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Benchmarks snap seven week winning streak
Apr-12-2019

Snapping seven weeks winning streak, Indian equity benchmarks ended the passing week with marginal losses with major indices breaching their crucial 38,800 (Sensex) and 11,650 (Nifty) levels. Markets started the session on pessimistic note as traders shrugged off Finance Minister Arun Jaitley’s statement that India is expected to become the third largest economy in the world by 2030 with GDP touching $10 trillion, helped by consumption and investment growth. Currently, the size of the Indian economy is about $2.9 trillion. On the very next day, key gauges staged strong recovery as market participants took encouragement with the World Bank’s latest report stating said that India's GDP growth is expected to accelerate moderately to 7.5% in the fiscal year 2019-20 (FY20), supported by continued investment strengthening, particularly private-improved export performance and resilient consumption. It added that the real GDP growth is estimated at 7.2% in 2018-19. However, traders turned pessimistic and witnessed a cut of around a percent after the IMF lowered GDP outlook for India. The IMF has moderately scaled down India’s economic growth projection to 7.3 per cent for the current financial year from its earlier forecast of 7.4 per cent and suggested that the country should continue to undertake economic reforms, including hire and fire, to create jobs. Buying in final two days of trade helped markets to pare most of their weekly losses as traders took some relief with reports that the government extended the last date for filing final sales return form GSTR-1 for March by two days till April 13. Some support also came with RBI’s report that foreign investment of Indian companies grew 18 per cent to $2.69 billion in March as compared to the year-ago period. The domestic firms made investment of $2.28 billion in their subsidiaries and wholly-owned units abroad during March 2018.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 95.12 points or 0.24% to 38,767.11 during the week ended April 12, 2019. The BSE Midcap index losses 82.91 points or 0.53% to 15,426.45 and Smallcap index slipped 23.69 points or 0.16% to 15,022.18. On the sectoral front, S&P BSE Auto was up by 457.34 points or 2.37% to 19785.20, S&P BSE Fast Moving Consumer Goods was up by 251.33 points or 2.16% to 11879.53, S&P BSE Power was up by 29.55 points or 1.46% to 2051.40, S&P BSE Healthcare was up by 150.64 points or 1.05% to 14481.90 and S&P BSE PSU was up by 7.34 points or 0.10% to 7536.07 were the top gainers on the BSE sectoral front, while S&P BSE Metal was down by 241.60 points or 2.06% to 11467.33, S&P BSE TECK was down by 61.71 points or 0.80% to 7678.65, S&P BSE Finance was down by 50.17 points or 0.78% to 6406.27, S&P BSE Information Technology was down by 83.46 points or 0.54% to 15471.41 and S&P BSE Consumer Durables was down by 102.42 points or 0.44% to 23353.67 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty slipped 22.50 or 0.19% to 11,643.45. On the National Stock Exchange (NSE), Bank Nifty was down by 146.10 points or 0.49% to 29,938.55, Nifty IT was down by 11.95 points or 0.08% to 15,911.10, Nifty Mid Cap 100 decreased 78.45 points or 0.43% to 18,167.90. On the other side, Nifty Next 50 gained 128.05 points or 0.45% to 28,271.10.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 25865.28 crore and gross sales of Rs 21545.58 crore, leading to a net inflow of Rs 4319.70 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 5217.53 crore against gross sales of Rs 7074.34 crore, resulting in a net outflow of Rs 1856.81 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 16.60 crore and gross sales of Rs 11.45 crore, leading to a net inflow of Rs 5.15 crore.

Industry and Economy

Global rating agency Moody’s Investors Service in its latest report has said that Reserve Bank of India’s (RBI) recent move to cut repo rate by 25 basis points (bps) to 6 percent is credit positive for residential mortgage-backed securities (RMBS) market as it will help offset rising funding cost for the lenders, preventing further increase in mortgage rates. It also said “funding costs for lenders have increased by 50 basis points over the past year, and as a result we view a cut in mortgage interest rates as unlikely.”

Outlook for the coming week

In the passing week, Indian equity markets ended in red territory with a cut of around quarter a percent as investors remain focused on the upcoming earnings season.

In the next week, traders will keep an eye on the second phase of election in 13 states for 97 seats which is schedule to be held on April 18. Meanwhile, trend in investment by foreign institutional investors and the movement of rupee against the dollar will be also be closely watched by the market-participants.

On the economy front, traders would be awaiting for the release of the wholesale price index (WPI) data for the month of March on April 15.  Wholesale prices in India surge by 2.93 percent year-on-year in February 2019, accelerating from a 2.76 percent rise in the prior month.

In the ongoing earning season, market-participants would be majorly looking for earnings from industry’s big-wigs such as WIPRO, ICICI Lombard General Insurance Company, RBL Bank etc.

On the global front from the US, traders will be eyeing important macro-economic data, starting with Redbook, Industrial Production on April 16, followed by International Trade, Wholesale Trade, Beige Book on April 17, Jobless Claims, Retail Sales, Fed Balance Sheet, Money Supply on April 18 and finally Baker-Hughes Rig Count on April 19.

Top Gainers

  • Wipro up by 9.40% was the top gainer on Nifty for the week - Wipro gained ahead of fourth quarter and year end result for fiscal year 2018-19. The company is schedule to release its result on April 16. Besides, a report stated that Information Technology (IT) sector to deliver a steady growth of 10-16 percent on a year-on-year (Y-o-Y) basis. Moreover, the company will consider buyback of equity shares on April 16. The company is set to announce its largest buyback of Rs 12,000 crore ($1.7 billion) following the Securities and Exchange Board of India's (SEBI) nod to the proposal.
  • Cipla up by 6.50% was another top gainer on Nifty for the week - Cipla gained on launching Niveoli, India’s first extra-fine particle beclomethasone-formoterol combination hydrofluoroalkane inhaler for adults, targeting drug delivery to the small airways. Niveoli is a proprietary Cipla inhaler, and the latest offering from Cipla in respiratory inhalation therapy that addresses an unmet need associated with obstructive airway diseases such as asthma and chronic obstructive pulmonary disorder. Besides, the company has received Establishment Inspection Report from USFDA for Goa manufacturing facility.

Top Losers

  • Asian Paints down by 5.29% was the top loser of the week on Nifty - Asian Paints fell after a fire incident occurred at its paint manufacturing facility in Vishakhapatnam in the state of Andhra Pradesh. The manufacturing operations of the plant have been affected. Besides, it has plans to produce three lakh kilo litres each from its greenfield facilities in Visakhapatnam and Mysuru during the first phase. Meanwhile, the company has unveiled a new brand identity for its operations in Bahrain. The newly unveiled brand, ‘Asian Paints Berger’ delivers a new positioning.
  • Bharti Airtel down by 4.16% was another top loser of the week on Nifty - Bharti Airtel made a payment of over Rs 2,745.8 crore to the Department of Telecom (DoT) towards its spectrum dues. Earlier, the company had made deferred payment of over Rs 1,918 crore to the department of Telecom in March. The deferred payment is for the installment for spectrum bought in auctions. Besides, the Department of Telecom (DoT) has given approval for the merger of Tata Teleservices (TTSL) with Bharti Airtel, subject to the condition that Bharti Airtel furnishes Rs 7,200 crore worth bank guarantee.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,710.30 on April 8 and lowest level of 11,549.10 on April 8. On the last trading day, the Nifty closed at 11,643.45 with weekly loss of 22.50 points or 0.19 percent. For the coming week, 11,558.27 followed by 11,473.08 are likely to be good support levels for the Nifty, while the index may face resistance at 11,719.47 and further at 11,795.48 levels.

US Market

The US markets ended mostly lower during the passing week as investors look ahead to the beginning of earnings season.  Further, some cautiousness also prevailed in the markets on fears over escalation of trade tensions with the European Union and a weaker global outlook from the International Monetary Fund (IMF). The IMF has slashed the global growth forecast for this year, citing the trade tensions, weaker business confidence, tighter financial conditions and higher policy uncertainty. The Washington-based global lender cut the growth forecast for this year to 3.3% in its latest World Economic Outlook, or WEO. In a January update to the WEO, the IMF had predicted 3.5%, which was lower than 3.7% seen in the October report.  Meanwhile, while projections provided by the Federal Reserve following the March monetary policy meeting suggested the central bank no longer expects to raise interest rates this year, the minutes of the meeting note the outlook for rates remains fluid.

Several of these participants saw the current target range for rates of 2.25 to 2.50 percent as close to their estimates of its longer-run neutral level. However, the minutes noted participants continued to emphasize that future rate decisions would depend on their ongoing assessments of the economic outlook and potential risks. The minutes said several participants noted that their views of the appropriate target range for the federal funds rate could shift in either direction based on incoming data and other developments. Some participants even indicated it would be appropriate to raise rates modestly later this year if the economy evolves as they currently expect. Besides, reflecting a spike in energy prices, the Labor Department released a report showing consumer prices in the U.S. increased by slightly more than anticipated in the month of March. The Labor Department said its consumer price index climbed by 0.4 percent in March after edging up by 0.2 percent in February.

However, First-time claims for U.S. unemployment benefits once again slid to their lowest level in nearly 50 years in the week ended April 6th, according to a report released by the Labor Department. The report said initial jobless claims fell to 196,000, a decrease of 8,000 from the previous week's revised level of 204,000. The continued drop surprised participants, who had expected jobless claims to rise to 211,000 from the 202,000 originally reported for the previous week. With the unexpected decrease, initial jobless claims fell to their lowest level since hitting 193,000 in October of 1969. The Labor Department said the less volatile four-week moving average also dipped to 207,000 from the previous week's revised average of 214,000, hitting its lowest level since December of 1969.

European Market

European markets ended the passing week on mixed note, after the European Central Bank held its key interest rates and forward guidance unchanged in April, after it announced long-term loans for banks in March, as activity in the euro area economy remains sluggish. The start of the week was cautious, as Germany's exports and imports declined more-than-expected in February at the fastest pace in a year, as demand ebbed amid the global uncertainties, adding to concerns sparked by recent data that growth in the biggest economy in the euro area remained sluggish in the first quarter. The preliminary figures from the Federal Statistical Office showed that exports fell a calendar and seasonally-adjusted 1.3 percent month-on-month, while imports decreased 1.6 percent in February.

Volatility remained on the markets during the week, as the International Monetary Fund slashed the global growth forecast for this year, citing the trade tensions, weaker business confidence, tighter financial conditions and higher policy uncertainty. The Washington-based global lender cut the growth forecast for this year to 3.3 percent in its latest World Economic Outlook, or WEO, which is released twice a year. Traders got worried, with data from the Office for National Statistics showing that the UK economy expanded for the second straight month, but at a slower pace, in February. Gross domestic product, or GDP, grew 0.2 percent month-on-month in February, while the economy expanded 0.5 percent in January. The street was looking for growth to remain flat in February.

On the inflation front, Germany's consumer price inflation slowed in March, as initially expected. The latest figures from the Federal Statistical Office showed that the consumer price index rose 1.3 percent year-on-year following a 1.5 percent climb in February. That was in line with the flash estimate. Separately, Norway consumer price inflation fell to its weakest level in nine-month, though marginally, for the third month in a row in March. The figures from Statistics Norway showed that the consumer price index climbed 2.9 percent year-on-year in March, after a 3.0 percent rise in February. Prices for clothing and footwear eased to 5.6 percent and recreation and culture fell 0.7 percent. Meanwhile, furnishing and housing prices rose 1.1 percent in March.

Asian market

The Asian equity indices made a mixed closing during the passing week, as investors eyed ahead to the impending corporate earnings season. Lingering uncertainty about the global economic outlook and a potential U.S.-China trade deal also kept investors on the sidelines.

Chinese benchmark -- Shanghai Composite edged lower by over one and half percent, despite more signs of progress in US-China trade talks. US Treasury Secretary Steven Mnuchin said that a call with Chinese Vice-Premier Liu He was productive and the two sides have settled on a mechanism to police any agreement, including new enforcement offices. Traders also took a note of report that China's exports rebounded in March but imports shrank for a fourth straight month and at a sharper pace, painting a mixed picture of the economy as trade talks with the United States reach their endgame.

However, Japanese Nikkei edged marginally higher during week, as the yen's fall against the dollar lifted export-oriented shares. However, gains remained capped as many investors stayed on the sidelines ahead of the US and domestic earnings season and an upcoming 10-day holiday in Japan.

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