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Bulls tighten grip on Dalal Street during the week
Mar-08-2019

Bulls tightened grip on Dalal Street in the week gone by, with frontline gauges surpassing their crucial 11,000 (Nifty) and 36,600 (Sensex) levels. Markets started the holiday truncated week on an optimistic note, as India’s services sector gathered momentum in the month of February, with a quicker expansion in new work supporting a faster increase in output and solid job creation. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index rose to 52.5 in February from 52.2 in January. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- also surged to 53.8 in February as against 53.6 in January. The street remained positive, amid reports that the income tax e-returns filed for the April-February period has grown nearly 30% compared with the corresponding period in FY18. Markets extended rally during the week aided by the Reserve Bank of India’s (RBI) statement that it would infuse Rs 12,500 crore into the financial system on March 07, 2019. Traders also took support with the Federation of Indian Chambers of Commerce and Industry (FICCI) President Sandip Somany’s statement that the government has promised to lower corporate tax rate to 25% for all companies once Goods and Services Tax (GST) mop-up improves. However, markets trim some of their weekly gains on last day of the trade, as markets participants remained concern about a report that the government may be staring at higher-than-projected deficit for the current fiscal with country’s direct tax revenue expected to fall short by Rs 60,000 to 70,000 crore over the revised target of Rs 12 lakh crore for FY19. As per the report, the direct tax revenue growth is at 12.2 per cent so far as against revised full year aim of 19.8 per cent.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 607.62 points or 1.68% to 36,671.43 during the week ended March 08, 2019. The BSE Midcap index gained 301.39 points or 2.08% to 14,804.21 and Smallcap index surged 547.33 points or 3.91% to 14,529.06. On the sectoral front, S&P BSE Consumer Durables was up by 818.06 points or 3.81% to 22317.21, S&P BSE Power was up by 68.44 points or 3.70% to 1917.27, S&P BSE PSU was up by 226.83 points or 3.31% to 7088.19, S&P BSE Finance was up by 160.24 points or 2.77% to 5935.12 and S&P BSE Oil & Gas was up by 372.39 points or 2.67% to 14309.84 were the top gainers on the BSE sectoral front, while S&P BSE Information Technology was down by 327.47 points or 2.13% to 15032.21 and S&P BSE TECK was down by 142.61 points or 1.87% to 7492.07 were the only losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 171.90 or 1.58% to 11,035.40. On the National Stock Exchange (NSE), Bank Nifty surged 717.90 points or 2.65% to 27,761.80, Nifty Mid Cap 100 increased 416.70 points or 2.46% to 17,379.15 and Nifty Next 50 gained 610.30 points or 2.27% to 27,458.20. On the other side, Nifty IT was down by 439.60 points or 2.77% to 15,408.70.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 27334.51 crore and gross sales of Rs 22577.83 crore, leading to a net inflow of Rs 4756.68 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 5740.60 crore against gross sales of Rs 5271.40 crore, resulting in a net inflow of Rs 469.20 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 21.35 crore and gross sales of Rs 27.43 crore, leading to a net outflow of Rs 6.08 crore.

Industry and Economy

Lauding success of the government reforms in increasing employment, the Confederation of Indian Industry (CII) has made a prediction that Indian eight sectors -- retail, construction, transport and logistics, tourism and hospitality, handlooms and handicrafts, textiles and apparels, food processing, and automotive--are likely to generate over 10 crore jobs by 2025. CII President Rakesh Bharti Mittal said that with skill levels rising and substantial growth in startups and new businesses, the quality of jobs is being also enhanced, including through higher incomes.

Outlook for the coming week

In the passing week, Indian equity markets ended in green terrain with Sensex and Nifty posting gains of 1.58% and 1.68% respectively amid strengthening rupee and sustained foreign fund inflows.

In the coming week traders will be eyeing the announcement of the Index of Industrial Production (IIP) and Wholesale Price Inflation (WPI) data. IIP data for the month of January will be releasing on March 12. India’s IIP growth accelerated to 2.4 percent year-on-year in December 2018 from a 17-month low of 0.3 percent in the previous month, boosted by a rebound in manufacturing output.

WPI data for the month of February will be releasing on March 14. Wholesale prices in India rose by 2.76 percent year-on-year in January 2019, slowing from a 3.80 percent rise in the prior month. It was the lowest wholesale inflation since March 2018, mainly due to a noticeable slowdown in cost of fuel and manufactured products.

On the global front from the US, traders will be eyeing important macro-economic data, starting with Retail Sales on March 11, followed by Redbook on March 12, Construction Spending on March 13, Jobless Claims, Import and Export Prices, New Home Sales, Fed Balance Sheet, Money Supply on March 14 and finally JOLTS, Baker-Hughes Rig Count and Treasury International Capital on March 15.

Top Gainers

  • Hindustan Petroleum Corporation (HPCL) up by 11.86% was the 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 on the back of record US crude output and rising commercial fuel inventories. Generally, lower crude oil price is positive for OMCs as it improves their refining and marketing margins. Besides, HPCL won licences to retail CNG to automobiles and piped natural gas to households in nine cities in Uttar Pradesh and West Bengal, in the 10th city gas bid round.
  • Eicher Motors up by 10.08% was another top gainer on Nifty for the week - Eicher Motors gained despite report that overall domestic passenger vehicle (PV) sales dropped 1.11% in February, making it the seventh decline in eight months, prompting auto industry body Society of Indian Automobile Manufacturers (SIAM) to suggest that it will miss even the scaled down forecast of 6% for the ongoing fiscal. SIAM said uncertainty ahead of elections coupled, weak market sentiment and unfavourable factors like high interest rates and insurance cost are continuing to affect sales.

Top Losers

  • Wipro down by 6.86% was the top loser of the week on Nifty - Wipro came under pressure amid reports that Promoter Azim Premji Trust is likely to sell the 0.4% stake or up to 2.67 crore shares in the company through his philanthropic trust. Besides, Wipro and Risklens have entered into partnership to deliver quantitative cyber risk assessments to enterprise customers arid government organizations. The company will leverage Risklens' CRQ platform to perform quantitative risk analysis, measure the effectiveness of cybersecurity controls and provide the rationale for adequate cybersecurity investments.
  • HCL Technologies down by 4.26% was another top loser of the week on Nifty - Most of the Information Technology (IT) stocks came under pressure as rupee strengthened against the dollar. During the week, most of the time rupee traded higher against dollar. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports. Besides, HCL Technologies has strengthened its Leader position as the Star Performer in the recently published Global Capital Markets Application Services PEAK Matrix 2018 report by Everest Group.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,089.05 on March 7 and lowest level of 10,817.00 on March 5. On the last trading day, the Nifty closed at 11,035.40 with weekly gain of 171.90 points or 1.58 percent. For the coming week, 10,871.92 followed by 10,708.43 are likely to be good support levels for the Nifty, while the index may face resistance at 11,143.97 and further at 11,252.53 levels.

US Market

The US markets ended lower during the passing week as investors awaited more concrete developments following reports that U.S. and Chinese negotiators were close to completing a trade deal.  Meanwhile, a U.S. think tank said analysis of new satellite images of activity at a North Korean long-range rocket site suggests Pyongyang may be rapidly rebuilding the test facility that it pledged to dismantle. The Center for Strategic and International Studies said the images were taken two days after the second summit between President Donald Trump and North Korean leader Kim Jong Un ended without an agreement late last month. Besides, sentiment also got dampened after the European Central Bank (ECB) slashed its economic growth forecast, citing lingering, mainly external uncertainties. The ECB said it now expects eurozone interest rates to remain at the current level at least till the end of this year. The eurozone growth outlook for this year was cut to 1.1% from 1.7%, while the outlook for next year was trimmed to 1.6% from 1.7%.

On the economic front, the Labor Department released a report showing a modest decrease in first-time claims for US unemployment benefits in the week ended March 2nd. The report said initial jobless claims edged down to 223,000, a decrease of 3,000 from the previous week's revised level of 226,000. Street had expected jobless claims to come in unchanged compared to the 225,000 originally reported for the previous week. The Labor Department said the less volatile four-week moving average dipped to 226,250, a decrease of 3,000 from the previous week's revised average of 229,250. Meanwhile, Government shutdown-delayed data released by the Labor Department showed labor productivity in the U.S. increased by more than expected in the fourth quarter of 2018. The Labor Department said labor productivity climbed by 1.9 percent in the fourth quarter following a downwardly revised 1.8 percent increase in the third quarter.

Besides, with imports jumping and exports slumping, the Commerce Department released a report showing the U.S. trade deficit widened by more than anticipated in the month of December. The Commerce Department said the trade deficit widened to $59.8 billion in December from a revised $50.3 billion in November. Street had expected the deficit to widen to $57.9 billion from the $49.3 billion originally reported for the previous month. The substantial monthly increase drove the U.S. trade deficit to its highest level since reaching $60.2 billion in October of 2008. Private sector job growth in the U.S. slowed in the month of February after spiking in January, according to a report released by payroll processor ADP. ADP said private sector employment increased by 183,000 jobs in February after soaring by an upwardly revised 300,000 jobs in January.

European Market

European markets exhibited mixed trend during the passing week after the European Central Bank (ECB) slashed its forecast for eurozone economic growth. ECB Said that the risks surrounding the euro area growth outlook are still tilted to the downside, on account of the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets. Worries about Chinese economy due to the ongoing trade war with the U.S., and geopolitical concerns too weighed on sentiment. However, traders took some solace after the ECB announced plans to launch fresh loans in September, but retreated again after the bank cut growth forecast for the zone, citing lingering, mainly external uncertainties. The ECB also said it now expects eurozone interest rates to remain at the current level at least till the end of this year.
 
On the economic front, Eurozone PMI services was revised up to 52.8 in February from initial reading of 52.3, while the region's retail sales grew 1.3% month-on-month in January after a 1.4% drop in December. Separately, a closely watched survey showed that there was a modest upturn in the U.K. service sector output in February. Data released by the Federal Statistical Office showed Switzerland’s consumer price inflation was stable in February after slowing slightly at the start of the year. The consumer price index rose 0.6% year-on-year, same as in January. The latest inflation rate was in line with traders’ expectations. Compared to the previous month, the CPI climbed 0.4% year-on-year after declining 0.3% in each of the previous three months. The latest increased matched the street’s expectations.

Meanwhile, eurozone producer price inflation held steady in January, after easing in the previous month. Producer prices climbed 3% year-on-year in January, the same rate of increase as in December. Prices were expected to gain 2.9%. Excluding energy, producer price inflation slowed marginally to 1.2% in January from 1.3% a month ago. Among components, capital goods and durable goods prices advanced 1.4% each. Prices for energy and intermediate goods eased slightly by 7.3% and 1.7%, respectively in January. On a monthly basis, producer prices rose 0.4% in January, after a 0.8% decline in the previous month. A survey data from Sentix said Eurozone investor confidence improved in March. The investor confidence index for the euro area rose to -2.2 in March from -3.7 in February.

Asian market

All the Asian equity indices snapped the week’s trade in the negative terrain, after the European Central Bank (ECB) downgraded its 2019 GDP forecast and China reported worse than expected trade data for the month of February. Investors also looked ahead to the release of the US Labor Department's closely-watched monthly jobs report for February.

Japanese Nikkei remained the top looser in the Asian pack, declining by over two and half percent, as the yen strengthened against the US dollar. Traders remain concerned with the Bank of Japan stating that overall bank lending in Japan was up 2.3 percent on year in February, coming in at 533.7 trillion yen. That was down from 2.4 percent in January. Traders even overlooked data showing that Japan's gross domestic product gained a seasonally adjusted 0.5 percent on quarter in the fourth quarter of 2018. That beat expectations for an increase of 0.4 percent following the 0.3 percent gain in the previous reading.

Chinese Shanghai too edged lower by around a percent, after official data showed Chinese exports plummeted 20.7 percent in February from a year earlier, reflecting weaker demand and distortions from the Lunar New Year holiday. That was far below expectations for a 4.8 percent drop. Imports fell 5.2 percent after a 1.5 percent fall in January. Some concern also came in with IHS Markit showing that China's private sector growth weakened marginally in February with softer growth in services activity. The Caixin composite output index fell to 50.7 in February from 50.9 in January. The services PMI slid to 51.1 from 53.6 a month ago.
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