HOME > MARKETS > MARKET COMMENTARY
  MARKET COMMENTARY
EQUITY
Benchmarks end holiday shortened week in red
May-03-2019

Extending southward journey for second straight week, Indian equity benchmarks ended the holiday truncated week with a cut of around one third of a percent, as traders remained on sidelines ahead of election results later this month. Markets started the session on pessimistic note with the India Meteorological Department’s (IMD) statement that pre-monsoon rainfall from March to April, a phenomenon critical to agriculture in some parts of the country, has recorded 27 per cent deficiency. The IMD recorded 43.3 millimetres of rainfall across the country from March 1 to April 24 as against the normal precipitation of 59.6 millimetres. This was 27 per cent less of the Long Period Average (LPA). Traders also remained cautious with private report stating that the decline in economic growth momentum in October-December quarter of FY19 is likely to continue. As per the report, subdued consumption demand and election related uncertainty is expected to weigh on India's industrial production. Sentiments also remain dampened after India Ratings and Research (Ind-Ra) in its latest report lowered India’s GDP growth projection to 7.3% for FY20, from its earlier projection of 7.5%. Adding more anxiety on the street, April data signaled further loss in the growth momentum across India's manufacturing sector, reflecting softer increase in new orders. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance - eased to 51.8 in April from 52.6 in March. Markets extended losses with the Finance Ministry’s monthly report stating that India’s economy slowed down slightly in the last fiscal due to declining growth in private consumption, slow increase in fixed investment and muted exports though it is still fastest growing major economy.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 104.07 points or 0.27% to 38,963.26 during the week ended May 03, 2019. The BSE Midcap index losses 280.64 points or 1.86% to 14,783.35, while Smallcap index slipped 265.23 points or 1.79% to 14,548.15. On the sectoral front, S&P BSE Information Technology was down by 384.79 points or 2.40% to 15659.96, S&P BSE Healthcare was down by 312.13 points or 2.16% to 14152.57, S&P BSE Fast Moving Consumer Goods was down by 250.87 points or 2.12% to 11593.82, S&P BSE TECK was down by 153.74 points or 1.95% to 7741.19 and S&P BSE Auto was down by 264.61 points or 1.38% to 18900.14 were the top losers on the BSE sectoral front, while S&P BSE Metal was up by 144.66 points or 1.27% to 11494.36, S&P BSE Oil & Gas was up by 88.99 points or 0.59% to 15270.42 and S&P BSE Consumer Durables was up by 54.35 points or 0.23% to 23700.81 were the few gainers on the BSE sectoral front.

NSE movement for the week

The Nifty slipped 42.40 or 0.36% to 11,712.25. On the National Stock Exchange (NSE), Bank Nifty was down by 59.35 points or 0.20% to 29,954.15, Nifty IT was down by 411.55 points or 2.49% to 16,092.90, Nifty Mid Cap 100 decreased 262.95 points or 1.48% to 17,465.00 and Nifty Next 50 was down by 383.30 points or 1.37% to 27,537.75.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 18609.46 crore and gross sales of Rs 18815.35 crore, leading to a net outflow of Rs 205.89 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 1355.01 crore against gross sales of Rs 3529.73 crore, resulting in a net outflow of Rs 2174.72 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 56.59 crore and gross sales of Rs 73.75 crore, leading to a net outflow of Rs 17.16 crore.

Industry and Economy

The Finance Ministry in its monthly report for March said that though easing of monetary policy has the potential to support growth, the recent cuts in the key short-term lending rate, or repo rate by 25 basis points each in February and April are yet to transmit to weighted average lending rate (WALR) of banks. Therefore, it said the effects of easing on investment activity are yet to manifest. According to the report, credit growth could have been challenged by continuous tightening of bank liquidity causing the call money market rates to trend up since Q1 (April-June) of 2018-19, however, some relief is evident in Q4FY19.

Outlook for the coming week

In the passing week, Indian equity markets witnessed selling pressure and ended in red terrain on the back of mixed economic data. In next week, investors will be looking forward to a meeting between US commerce secretary Wilbur Ross with Suresh Prabhu which is schedule to be held on May 6. The meeting will be to discuss an opportunity on several contentious issues, including Washington’s withdrawal of benefits under the GSP programme and the ending of exemptions to sanctions on Iranian oil imports.

On the economy front, traders would keep a watch on release of Nikkei Services PMI data for the month of April on May 6. The Nikkei India Services PMI dropped to 52.0 in March 2019 from 52.5 in the previous month and below market consensus of 52.5.

Market participants will also be awaiting India's industrial production (IIP) data for the month of March, which is scheduled to be released on May 10. IIP rose 0.1 percent year-on-year in February 2019, following a downwardly revised 1.4 percent increase in the previous month and below market expectations of a 2 percent gain.

In the ongoing earning season, market-participants would be majorly looking for earnings from industry’s big-wigs such as Federal Bank, Bharti Airtel, ICICI Bank, Escorts Finance, LIC Housing Finance , NIIT Technologies, Wockhardt , CEAT , Escorts , Vedanta, Dhanlaxmi Bank , Asian Paints, Satin Creditcare Network, Tata Communications, Apollo Tyres , HCL Technologies, ICRA, Canara Bank, IDFC First Bank, Larsen & Toubro, Relaxo Footwears, State Bank of India, Tata Investment Corporation, Marico, Gillette India, JSW Holdings, Titan Company, Mahanagar Gas, PNB Housing Finance, NOCIL, PVR, etc.

On the global front from the US, traders will be eyeing important macro-economic data, starting with Redbook, JOLTS, Consumer Credit on May 7, followed by International Trade, Jobless Claims, Wholesale Trade, Fed Balance Sheet, Money Supply on May 9 and finally Baker-Hughes Rig Count and Treasury Budget on May 10.

Top Gainers

  • JSW Steel up by 7.76% was the top gainer on Nifty for the week - JSW Steel gained traction on receiving National Company Law Appellate Tribunal (NCLAT) approval for the Resolution Plan submitted by the company for Vardhman Industries (VIL). Since the implementation of the Resolution Plan would in effect be on an interim basis and could create wide ranging uncertainties around rights and liabilities of various stakeholders dealing with VIL, the Company is evaluating its options which include approaching the Supreme Court to seek a direction to defer the implementation till the resolution plan.
  • Tata Steel up by 7.25% was another top gainer on Nifty for the week - Tata Steel gained on receiving approval for merger of Bamnipal Steel and Tata Steel BSL (formerly Bhushan Steel) into the Company by way of a composite scheme of amalgamation and have recommended a merger ratio of 1 equity share of Rs 10 each fully paid up of the Company for every 15 equity shares of each fully paid up held by the public shareholders of Tata Steel BSL. Besides, Tata Steel plans to double iron ore output from captive sources over the next decade.

Top Losers

  • Yes Bank down by 25.80% was the top loser of the week on Nifty - Yes Bank witnessed selling pressure on reporting a net loss of Rs 1,506.64 crore for the quarter ended March 31, 2019 against net profit of Rs 1,179.44 crore for the same quarter year ago, due to increase in bank provinces and operating expenses. Provisions and contingencies shot up significantly to Rs 3,661.7 crore in Q4FY19, a massive increase of 9 times over Q4FY18 and 6.6 times compared to Q3FY19. It has created contingency provision of around Rs 2,100 crore pursuant to a review of the credit portfolio.
  • Britannia Industries down by 9.20% was another top loser of the week on Nifty - Britannia Industries came under pressure despite reporting 11.82% rise in its consolidated net profit at Rs 294.27 crore for Q4FY19 as compared to Rs 263.16 crore for Q4FY18. Total consolidated income of the company rose 10.80% at Rs 2,860.75 crore for quarter under review as compared to Rs 2,581.93 crore for the same quarter ended previous year. For FY19, the company has posted 15.09% rise in its consolidated net profit at Rs 1,155.46 crore as compared to Rs 1,003.96 crore for FY18.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 11,789.30 on May 2 and lowest level of 11,655.90 on April 30. On the last trading day, the Nifty closed at 11,712.25 with weekly loss of 42.40 points or 0.36 percent. For the coming week, 11,649.00 followed by 11,585.75 are likely to be good support levels for the Nifty, while the index may face resistance at 11,782.40 and further at 11,852.55 levels.

US Market

The US markets ended lower during the passing week after Federal Reserve Chairman Jerome Powell dashed traders' hopes for a near-term interest rate cut. Powell said the Fed sees transitory factors contributing to recent low inflation readings. Powell said the Fed would take persistently low inflation into account when setting policy but currently expects inflation to return to the 2 percent objective. The comments from Powell came after the Fed announced its widely expected decision to leave interest rates unchanged. The Fed maintained the target range for the federal funds rate at 2.25 to 2.50 percent for the third consecutive meeting. The central bank said information received since its previous meeting in March showed economic activity rose at a solid rate. After the March meeting, the Fed noted the pace of economic growth had slowed from the solid rate in the fourth quarter.

Further, negative sentiment also generated in the markets after a report released by the Commerce Department showed an unexpected pullback in US construction spending in the month of March. The report said construction spending slumped by 0.9 percent to an annual rate of $1.282 trillion in March after climbing by 0.7 percent to a revised rate of $1.293 trillion in February. Street had expected spending to inch up by 0.1 percent. The unexpected decrease in construction spending was partly due to a steep drop in spending on private residential construction, which plunged by 1.8 percent to a rate of $500.9 billion. Meanwhile, the Labor Department released a report showing first-time claims for US unemployment benefits were unchanged in the week ended April 27th. The report said initial jobless claims came in at 230,000, unchanged from the previous week's unrevised level of 230,000. Street had expected jobless claims to dip to 215,000.

However, a report released by the Commerce Department showed new orders for US manufactured goods jumped by more than expected in the month of March amid a substantial rebound in orders for transportation equipment. The Commerce Department said factory orders spiked by 1.9 percent in March after falling by a revised 0.3 percent in February. Street had expected orders to surge up by 1.5 percent compared to the 0.5 percent drop originally reported for the previous month. The bigger than expected rebound in factory orders came as orders for transportation equipment soared by 7.0 percent in March after plunging by 2.9 percent in February. Besides, reflecting a spike in output, the Labor Department released a report showing a much bigger than expected increase in labor productivity in the first quarter. The Labor Department said productivity surged up by 3.6 percent in the first quarter after climbing by a downwardly revised 1.3 percent in the fourth quarter.

European Market

European markets ended the passing week on mixed note, amid disappointing Eurozone economic data. Most of the markets made a cautious start of the week, as Eurozone economic sentiment weakened for a tenth straight month in April to its lowest level in nearly three years, amid a sharp deterioration in the morale in industry to its weakest level in about five years. The survey data from the European Commission showed that the economic sentiment index decreased to 104 from 105.6 in March. Adding more worries, UK manufacturing expansion slowed to a two-month low in April amid a decline in export business and an easing in the robust pace of stock-building. The survey data from IHS Markit showed that the IHS Markit/CIPS Purchasing Managers' Index, or PMI, fell to 53.1 in April from March's 13-month high of 55.1.

Trader seemed pessimistic during the week, after Germany's retail sales fell for the first time in three months, defying expectations for a rise. The data from the Federal Statistical Office showed that retail sales declined 2.1 percent year-on-year in March, after a 4.4 percent rise in February, which was revised from 4.7 percent. The latest decline was the worst since last September, when sales fell 2.9 percent. Separately, Hungary's export and import growth slowed in February leading to a decrease in trade surplus. According to the data from the Hungarian Central Statistical Office, trade surplus decreased by EUR 26 million to EUR 816 million in February. Exports climbed 6.5 percent year-on-year in February, following a 6.6 percent rise in January. Imports rose 6.6 percent annually in February, slower than the 8.7 percent increase in the previous month.

On the inflation front, Germany's consumer price inflation accelerated sharply in April to its highest level in four months, led by a strong increase in service costs. As per flash data from Destatis, the consumer price index rose 2 percent year-on-year following a 1.3 percent increase in March. Further, Iceland's consumer price inflation also accelerated in April to its highest level in three months. The figures from Statistics Iceland showed that the consumer price index rose 3.30 percent year-on-year following a 2.90 percent increase in March. The inflation rate was the highest since January, when price growth was 3.4 percent. Excluding housing cost, inflation was 2.8 percent. On a monthly basis, the CPI climbed 0.40 percent in April after a 0.50 percent rise in March.

Asian market

Asian equity indices ended the weekly trade mostly in green terrain, followed by upbeat US GDP data as well as growing optimism over a possible US-China trade deal. However, gains remain capped as investors looked ahead to the release of US Labor Department's closely watched monthly jobs report for April for clues on the strength of the world's largest economy. Market in Japan was closed for the week due to public holidays.

Seoul edged higher by more than half percent, as the latest survey from Nikkei revealed that the manufacturing sector in South Korea moved back into expansion territory in April, with a manufacturing PMI score of 50.2, up from 48.8 in March. Traders also took encouragement with a government report showing that industrial output in South Korea climbed a seasonally adjusted 1.4 percent month-on-month in March, rebounding from the 3.4 percent contraction in February.

However, Chinese Shanghai edged marginally lower during the passing week, as data showed factory activity in China expanded for a second straight month in April but at a much slower pace, rekindling investor concerns over slowing global growth. The official Purchasing Managers' Index (PMI) for manufacturing unexpectedly fell to 50.1 in April from 50.5 in March, while the Caixin-Markit China PMI slipped to 50.2 against the 50.8 reading in the previous month. Growth in China's services sector also slowed in the month.
  RELATED NEWS >>
Most Viewed >>
April 19 , 2024
Best mutual funds: These 7 large cap schemes b
April 18 , 2024
How to choose the right debt funds? Here are 7
April 18 , 2024
Modest rise in net SIP inflows in FY24 owing t
April 19 , 2024
Axis AMC elevates R Sivakumar as head of the c
EXPLORE
© CITRUS INTERACTIVE
Designed & Developed Accord Fintech Pvt. Ltd.