data, starting with Wholesale Trade on February 25, followed by Redbook, Consumer Confidence on February 26, International Trade in Goods, Factory Orders, MBA Mortgage Applications, State Street Investor Confidence Index on February 27, GDP, Jobless Claims, Kansas City Fed Manufacturing Index, Fed Balance Sheet, Money Supply on February 28 and finally PMI Manufacturing Index, Motor Vehicle Sales, Baker-Hughes Rig Count on March 1. Additionally, global investors will also be eyeing China-US trade talk to negotiate a comprehensive trade deal before their self-imposed deadline of March 1.

Top Gainers

  • Oil and Natural Gas Corp (ONGC) up by 12.45% was the top gainer on Nifty for the week - The Government will give ONGC pricing and marketing freedom for yet to be developed discoveries and will charge less royalty for raising production from existing fields. Besides, the company reported higher-than-expected earnings in the December quarter on the back of higher revenue from offshore operations. It posted a 64.77% growth in its net profit at Rs 8,262.70 crore for quarter ended December 31, 2018, as compared to Rs 5,014.67 crore reported for Q3FY18.
  • Indian Oil Corporation (IOC) up by 10.07% was another top gainer on Nifty for the week - Oil marketing companies (OMCs) gained following a fall in crude oil prices in the international markets. Oil prices fell after the United States reported its crude output hit a record 12 million barrels per day (bpd) for week ended February 15, undermining efforts by Middle East dominated producer club OPEC to withhold supply and tighten global markets. Generally, lower crude oil price is positive for OMCs as it improves their refining and marketing margins.

Top Losers

  • Tata Consultancy Services (TCS) down by 5.82% was the top loser of the week on Nifty - Most of the Information and Technology (IT) sector stocks came under pressure amid volatility in Indian rupee. Besides, industry body Nasscom has done away with annual guidance even as the Indian IT and BPM sector beat growth expectations in 2018-19. Nasscom said it remained cautiously optimistic about industry prospects this year as it continues to transition. Meanwhile, TCS has entered into a partnership with Nanoheal to offer enterprises cognitive, self-healing end-user device management solutions.
  • Kotak Mahindra Bank down by 3.80% was another top loser of the week on Nifty - Kotak Mahindra Bank witnessed selling pressure amid reports that ING group was looking to sell its stake through block deals. As per the reports, ING Group is looking to sell 1.21% stake in the Bank for over Rs 28 billion ($393.43 million) via a block deal. The offer price would range between Rs 1,225-1,250 apiece, up to 5% discount to February21 closing price. According to the BSE data, ING Mauritius Investments held 3.06% in the bank as of December 31, 2018.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 10,808.85 on February 21 and lowest level of 10,585.65 on February 19. On the last trading day, the Nifty closed at 10,791.65 with weekly gain of 67.25 points or 0.63 percent. For the coming week, 10,648.58 followed by 10,505.52 are likely to be good support levels for the Nifty, while the index may face resistance at 10,871.78 and further at 10,951.92 levels.

US Market

The US markets ended marginally lower during the passing week following the release of a batch of disappointing U.S. economic data. Philadelphia-area manufacturing activity contracted for the first time since May of 2016, the Federal Reserve Bank of Philadelphia revealed in a report. The Philly Fed said its index for current manufacturing activity in the region tumbled to a negative 4.1 in February from a positive 17.0 in January, with a negative reading indicating contraction. The index had been expected to slip to 14.0. The much steeper than expected drop by the headline index came amid contractions in both new orders and shipments. The new orders index plunged to a negative 2.4 in February from a positive 21.3 in January, while the shipments index slumped to a negative 5.3 from a positive 11.4. Besides, existing home sales in the U.S. unexpectedly showed a steep drop in the month of January, according to a report released by the National Association of Realtors (NAR). 

The Conference Board released a report unexpectedly showing a modest drop by its reading on leading U.S. economic indicators in the month of January. The Conference Board said its leading economic indicators edged down by 0.1 percent after coming in unchanged in December. Street had expected the index to inch up by 0.1 percent. Meanwhile, first-time claims for U.S. unemployment benefits fell more than expected in the week ended February 16th, according to a report released by the Labor Department. The report said initial jobless claims dropped to 216,000, a decrease of 23,000 from the previous week's unrevised level of 239,000. Street had expected jobless claims to dip to 229,000. 

Traders also shrugged off the minutes of the latest Federal Reserve meeting, which provided further insight into the central bank's decision to change the forward guidance language and indicate a patient approach to raising interest rates. Meeting participants pointed to a variety of considerations that supported a patient approach to monetary policy as an appropriate step in managing various risks and uncertainties in the outlook. The Fed said additional data would help policymakers gauge the trajectory of business and consumer sentiment, whether the recent softness in core and total inflation and inflation compensation would persist, and the effect of the tightening of financial conditions on aggregate demand.  Further, the minutes of the January meeting also showed officials discussed a plan to end the reduction of bonds on the Fed's balance sheet before the end of 2019.

European Market

European markets ended the passing week on mixed note, as European Central Bank policymakers acknowledged that the uncertainty surrounding the euro area growth and inflation outlook has risen recently. The start of the week was cautious, after Eurozone current account surplus weakened in December, as the surpluses in the visible trade, services and primary income accounts were partly offset by a deficit in the secondary income account. The figures from the European Central Bank showed that the current account surplus declined to EUR 16 billion from EUR 23 billion in November, which was revised from EUR 20 billion. The visible trade surplus weakened to EUR 16 billion from EUR 20 billion in the previous month. 

However, most of the markets in the region staged recovery, after Germany's investor confidence improved further to its highest level in five months in February. The survey data from the ZEW - Leibniz Centre for European Economic Research showed that the ZEW Indicator of Economic Sentiment for Germany rose to -13.4 points from -15.0 points in January. Adding some comfort, the survey data from Rightmove showed that UK housing affordability improved at the fastest pace in eight years in February, but annual house price growth remained weak. The survey found UK's annual average wage growth of 3.4% outstripped asking prices at the fastest rate since 2011. Average asking prices rose 0.7% month-on-month in February, after a 0.40% rise in January. Besides, Eurozone's private sector expanded at the fastest pace in three months in February, led by stronger growth in services, while manufacturing contracted. As per preliminary survey data from IHS Markit, the flash Composite Purchasing Managers' Index rose to 51.4 from 51 in January.

On the inflation front, Germany's producer price inflation eased for a second straight month to its lowest level in eight months in January. The figures from the Federal Statistical Office showed that the producer price index rose 2.6 percent year-on-year in January, following a 2.7 percent in December. Separately, France's consumer price inflation eased for a third consecutive month to its lowest level in eleven months in January. The latest figures from the statistical office INSEE confirmed that the consumer price index rose 1.2 percent year-on-year following a 1.6 percent increase in December. That was in line with the flash estimate released on January 31. Further, Denmark producer price inflation eased marginally for the third straight month in January. As per figures from Statistics Denmark, the producer price index climbed 3.2 percent year-on-year in January, following a 3.3 percent rise in December. 

Asian market

All the Asian equity indices rallied during the passing week, as hopes for Chinese stimulus helped offset weak economic readings from the US and Europe. Investors continued to closely watch high-level talks between US and Chinese trade negotiators in Washington, as the two sides face a March 1 deadline to avoid a further escalation in tariffs.

Chinese Shanghai remained the top gainer in the region, higher by over four and half percent, after data showed growth in China's new home prices fell to a nine-month low in January, boosting stimulus hopes. Reports indicated that Chinese authorities could be getting ready to implement more extensive stimulus measures in a bid to encourage economic growth.

Japanese Nikkei too edged higher by over two and half percent, on a weaker yen after Japan's trade deficit for January came in wider than expected. Sentiments remained positive with data showing that the value of core machine orders in Japan eased 0.1 percent month on month in December, exceeding expectations for a decline of 1.0 percent following a flat reading in November. Investors overlooked the latest survey from Nikkei revealed that Japan's manufacturing sector slipped into contraction in February, with a 32-month low manufacturing PMI score of 48.5. That's down from 50.3 in January.
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