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Bulls outperform bears for seventh consecutive week
Apr-05-2019

Bulls continues to outperform bears for seventh consecutive week and ended the first week of FY20 above their crucial 38,800 (Sensex) and 11,650 (Nifty) levels. Markets started the week on an optimistic note aided by the RBI’s data showing that India's foreign exchange reserves continued to surge for the third week in a row, adding $1.029 billion at $406.667 billion in the week to March 22. Sentiments also got boost with report that the GST collections scaled record high of Rs 1.06 lakh crore in March, up from Rs 97,247 crore in the previous month. Market participants ignored the RBI’s data that the country's current account deficit widened to 2.5 per cent of GDP in third quarter of Financial year 2019 from 2.1 per cent a year ago, primarily on account of a higher trade deficit. Investors also paid no heed towards Commerce Ministry’s data showing that the growth of eight core sectors slowed down to 2.1% in February 2019 as compared to 5.4% in February 2018. Key gauges extended gains with a private report that the government has been able to contain its fiscal deficit around 3.4% of the GDP in 2018-2019 by resorting to withdrawals/cash support from public accounts and savings on expenditure. However, markets witnessed selloff in two consecutive sessions as traders turned anxious with Private weather forecaster Skymet said India’s monsoon rains were seen below normal this year. Traders also failed to take any sense of relief from the RBI’s repo rate cut. RBI cut repo rate by 25 bps to 6.0% in its First Bi-monthly Monetary Policy Statement, 2019-20, to bring interest rate to the lowest level in one year on softening inflation. But rally in last session of the week helped markets to settle in green with Finance Secretary Subhash Chandra Garg’s statement that the government is close of meeting fiscal deficit target of 3.4 per cent for 2018-19.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 189.32 points or 0.49% to 38,862.23 during the week ended April 05, 2019. The BSE Midcap index gained 29.74 points or 0.19% to 15,509.36 and Smallcap index surged 18.51 points or 0.12% to 15,045.87. On the sectoral front, S&P BSE Metal was up by 353.81 points or 3.12% to 11708.93, S&P BSE Realty was up by 61.94 points or 2.98% to 2139.03, S&P BSE Auto was up by 502.97 points or 2.67% to 19327.86, S&P BSE Information Technology was up by 274.57 points or 1.80% to 15554.87 and S&P BSE TECK was up by 118.57 points or 1.56% to 7740.36 were the top gainers on the BSE sectoral front, while S&P BSE Oil & Gas was down by 428.95 points or 2.81% to 14840.75, S&P BSE Consumer Durables was down by 400.56 points or 1.68% to 23456.09, S&P BSE PSU was down by 111.74 points or 1.46% to 7528.73, S&P BSE BANKEX was down by 389.71 points or 1.14% to 33752.23 and S&P BSE Fast Moving Consumer Goods was down by 113.31 points or 0.97% to 11628.20 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 42.05 or 0.36% to 11,665.95. On the National Stock Exchange (NSE), Bank Nifty was down by 342.15 points or 1.12% to 30,084.65, Nifty Mid Cap 100 decreased 12.15 points or 0.07% to 18,246.35 and Nifty Next 50 lost 138.85 points or 0.49% to 28,143.05. On the other side, Nifty IT was up by 294.85 points or 1.89% to 15,923.05.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 37721.54 crore and gross sales of Rs 28732.46 crore, leading to a net inflow of Rs 8989.08 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 13747.60 crore against gross sales of Rs 14102.87 crore, resulting in a net outflow of Rs 355.27 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 752.14 crore and gross sales of Rs 112.28 crore, leading to a net inflow of Rs 639.86 crore.

Industry and Economy

Fitch Ratings in its latest report has retained India's sovereign rating at the lowest investment grade of 'BBB-' with a stable outlook. It noted that a weak fiscal position continues to constrain country’s sovereign ratings. In this regard, it said that the next government's medium-term fiscal policy will be of particular importance from a rating perspective. For the thirteenth year in a row, Fitch has rated India at 'BBB-'. It had last upgraded India's sovereign rating from 'BB+' to 'BBB-' with a stable outlook on August 1, 2006.

Outlook for the coming week

Local equity markets remained in jubilant mood in the passing week, which led both Sensex and Nifty to conclude above their psychological levels of 38,800 and 11,650 levels respectively.

In the next week, traders will keep an eye on the first phase of election in 20 states which is schedule to be held on April 11. Elections will be held in seven phases between April 11- May 19 and the results will be announced on May 23. Investors will also be looking forward to the Finance Minister Arun Jaitley’s meeting with International Monetary Fund (IMF) - World Bank Spring in Washington DC which is schedule to be held from April 12-14.

After reacting to Nikkei Manufacturing PMI data on the economy front, traders would be awaiting for the release of the industrial production (IIP) data for the month of February on April 12. Industrial production in India increased 1.7 percent year-on-year in January of 2019, following an upwardly revised 2.6 percent rise in the previous month and below market expectations of 2 percent.

With the official start of the earnings season, market-men will be eyeing the result announcements of Delta Corp, Hathway Bhawani Cabletel & Datacom, Bajaj Consumer Care, Infosys, Tata Consultancy Services, etc.

On the global front from the US, traders will be eyeing important macro-economic data, starting with Redbook, JOLTS on April 10, followed by CPI, FOMC Minutes, Treasury Budget on April 10, Jobless Claims, PPI-FD, Fed Balance Sheet, Money Supply on April 11 and finally Import and Export Prices and Baker-Hughes Rig Count on April 12.

Top Gainers

  • Tata Motors up by 20.29% was the top gainer on Nifty for the week - Tata Motors gained traction after Jaguar Land Rover (JLR) sales showed sequential improvement in March. JLR has sold 13,171 units in March 2019 in the North America market, up by 13.4% on sequential basis compared to 11,616 units sold in in February 2019. Besides, Tata Motors Commercial and Passenger Vehicles Business sales in the domestic market for FY19, grew by 16% with 678,486 units as compared to 586,507 units over the same period last year. In March 2019, the company witnessed sold 68,709 units.
  • Tata Steel up by 8.49% was another top gainer on Nifty for the week - Tata Steel gained on acquiring shares and convertible warrants of its subsidiary -- Tata Metaliks for about Rs 403.79 crore. The company has acquired 27.97 lakh equity shares of Tata Metaliks at a price of Rs 642 per share aggregating to Rs 179.57 crore. Besides, German steel giant ThyssenKrupp has submitted a comprehensive package of proposed solutions to the European Commission to obtain clearance for the merger of Thyssenkrupp Steel Europe and Tata Steel Europe.

Top Losers

  • Bharat Petroleum Corporation (BPCL) down by 7.19% was the top loser of the week on Nifty - Oil marketing companies (OMCs) fell after crude prices firmed up in international market. Crude oil gained $4 a barrel in a month mainly on contracting supplies from key producers such as Saudi Arabia, Russia, and other members of the oil cartel OPEC. Generally, higher crude oil prices are negative for OMCs as it lowers their refining and marketing margins. International crude oil price trend influences rates of petrol and diesel, which also get affected by their respective demand-supply situation.
  • Zee Entertainment Enterprises (ZEE) down by 7.07% was another top loser of the week on Nifty - ZEE came under pressure amid report that the company’s promoters have been reportedly in talks with many investors to offload 20-25% stake in the company to pay off loans taken by pledging shares. As per the reports, Zee promoters may look to financial investors for offloading their equity stake in the company, as talks with some potential strategic partners may not be moving as expected. Besides, another report said that Mukesh Ambani and Sunil Bharti Mittal are considering competing bids for a stake in Zee.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,761.00 on April 3 and lowest level of 11,559.20 on April 4. On the last trading day, the Nifty closed at 11,665.95 with weekly gain of 42.05 points or 0.36 percent. For the coming week, 11,563.10 followed by 11,460.25 are likely to be good support levels for the Nifty, while the index may face resistance at 11,764.90 and further at 11,863.85 levels.

US Market

The US Markets ended higher during the passing week as investors continued to monitor trade talks between the US and China, which are reportedly in their final stretch. A private report stated that the U.S. and Chinese officials have resolved most of the issues standing in the way of a deal to end their long-running trade dispute. Officials are still haggling over how to implement and enforce the agreement. The two sides remain apart on two key issues the fate of existing US tariffs on Chinese goods and the terms of an enforcement mechanism demanded by Washington to ensure that China abides by the deal.  Besides, President Donald Trump said that the China talks were moving along nicely even while taking yet another swipe at the Federal Reserve for raising interest rates last year. At the same time, there are reportedly major hurdles to overcome regarding U.S. desires to maintain some tariffs on Chinese goods as a means to ensure Chinese adherence to any deal.

On the economic front, Service sector growth in the U.S. cooled off in March after a significant acceleration in the previous month, according to a report released by the Institute for Supply Management. The ISM said its non-manufacturing index slid to 56.1 in March after jumping to 59.7 in February, although reading above 50 still indicates growth in the service sector. Street had expected the index to show a more modest pullback, with forecasts calling for the index to dip to 58.0. Meanwhile, Payroll processor ADP released a report showing much weaker than expected private sector job growth in the month of March. ADP said private sector employment rose by 129,000 jobs in March after jumping by an upwardly revised 197,000 jobs in February. Street had expected employment to increase by 170,000 jobs compared to the addition of 183,000 jobs originally reported for the previous month.

Orders for U.S. manufactured durable goods showed a steep drop in the month of February, according to a report released by the Commerce Department, with orders for transportation equipment leading the way lower. The Commerce Department said durable goods orders tumbled by 1.6 percent in February after inching up by a downwardly revised 0.1 percent in January. Street had expected durable goods orders to plunge by 1.8 percent compared to the 0.3 percent increase that had been reported for the previous month. Besides, with the more closely watched monthly jobs report looming, the Labor Department released a report showing an unexpected decrease in first-time claims for U.S. unemployment benefits in the week ended March 30th. The report said initial jobless claims dipped to 202,000, a decrease of 10,000 from the previous week's revised level of 212,000.

European Market

European markets ended the passing week on optimistic note. The start of the week was positive, as UK manufacturing sector grew at the fastest pace in over a year in March, as stockpiling by businesses hit a record as they braced for Brexit disruptions. The survey data from IHS Markit showed that the CIPS purchasing managers' index, or PMI, for the manufacturing sector climbed to a 13-month high of 55.1 from 52.1 in February. The February reading was revised from the original 52. A reading above 50 suggests growth in the sector. The market participants took encouragement, after Spain's manufacturing sector grew in March, driven by upturns in new and output amid subdued inflationary pressures. As per survey data from IHS Markit, the purchasing managers' index, or PMI, for the factory sector rose to 50.9 in March from February's 49.9. A reading above 50 suggests growth in the sector. The street had forecast a score of 50.

Most of the markets in the region extended their gains during the week, after Eurozone retail sales grew for a second consecutive month and at a faster-than-expected pace in February. The preliminary data from Eurostat showed that retail sales rose 0.4 percent month-on-month in February. January's monthly growth of 1.3 percent was revised down to 0.9 percent. Adding optimism on the street, the German construction sector grew the most in 14 months in March, led by strong gains in residential and commercial activity that boosted job creation. A survey from IHS Markit showed that IHS Markit's purchasing managers' index for the German construction sector rose to 55.6 in March from 54.7 in February, marking the highest reading since January 2018. Besides, Italy's services sector grew more than expected in March at the fastest pace in six months, driven by broad-based improvement. The survey data from IHS Markit showed that the services purchasing managers' index, or PMI, rose to 53.1 in March from 50.4 in February.

On the inflation front, UK house price inflation unexpectedly accelerated in March to its highest level in seven months. The survey data from the Lloyds Bank subsidiary Halifax showed that the house price inflation rose to 3.2 percent from 2.8 percent in February. Further, Eurozone producer prices also rose at a slightly faster pace in February, after easing slightly in February. The preliminary data from Eurostat showed that the industrial producer price index rose 3 percent year-on-year following a 2.9 percent rise in January, which was revised from 3 percent. Separately, Switzerland's consumer price inflation rose in March after remaining unchanged in the previous month. As per figures from the Federal Statistical Office, the consumer price index rose 0.7 percent year-on-year in March, following a 0.6 percent rise in each of the previous two months.

Asian market

All the Asian equity benchmarks, barring KLSE composite ended in the positive terrain during the passing week, as upbeat manufacturing data from China and the United States bolstered investor confidence in the global economy. Traders also found some support after US President Donald Trump said the US and China are making progress in trade talks and something very monumental could be announced in next four weeks. However, there was some cautiousness too ahead of the all-important US jobs report, with traders looking for stabilization in payrolls, following the weakest reading since 2017.

Chinese Shanghai remained the top gainer in the region, higher by over five percent, as investors monitored progress in U.S.-China trade talks. Traders took support with official data showed China's factory activity in March unexpectedly grew for the first time in fourth months. The Caixin/ Markit PMI also showed the manufacturing sector in the world's second biggest economy returning to growth.

Japanese Nikkei too edged higher by around three and half percent, as the yen weakened against the dollar. Investors shrugged off data showing that Japan's household spending rose less than expected in February and real wages fell unexpectedly. Investors paid no heed towards central bank survey showed Japan's business confidence hit a two-year low in the March quarter, underscoring renewed concerns surrounding global demand. Another private survey showed that manufacturing activity in the country contracted for a second straight month in March, with output down at the sharpest rate in nearly three years.
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