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Bulls tighten grip on Dalal Street during the week
Mar-15-2019

Bulls tightened grip on Dalal Street in the week gone by with frontline gauges snapping the week with a massive gain of over three and a half percent in tandem with firm global cues. The markets’ mood remained up-beat throughout the week and there appeared not even an iota of profit booking, as the benchmarks fervently gained from strength to strength, as investors continued hunt for fundamentally strong stocks. Markets made an optimistic start of the week, as Economic Affairs Secretary Subhash Chandra Garg expressed confidence that fiscal deficit target of 3.4 per cent for 2018-19 would be met as shortfall in indirect tax collection would be compensated by lower expenditure. Adding optimism among traders, Commerce and Industry minister Suresh Prabhu said that the government has set a target of attracting $100 billion in foreign direct investments over the next two years. Afterwards, markets witnessed consolidation as traders remained concern with weak macro-economic data. The latest data from CSO showed that IIP slipped to 1.7% in January from 7.5% a year ago. Subdued performance of the manufacturing sector, especially capital and consumer goods, mainly pulled down the growth in industrial production. Besides, Retail inflation rose to four-month high of 2.57% in February. CPI stood at 1.97% in January and 4.44% in February 2018. Meanwhile, WPI in the month of February surged to 2.93 percent, on account of rise in the prices of food and fuel products, after falling to a 10-month low of 2.76 percent in January. But rally in final day of trade helped markets to surpass their crucial 38,000 (Sensex) and 11,400 (Nifty) levels. Sentiments turned optimistic on report that RBI has decided to inject long-term liquidity worth $5 billion into the system through foreign exchange swap arrangement with banks for three years.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 1352.89 points or 3.69% to 38,024.32 during the week ended March 15, 2019. The BSE Midcap index gained 367.31 points or 2.48% to 15,171.52 and Smallcap index surged 308.12 points or 2.12% to 14,837.18. On the sectoral front, S&P BSE Realty was up by 119.80 points or 6.54% to 1951.79, S&P BSE BANKEX was up by 1828.63 points or 5.88% to 32915.02, S&P BSE Finance was up by 301.27 points or 5.08% to 6236.39, S&P BSE Oil & Gas was up by 645.13 points or 4.51% to 14954.97 and S&P BSE PSU was up by 305.69 points or 4.31% to 7393.88 were the top gainers on the BSE sectoral front, while there were no losers.

NSE movement for the week

The Nifty surged 391.45 or 3.55% to 11,426.85. On the National Stock Exchange (NSE), Bank Nifty soared 1619.65 points or 5.83% to 29,381.45, Nifty IT was up by 137.90 points or 0.89% to 15,546.60, Nifty Mid Cap 100 increased 484.10 points or 2.79% to 17,863.25 and Nifty Next 50 was up by 449.45 points or 1.64% to 27,907.65.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 37871.09 crore and gross sales of Rs 25573.19 crore, leading to a net inflow of Rs 12297.90 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 14286.83 crore against gross sales of Rs 8906.95 crore, resulting in a net inflow of Rs 5379.88 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 8.72 crore and gross sales of Rs 12.89 crore, leading to a net outflow of Rs 4.17 crore.

Industry and Economy

In order to meet the durable liquidity needs of the system, the Reserve Bank of India (RBI) has decided to inject long-term liquidity worth $5 billion into the system through foreign exchange swap arrangement with banks for three years. The swap will be in the nature of a simple buy/sell foreign exchange swap from the RBI side. Under the swap, a bank would sell US dollars to the RBI and simultaneously agree to buy the same amount of US dollars at the end of the swap period.

Outlook for the coming week

In the passing week, Indian equity markets trade showed jubilation and settled with gains of over three and half percent each that led both indices to conclude the week at record highs as foreign investors poured funds into equities.

In the coming week, investors will keep a watch on the Goods and Services tax (GST) Council meet which will be held on March 19. In this meeting, the Council members to finalize guidelines to support the changed tax rate structure for under construction houses.

Market participants will also be eyeing the India-Africa Project Partnerships Conclave to be held between 17 to 19 March. Key policymakers from India and African nations will brainstorm on strategies for scaling up bilateral trade volume to USD 150 billion in the next few years.

On the global front from the US, traders will be eyeing important macro-economic data, starting with Redbook and Factory Orders on March 19, followed by Jobless Claims, Leading Indicators, Fed Balance Sheet, Money Supply on March 21 and finally Wholesale Trade, Baker-Hughes Rig Count and Treasury Budget on March 22.

Top Gainers

  • Indusind Bank up by 11.23% was the top gainer on Nifty for the week - Most of the banking sector stocks gained traction amid report that the performance of the private banks (PVBs) remained strong with year-on-year growth of 18.7% in advances as compared to 4.2% for public sector banks (PSBs) as on December 31, 2018, and around 64% share in incremental credit growth during the trailing 12 months. The report also stated that PSBs are likely to report net profit of Rs 23,000-37,000 crore in the next fiscal year 2019-20, after four years of consecutive losses, on expected fall in gross non-performing assets.
  • Hindustan Petroleum Corporation (HPCL) up by 11.22% was another top gainer on Nifty for the week - HPCL gained on report that the department of public enterprises is in the process of conferring Maharatna status to the company. A company with this formal status gets the authority for equity investment to establish financial joint ventures and wholly owned subsidiaries, and to undertake mergers and acquisitions in India or abroad. Besides, Oil marketing companies (OMCs) gained as the Indian rupee appreciated driven by sustained foreign fund inflows.

Top Losers

  • Tata Motors down by 4.91% was the top loser of the week on Nifty - Tata Motors witnessed selling pressure with report that Tata Motors Group global wholesales in February 2019, including Jaguar Land Rover (JLR), were at 110,262 units, lower by 9%, as compared to February 2018. Global wholesales of all Tata Motors’ Commercial Vehicles and Tata Daewoo range in February 2019 were at 84,512 units, lower by 9% over February 2018. Besides, JLR has started a voluntary recall of around 44,000 cars in the UK over higher than certified levels of carbon dioxide (CO2) emissions.
  • Wipro down by 2.01% was another top loser of the week on Nifty - Most of the Information Technology (IT) stocks came under pressure as rupee strengthened and hit seven-month high of 69.34 against the US dollar. During the week rupee remained strong with private report that foreign investments will continue to increase in the Indian market. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports. Besides, Wipro has launched Industrial Internet of Things (IIoT) Centre of Excellence (CoE) in Kochi in the state of Kerala.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,487.00 on March 15 and lowest level of 11,059.85 on March 11. On the last trading day, the Nifty closed at 11,426.85 with weekly gain of 391.45 points or 3.55 percent. For the coming week, 11,162.13 followed by 10,897.42 are likely to be good support levels for the Nifty, while the index may face resistance at 11,589.28 and further at 11,751.72 levels.

US Market

The US markets ended higher during the passing week on account of upbeat economic data. New orders for US durable goods unexpectedly increased in the month of January, according to a report released by the Commerce Department. The report said durable goods orders climbed by 0.4% in January after spiking by an upwardly revised 1.3% in December. Street had expected durable goods orders to drop by 0.5% compared to the 1.2% jump originally reported for the previous month. The unexpected increase in durable goods orders was largely due to a continued surge in orders for transportation equipment, which jumped by 1.2% in January after surging up by 3.1% in December. Orders for non-defense aircraft and parts led the way higher once again, soaring by 15.9% in January after spiking by 35.7% in December. Meanwhile, reflecting a spike in spending on public construction, the Commerce Department released a report showing US construction spending jumped much more than expected in the month of January.

The Commerce Department said retail sales rose by 0.2% in January after tumbling by a revised 1.6% in December. Street had expected retail sales to come in unchanged compared to the 1.2% slump originally reported for the previous month. The rebound in retail sales came despite a substantial decrease in sales by motor vehicle and parts dealers, which nosedived by 2.4% in December after rising by 0.3% in December.  Besides, a report released by the Labor Department showed U.S. import and export prices both rose by more than anticipated in the month of February. The Labor Department said import prices climbed by 0.6 percent in February after inching up by a revised 0.1 percent in January. Street had expected import prices to rise by 0.3 percent compared to the 0.5 percent drop originally reported for the previous month. The bigger than expected increase in import prices came as prices for fuel imports surged up by 4.9 percent in February, extending the 4.1 percent spike in January.

Meanwhile, First-time claims for U.S. unemployment benefits increased by more than expected in the week ended March 9th, according to a report released by the Labor Department. The report said initial jobless claims rose to 229,000, an increase of 6,000 from the previous week's unrevised level of 223,000. Street had expected jobless claims to edge up to 225,000. The Labor Department further said the less volatile four-week moving average fell to 223,750, a decrease of 2,500 from the previous week's unrevised average of 226,250. Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, climbed by 18,000 to 1.776 million in the week ended March 2nd. The four-week moving average of continuing claims still dipped to 1,766,250, a decrease of 1,000 from the previous week's revised average of 1,767,250.

European Market

European markets traded jubilantly during the passing week and ended with significant gains, as Brexit-related worries eased and investors remained hopeful for a U.S.-China trade dea. Investors ignored comments from U.S. President Donald Trump that he is in no rush to complete a trade deal with China. The British pound drifted lower against the dollar and euro after lawmakers voted to postpone the country’s departure from the European Union, giving Prime Minister Theresa May some breathing space. Markets started the session on an optimistic note as traders reacted positively to comments from Fed Chair Jerome Powell that interest rates are currently appropriate and roughly neutral. Market participants also reacted positively to some earnings and economic data from the zone and picking up stocks ahead of a no-deal Brexit vote.

On the economic front, Eurozone’s industrial production grew in January after declinin in the previous two months, and the pace of expansion exceeded street’s expectations. Industrial production rose 1.4% in January, from December, when it fell 0.9%. Economists had forecast a 1% increase. Growth was driven by a 2.4% surge in energy production, followed by a 2% climb in the output of non-durable consumer goods. Capital goods output rose 0.9%, durable goods production grew 1.1% and manufacture of intermediate goods was 0.2% higher. On a year-on-year basis, industrial production decreased 1.1% after a 4.2% slump in December. Economists had forecast a 2.1% fall.

Germany’s industrial production unexpectedly decreased in January while exports were unchanged, underpinned mainly by demand from outside the European Union. Industrial production decreased 0.8 percent month-on-month in January, while economists had predicted a 0.5 percent gain. A 9.2 percent slump in the automobile industry influenced the January outcome. Meanwhile, U.K. GDP grew 0.5 percent month-on-month in January after a 0.40 percent decline in December, official data showed. Economists had expected a 0.20 percent increase. Industrial production rose 0.6 percent from December, when it fell 0.5 percent. Construction output rose 2.8 percent, reversing a similar size fall in December. Spain’s consumer price inflation rose marginally in February, after slowing in the previous three months, led by higher prices for transport and vegetables. The consumer price index rose 1.1% year-on-year in February, following a 1% rise in January, in line with the flash estimate released on February 28. Headline inflation accelerated for the first time since October, when inflation was 2.3%.

Asian market

All the Asian equity indices snapped the week’s trade in the positive terrain, after U.K. lawmakers backed delaying the Brexit process and Chinese Premier pledged support for the slowing economy. The upside, however, remain capped amid a fresh flare up in U.S.-China trade concerns after U.S. President Donald Trump said he was in no rush to complete a trade pact with China.

Chinese Shanghai surged by over one and half percent, as Chinese Premier Li Keqiang said the country could use reserve requirements and interest rates to prevent a sharper deceleration in the world's second-largest economy. Some support also came with data showing that retail sales climbed 8.2 percent and fixed asset investment rose 6.1 percent in the same period, beating expectations. Investors paid no heed towards a government report that China's industrial output grew an annual 5.3 percent in the first two months of 2019. This marked the slowest pace of growth in 17 years and fell short of expectations for a score of 5.5 percent.

Japanese Nikkei too edged higher by over two percent, as the yen's fall against the dollar lifted export-oriented shares. Sentiments remained positive after the Bank of Japan left its monetary stimulus program unchanged, as widely expected, but offered a relatively weak assessment of the economy. Traders overlooked a report showed Japan's machinery orders fell in January at the fastest pace in four months. The total value of core machine orders in Japan dropped a seasonally adjusted 5.4 percent in January, missing expectations for a decline of 1.5 percent following the downwardly revised 0.3 percent fall in December. 

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