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Markets extend winning streak for fifth straight week
Mar-22-2019

Extending winning streak for fifth straight week, Indian equity benchmarks ended the holiday truncated week with a gain of around one third of a percent, with frontline gauges recapturing their crucial 38,100 (Sensex) and 11,450 (Nifty) levels. Markets started the week with an optimistic start as traders took encouragement with the trade ministry’s statement that India's trade deficit narrowed to $9.60 billion in February, dragged down by a fall in gold and oil imports, as compared to $14.73 billion in January. The data showed that in February, merchandise exports rose 2.44 percent from a year earlier to $26.67 billion, while imports were down 5.41 percent to $36.26 billion. Key gauges extended gains on reports that the net direct tax collection figure has crossed the Rs 10 lakh crore mark as on March 16, helped by the fourth and final installment of tax payment. The entire advance tax data from across the country has not come yet. The net direct tax collection during April-January of this fiscal stood at Rs 7.89 lakh crore as against Rs 12 lakh crore targeted for the entire fiscal of 2018-19. Afterwards, markets witnessed consolidation, as anxiety persisted with report that there is a 70% chance of El Nino climate cycle forming towards the second half of this year, a forecast that does not augur well for the monsoon season in India. Meanwhile, economists raised concerns over a sharp slowdown in the Indian economy and pitched for a monetary policy boost to support growth at a meeting with the RBI chief on March 19. On final day of the week, markets pared some of their gains as traders turned cautious with Fitch Ratings in its latest report cut India’s economic growth forecast for the next financial year starting April 1, to 6.8% from its previous estimate of 7%, on weaker than expected momentum in the economy.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 140.29 points or 0.37% to 38,164.61 during the week ended March 22, 2019. The BSE Midcap index losses 94.63 points or 0.62% to 15,076.89 and Smallcap index slipped 78.38 points or 0.53% to 14,758.80. On the sectoral front, S&P BSE Realty was up by 111.91 points or 5.73% to 2063.70, S&P BSE Power was up by 19.07 points or 0.96% to 2000.75, S&P BSE Fast Moving Consumer Goods was up by 84.85 points or 0.73% to 11692.75, S&P BSE BANKEX was up by 235.78 points or 0.72% to 33150.80 and S&P BSE Information Technology was up by 81.50 points or 0.54% to 15240.23 were the top gainers on the BSE sectoral front, while S&P BSE Auto was down by 896.95 points or 4.55% to 18798.43, S&P BSE Consumer Discretionary Goods & Services was down by 73.04 points or 1.95% to 3676.94, S&P BSE Oil & Gas was down by 142.10 points or 0.95% to 14812.87, S&P BSE Metal was down by 72.36 points or 0.64% to 11151.85 and S&P BSE PSU was down by 44.22 points or 0.60% to 7349.66 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 30.05 or 0.26% to 11,456.90. On the National Stock Exchange (NSE), Bank Nifty was up by 201.05 points or 0.68% to 29,582.50, Nifty IT was up by 4.50 points or 0.03% to 15,551.10. On the other side, Nifty Mid Cap 100 decreased 122.10 points or 0.68% to 17,741.15 and Nifty Next 50 lost 147.65 points or 0.53% to 27,760.00.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 35788.11 crore and gross sales of Rs 26282.99 crore, leading to a net inflow of Rs 9505.12 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 11885.39 crore against gross sales of Rs 3597.61 crore, resulting in a net inflow of Rs 8287.78 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 1.70 crore and gross sales of Rs 1.14 crore, leading to a net inflow of Rs 0.56 crore.

Industry and Economy

Emphasizing on several key reforms carried out by India in the last five years, the International Monetary Fund (IMF) stated that the country has been one of the fastest growing large economies in the world, with growth averaging about 7% over the past five years. But, it also said that more needs to be done on the reforms front. IMF said important reforms have been implemented and it feel that more reforms are needed to sustain this high growth, including to harness the demographic dividend opportunity, which India has.

Outlook for the coming week

In the passing week, Indian equity benchmarks ended the holiday shortened week with a decent gains, with Sensex and Nifty recapturing their crucial 28,100 and 11,450 levels, respectively.

The coming week is expected to be a volatile one for local equity markets on account of F&O expiry, which is scheduled to take place on March 28, 2019.

In the coming week, market participants will be eyeing the Reserve Bank of India (RBI) Governor Shaktikanta Das’ discussions with representatives of trade bodies and credit rating agencies on interest rate and steps to boost economic activities which is slated to be held on March 26.

Further, Indian Foreign Secretary Vijay Keshav Gokhale is arriving in Kathmandu on March 28 for a two-day visit during which he will hold delegation level discussions with Nepali officials on a wide range of bilateral issues, including the India-funded projects in Nepal.

On global front from the US, traders will be eyeing important macro-economic data, starting with Redbook and Consumer Confidence on March 26, followed by GDP, Jobless Claims, Fed Balance Sheet, Money Supply on March 28 and finally Chicago PMI, Consumer Sentiment and Baker-Hughes Rig Count on March 29.

Top Gainers

  • NTPC up by 9.03% was the top gainer on Nifty for the week - NTPC gained traction as its 200 kilo watt (kW) waste-to-energy plant in Karsada has achieved full generation capacity. The plant is located in Karsada at Varanasi, Uttar Pradesh (UP). In a separate development, the company has signed a Memorandum of Understanding (MoU) with Hazipur-based East Central Railway Zone for transportation of fly ash under Indian Railways’ Special Freight Train Operator (SFTO) scheme. The company has become the first entity in the country to sign an SFTO agreement with Indian Railways.
  • Kotak Mahindra Bank up by 5.95% was another top gainer on Nifty for the week - Kotak Mahindra Bank gained as its arm -- Kotak Investment Advisors (KIAL) has launched $400 million fund in partnership with Bengaluru-based realty firm DivyaSree Developers to develop and acquire commercial office assets. The fund’s strategy is to develop greenfield projects as well as acquire under construction and completed assets across key markets in India. DivyaSree is the exclusive development partner and property advisor for the fund and KIAL will act as investment manager.

Top Losers

  • Maruti Suzuki down by 7.59% was the top loser of the week on Nifty - Maruti Suzuki witnessed selling pressure amid report that the company cut production by a quarter over March last year. As per the report, the company is estimated to have cut production to around 126,000 units as compared to more than 172,000 units a year ago, which is a 26.8% reduction. Besides, Maruti Suzuki India's entry level small car ‘Alto’ has been emerged as the best-selling passenger vehicle (PV) model in February, clocking 24,751 units as the company swept the top six spots.
  • Hero MotoCorp down by 7.15% was another top loser of the week on Nifty - Hero MotoCorp came under pressure amid report that the company has decided to cut back their monthly production by around 15% from the current month till May, a week after the Federation of Automobile Dealers Association (FADA) flagged off declining two-wheeler sales - down 7.97% to 11,25,405 units last month compared to the year-ago period. Companies generally align production to demand because once the inventory with dealers crosses the normal mark, they run short of space to store the products.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,572.80 on March 22 and lowest level of 11,412.50 on March 18. On the last trading day, the Nifty closed at 11,456.90 with weekly gain of 30.05 points or 0.26 percent. For the coming week, 11,388.67 followed by 11,320.43 are likely to be good support levels for the Nifty, while the index may face resistance at 11,548.97 and further at 11,641.03 levels.

US Market

The US markets ended higher during the passing week on the back of upbeat economic data. A report released by the Labor Department showed first-time claims for U.S. unemployment benefits fell by more than expected in the week ended March 16th. The report said initial jobless claims dropped to 221,000, a decrease of 9,000 from the previous week's revised level of 230,000. Street had expected jobless claims to dip to 225,000 from the 229,000 originally reported for the previous week. The Labor Department said the less volatile four-week moving average crept up to 225,000, an increase of 1,000 from the previous week's revised average of 224,000. Meanwhile, after reporting an unexpected contraction in regional manufacturing activity in the previous month, the Federal Reserve Bank of Philadelphia released a report showing its index of manufacturing activity rebounded by much more than anticipated in March. The Philly Fed said its index for current manufacturing activity in the region jumped to a positive 13.7 in March from a negative 4.1 in February, with a positive reading indicating growth. Street had expected the index to rise to a positive 4.5.

The bigger than expected rebound by the headline index came as the indicators for new orders and shipments returned to positive territory. The new orders index rose to a positive 1.9 in March from a negative 2.4 in February, while the shipments index spiked to a positive 20.0 form a negative 5.3. Reflecting accommodative financial conditions and a rebound in stock prices, the Conference Board released a report showing its reading on leading U.S. economic indicators rose for the first time in five months in February. The Conference Board said its leading economic index edged up by 0.2 percent in February after revised data showed no change in January. Street had expected the index to inch up by 0.1 percent compared to the 0.1 percent dip originally reported for the previous month.

Besides, in a widely anticipated move, the Federal Reserve announced its decision to leave interest rates unchanged following a two-day monetary policy meeting. The Fed decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent in support of its mandate of fostering maximum employment and price stability. The central bank's forward projections also indicated interest rates are likely to remain unchanged for the remainder of the year. The forecast for interest rates to be unchanged at the end of the current year compares to the December projections indicating two rate hikes. The downward revision to the rate projections comes as the Fed noted data received since its January meeting points to a slowdown in economic growth from the solid rate seen in the fourth quarter of 2018. The Fed also noted overall inflation has declined due to lower energy prices but said inflation for items other than food and energy remains near 2 percent.

European Market

European markets ended the passing week mostly lower. Key indices started the week on a mixed note, as Eurozone's merchandise trade surplus for January decreased sharply from a year ago with the pace of increase in imports outpacing that of exports. The figures from the euro area statistical office Eurostat showed that the trade surplus fell to EUR 1.5 billion in January from EUR 3.1 billion in the same month last year. Exports increased 2.5% year-on-year in January and imports rose 3.4%. Adding concerns among the market participants, the Bundesbank in its monthly report said that the German economy is unlikely to rebound in the first quarter due to continued slowdown in manufacturing activity. While the manufacturing sector could remain the drag on growth for a third straight quarter, construction and private consumption are expected to extend support.

Trade remained volatile during the week, amid reports that Eurozone construction output fell in January after rising in the previous two months, reflecting declines in both building and civil engineering segments. The data from the statistical office Eurostat showed that construction output declined a calendar and seasonally adjusted 1.4% month-on-month in January, reversing a 1.1% rise in December. The street paid no heed towards reports that Germany's investor confidence rose sharply in March, reversing a steep fall in the previous month, to its highest level in a year. The preliminary data from the ZEW - Leibniz Centre for European Economic Research showed that the ZEW Indicator of Economic Sentiment for Germany rose to -3.6 from -13.4 in February.

On the inflation front, UK consumer price inflation unexpectedly accelerated in February for the first time in six months, led by higher prices for food and alcohol, while house price inflation was the weakest in nearly six years at the start of the year. As per preliminary data from the Office for National Statistics, the consumer price index rose 1.9 percent year-on-year following a 1.8 percent increase in January. Further, Germany's producer price inflation was unchanged in February, defying expectations for an acceleration, after slowing in the previous two months. The preliminary figures from the Federal Statistical Office showed that the producer price index rose 2.6 percent year-on-year, same as in January. The street had expected a higher rate of 2.9 percent.

Asian market

All the Asian equity benchmarks, barring KLSE composite ended in the positive terrain during the passing week, after the U.S. Federal Reserve turned more dovish than expected and indicated it no longer expects to raise rates this year. However, the upside remained capped by Brexit-related uncertainty and renewed worries about U.S.-China trade talks.

Chinese Shanghai remained the top gainer in the region, higher by over two and half percent, on expectations that there is scope to ease monetary policy to support economic growth this year. Traders even overlooked private report stating that if China doesn’t step up its efforts on issues such as data privacy and intellectual property protection, the country could lose out on a 37 trillion yuan ($5.5 trillion) growth opportunity in the decade ahead.

Japanese Nikkei too edged higher by around a percent, as the yen weakened against the dollar. Traders overlooked data showing that the country's exports fell for a third month in February amid waning external demand, putting pressure on the Bank of Japan to offer more stimulus. Traders also took a note of the latest survey from Nikkei revealed that the manufacturing sector in Japan continued to contract at a steady pace, with a manufacturing PMI score of 48.9. That's unchanged from the February reading.
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