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Markets witness consolidation during the passing week
Apr-26-2019

Indian equity benchmarks witnessed consolidation during the passing week, as concern about rising crude oil prices in the international market dented investors’ sentiments. Markets started the week on a pessimistic note amid a private report stating that business sentiments continue to decline for the country's financial and macro-economic conditions in the second quarter of the year compared to the same period a year before. As per the report, Composite Business Optimism Index stands at 78.4 during Q2 2019 as against 85.0 during Q2 2018, marking a 7.7% decline. Key gauges extended southward journey as the Employees State Insurance Corporation in its latest payroll data showed that job creation declined by 1.73% in February 2019 to 15.03 lakh compared to 15.30 lakh in the same month last year. Market participants also got cautious with a private report stating that the India Volatility Index shot up to a three-year high of 24.05 on April 22, amid rising uncertainty over the new government formation and soaring crude oil prices. However, traders got some support with Fitch Ratings’ report indicating that the RBI is the first central bank in the Asia-Pacific region to begin an explicit interest rate easing cycle buoyed by benign food inflation and easier global financial condition. Local indices once again moved towards north amid a private report stating that Indians are becoming increasingly worried about the economy's condition, with fewer citizens believing that the local economy is getting better. Adding more worries among market participants, the World Bank forecasted slowdown in East Asia and Pacific economies in 2019. But, buying in last day of the week helped markets to pare almost all of their early losses, as traders took encouragement with the RBI’s data showing that bank credit rose by 14.19 percent to Rs 96.45 lakh crore while deposits grew 10.60 percent to Rs 125.30 lakh crore in the first fortnight ended on April 12.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 72.95 points or 0.19% to 39,067.33 during the week ended April 26, 2019. The BSE Midcap index losses 318.58 points or 2.07% to 15,063.99 and Smallcap index slipped 207.82 points or 1.38% to 14,813.38. On the sectoral front, S&P BSE Auto was down by 1036.34 points or 5.13% to 19164.75, S&P BSE Consumer Discretionary Goods & Services was down by 97.22 points or 2.58% to 3666.73, S&P BSE Metal was down by 251.72 points or 2.17% to 11349.70, S&P BSE Realty was down by 44.24 points or 2.11% to 2053.31 and S&P BSE Power was down by 38.42 points or 1.89% to 1994.93 were the top losers on the BSE sectoral front, while S&P BSE Information Technology was up by 484.81 points or 3.12% to 16044.75, S&P BSE TECK was up by 187.56 points or 2.43% to 7894.93, S&P BSE Oil & Gas was up by 172.97 points or 1.15% to 15181.43 and S&P BSE Consumer Durables was up by 30.18 points or 0.13% to 23646.46 were the few gainers on the BSE sectoral front.

NSE movement for the week

The Nifty rose 1.85 or 0.02% to 11,754.65. On the National Stock Exchange (NSE), Bank Nifty was down by 209.90 points or 0.69% to 30,013.50, Nifty Mid Cap 100 decreased 349.90 points or 1.94% to 17,727.95 and Nifty Next 50 was down by 498.50 points or 1.75% to 27,921.05. On the other side, Nifty IT was up by 425.15 points or 2.64% to 16,504.45.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 29381.30 crore and gross sales of Rs 23660.82 crore, leading to a net inflow of Rs 5720.48 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 3323.67 crore against gross sales of Rs 4186.66 crore, resulting in a net outflow of Rs 862.99 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 7.75 crore and gross sales of Rs 16.00 crore, leading to a net outflow of Rs 8.25 crore.

Industry and Economy

Fitch Ratings in its latest report has stated the Reserve Bank of India (RBI) is the first central bank in the Asia-Pacific region to start an explicit interest rate easing cycle buoyed by benign food inflation and easier global financial conditions following the US Fed's shift to a more dovish policy stance. The six-member Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, cut rates in February and April citing prospects of benign inflation. In the four months of 2019, the RBI has cut policy interest rates twice by 0.25 percent each to one-year low of 6 percent.

Outlook for the coming week

In the passing week, markets witnessed volatility owing to some global developments and the F&O series expiry. Benchmarks ended almost flat with Sensex losing 0.19%, while Nifty was up by 1.85 points.

The next week marks the start of a new month and would be a holiday truncated week. Marketmen will be eyeing macro data starting with Nikkei Manufacturing PMI for the month of April which is scheduled to be released on May 02. The Nikkei India Manufacturing PMI dropped to a six-month low of 52.6 in March 2019 from 54.3 in the preceding month.

Traders will also keep an eye on the fourth phase of election in 9 states for 71 seats which is schedule to be held on April 29. Further, auto and cement companies would be in focus for the coming week as these companies will report their monthly sales figures.

In the ongoing earning season, market-participants would be majorly looking for earnings from industry’s big-wigs such as Cholamandalam Investment And Finance Company, Exide Industries, Kotak Mahindra Bank, Shoppers Stop, TVS Motor Company, Blue Star, Everest Industries, Dabur India, Intellect Design Arena, Larsen & Toubro Infotech, Tata Power, Godrej Consumer Products, L&T Technology Services etc.

On the global front from the US, traders will be eyeing important macro-economic data, starting with Personal Income and Outlays, Dallas Fed Mfg Survey on April 29, followed by Employment Cost Index, Redbook, Chicago PMI, Pending Home Sales Index on April 30, PMI Manufacturing Index, ISM Mfg Index, Construction Spending, FOMC Meeting Announcement, Fed Chair Press Conference on May 1, Jobless Claims, Factory Orders, Fed Balance Sheet, Money Supply on May 2 and finally International Trade in Goods, PMI Services Index and Baker-Hughes Rig Count on May 3.

Top Gainers

  • Ultratech Cement up by 8.22% was the top gainer on Nifty for the week - Ultratech Cement gained traction on reporting over 2-fold jump in its consolidated net profit at Rs 1,034.21 crore for Q4FY19, as compared to Rs 446.13 crore for Q4FY18, on the back of strong volume growth. Total income of the company increased by 17.34% at Rs 11,031.27 crore for Q4FY19 as compared Rs 9,401.49 crore for the Q4FY18. The company has reported a rise of 9.31% in its consolidated net profit at Rs 2,431.59 crore for FY19, as compared to Rs 2,224.46 crore for FY18.
  • Grasim Industries up by 5.33% was another top gainer on Nifty for the week - Grasim Industries gained after its subsidiary UltraTech Cement reported healthy earnings in March quarter. UltraTech Cement’s net sales during the quarter rose 18% year on year (Y-o-Y) at Rs 10,334 crore. Domestic sales volume jumped 16% Y-o-Y to 20.47 million tonnes. EBITDA (earnings before interest, tax, depreciation and amortization) improved 200 bps at 23% from 21% in year ago quarter. It reported more-than-doubled standalone net profit at Rs 1,017 crore in the Q4FY19.

Top Losers

  • Tata Motors down by 8.74% was the top loser of the week on Nifty - Some of the Auto industry stocks came under pressure amid reports that sales of passenger vehicles grew at their slowest pace in five years in the just concluded fiscal year as higher insurance costs, a liquidity crunch and uncertainty ahead of the general elections hurt consumer sentiment. The sector grew by less than 3% overall to around 3.3-3.4 million units. Besides, Tata Motors’ local sales dropped 12% in March to 17,810 units. However, for the fiscal year, the numbers were up 12% at 2,10,143.
  • Maruti Suzuki down by 8.12% was another top loser of the week on Nifty - Maruti Suzuki witnessed selling pressure after reporting 4.60% fall in its net profit at Rs 1795.60 crore for the quarter ended March 31, 2019, as compared to Rs 1882.10 crore for the same quarter in the previous year. However, total income of the company increased by 2.60% at Rs 22,327.10 crore for Q4FY19 as compared Rs 21,760.60 crore for the corresponding quarter previous year. Besides, the company has reported 2.86% fall in its net profit at Rs 7,500.60 crore for FY19 as compared to Rs 7,721.80 crore for FY18.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,796.75 on April 25 and lowest level of 11,564.80 on April 23. On the last trading day, the Nifty closed at 11,754.65 with weekly gain of 1.85 points or 0.02 percent. For the coming week, 11,614.05 followed by 11,473.45 are likely to be good support levels for the Nifty, while the index may face resistance at 11,846.00 and further at 11,937.35 levels.

US Market

The US markets ended mostly higher during the passing week on the back of upbeat earnings reports from a number of big-name companies, including Dow components United Technologies (UTX), Coca-Cola (KO) and Twitter (TWTR). These companies have reported better than expected first quarter results. Further, positive sentiment was also generated by a Commerce Department report showing new home sales in the U.S. unexpectedly jumped to their highest level in well over a year in the month of March. The Commerce Department said new home sales surged up by 4.5% to an annual rate of 692,000 in March after soaring by 5.9% to a revised rate of 662,000 in February. The continued increase surprised participants, who had expected new home sales to drop by 2.5 percent to a rate of 650,000 from the 667,000 originally reported for the previous month. With the unexpected spike, new home sales reached their highest annual rate since hitting 712,000 in November of 2017.

Meanwhile, reflecting a significant rebound in orders for transportation equipment, the Commerce Department released a report showing new orders for U.S. manufactured durable goods jumped by much more than expected in the month of March. The Commerce Department said durable goods orders surged up by 2.7 percent in March after tumbling by a revised 1.1 percent in February. Street had expected durable goods orders to climb by 0.8 percent compared to the 1.6 percent slump originally reported for the previous month. The bigger than expected rebound in durable goods orders came as orders for transportation equipment shot up by 7.0 percent in March after plunging by 2.9 percent in February. Orders for non-defense aircraft and parts led the way higher, soaring by 31.2 percent in March following a 25.4 percent nosedive in February. The report showed orders for motor vehicles and parts also jumped by 2.1 percent in March after coming in unchanged in the previous month.

Besides, after reporting first-time claims for U.S. unemployment benefits at a nearly fifty-year low in the previous week, the Labor Department released a report showing initial jobless claims rebounded by more than anticipated in the week ended April 20. The report said initial jobless claims climbed to 230,000, an increase of 37,000 from the previous week's revised level of 193,000. Street had expected jobless claims to rise to 200,000 from the 192,000 originally reported for the previous week. The bigger than expected increase came after the number of jobless claims in the previous week represented their lowest level since hitting 182,000 in September of 1969. The Labor Department said the less volatile four-week moving average also rose to 206,000, an increase of 4,500 from the previous week's revised average of 201,500.

European Market

European markets ended the passing week on mixed note, as investors fretted about slowing growth and reacted to a mixed bag of earnings news. The markets made a positive start of the week, as Turkey consumer confidence rose to the highest pace in eight months in April. The figures from the Turkish Statistical Institute showed that the consumer confidence index rose to 63.5 in April from 59.4 in March. The latest reading was the highest since last August, when it was 68.2. The indicator measuring the financial situation expectation of household for the next twelve months rose to 82.2 in April from 78.3 in March. The general economic situation expectation for the coming year increased to 82.4 from 78.6 in March. Traders were positive, amid reports that Finland's unemployment rate fell in March from last year. The data from Statistics Finland showed that the jobless rate for the 15 to 74 age group fell to 7.0 percent in March from 8.8 percent in the same month last year.

However, towards end of the week, key indices lost the gaining momentum, as Austria's production growth slowed in February. The data from Statistics Austria showed that the production index that combines both industry and construction climbed 5.9 percent year-on-year in February, after a 6.7 percent increase in January. Industrial production grew 5.1 percent annually and construction output rose by 9.3 percent in February. On a monthly basis, the production index rose 0.6 percent in February, slower than 0.7 percent rise in the previous month. Adding worries on the street, Denmark's retail sales growth slowed in March after rising in the previous month. As per figures from Statistics Denmark, retail sales rose 0.5 percent year-on-year in March, slower than 1.3 percent increase in February. In January, sales was zero. Sales of food and other groceries fell 2.8 percent annually in March.

On the inflation front, Finland's producer price inflation slowed for a seventh straight month to a thirteen-month low in March. The data from Statistics Finland showed that the producer price index climbed 2.3 percent year-on-year in March, after a 3.0 percent rise in February. The latest reading was the slowest since February 2018, when inflation was 2.2 percent. Besides, Estonia's producer price inflation also slowed in March. According to the data from Statistics Estonia, the producer price index rose 0.4 percent year-on-year in March, slower than the 0.6 percent rise in February. Price for electricity, gas, steam and air conditioning supply fell the most by 3.7 percent annually in March. Meanwhile, mining and quarrying prices rose 5.2 percent. On a month-on-month basis, producer prices were flat in March, after a 0.5 percent decline in the previous month.

Asian market

Asian equity indices made a mixed closing during the passing week, as investors digested a mixed set of US earnings and awaited the release of US first-quarter gross domestic product data for directional cues. Seoul stocks fell on growth worries after data showed the country's economy unexpectedly contracted in the first quarter in the biggest fall since the financial crisis. South Reports showing South Korea's gross domestic product was down a seasonally adjusted 0.3 percent sequentially in the first quarter of 2019. That follows the 1.0 percent increase in the three months prior.

Japanese Nikkei edged higher by more than half percent, as the yen's fall against the dollar lifted export-oriented shares. Sentiments remained up-beat with a government report showing that retail sales in Japan rose 0.2% sequentially in March. That beat expectations for a flat reading and was down from the 0.4% increase in February. Some support also came after the Bank of Japan revised its forward guidance and said it would keep extremely low interest rates until spring 2020. However, gains remain capped with data indicating that industrial output fell 0.9% on month in the month, missing expectations for a flat reading following the 0.7% increase in February.

However, Chinese Shanghai edged lower by over five percent during the week, on concerns that Beijing will slow the pace of further policy easing after unexpectedly strong first-quarter economic data. Reports from a recent high-level meeting in China, which was chaired by President Xi Jinping, showed willingness to fine-tune monetary policy but raised questions about future government stimulus. Meanwhile, the country's central bank extended 267.4 billion yuan ($39.8 billion) to some commercial banks to support liquidity in the banking system.

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