The dark clouds have made a comeback on Dalal Street, as the Bull Run fizzled out and Indian equity benchmarks extended their southward journey for third straight week, as the trade war reignites after President Donald Trump threatened to impose tariffs on all Chinese imports. Markets started the week on pessimistic note and never looked in recovery mood throughout the week, as traders remained concerned with report that India’s services sector fell for the second consecutive month in April, with rates of new business and output growth both cooling to seven-month lows. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index eased to 51 in April from 52 in March. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- also slipped to 51.7 in April as against 52.7 in March. Sentiments also remain impacted by S&P Global Ratings’ latest report stating that GST regime in India is not likely to reduce the deficits of state governments significantly, amid large and growing expenditure mandates for the social sector as well as capital spending. Domestic sentiments got hit, amid reports that direct Tax collections fell short by Rs 82,000 crore at Rs 11.18 lakh crore during 2018-19 with lower corporate tax collections emerging as one of the reasons for the lower mop. Blood bath continued and key gauges breached their crucial 37,500 (Sensex) and 11,300 (Nifty) levels, as the Reserve Bank of India warned of the growing risks to fiscal consolidation of the states as their finances are saddled with farm loan waivers, income support schemes and the Ujwal Discom Assurance Yojana (UDAY) bonds for their power distribution companies. Adding more worries among traders, Former Finance Minister P Chidambaram said that macro-economic indicators confirm that the Indian economy has entered a disastrous phase of slowdown. BSE movement for the week The Bombay Stock Exchange (BSE) Sensex slipped 1500.27 points or 3.85% to 37,462.99 during the week ended May 10, 2019. The BSE Midcap index losses 393.59 points or 2.66% to 14,389.76, while Smallcap index slipped 442.42 points or 3.04% to 14,105.73. On the sectoral front, S&P BSE Metal was down by 793.18 points or 6.90% to 10701.18, S&P BSE Power was down by 97.12 points or 4.89% to 1890.29, S&P BSE Realty was down by 97.63 points or 4.78% to 1943.70, S&P BSE Oil & Gas was down by 693.84 points or 4.54% to 14576.58 and S&P BSE Auto was down by 648.67 points or 3.43% to 18251.47 were the top losers on the BSE sectoral front, while there were no gainers. NSE movement for the week The Nifty slipped 433.35 or 3.70% to 11,278.90. On the National Stock Exchange (NSE), Bank Nifty was down by 913.65 points or 3.05% to 29,040.50, Nifty IT was down by 143.30 points or 0.89% to 15,949.60, Nifty Mid Cap 100 decreased 435.55 points or 2.49% to 17,029.45 and Nifty Next 50 lost 978.80 points or 3.55% to 26,558.95. FII transactions during the week Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 28018.85 crore and gross sales of Rs 26306.83 crore, leading to a net inflow of Rs 1712.02 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 5768.19 crore against gross sales of Rs 9432.20 crore, resulting in a net outflow of Rs 3664.01 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 127.19 crore and gross sales of Rs 120.89 crore, leading to a net inflow of Rs 6.30 crore. Industry and Economy Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Ramesh Abhishek has said India is hoping to further improve its rank in World Bank’s Doing Business report this year especially in indicators of paying taxes, insolvency resolution, trading across borders, issue of building permits and starting a business. Improving ranking helps a country to provide a better investment climate for investors. The next report is expected to be released in October 2019. India improved its ranking by 23 places to the 77th position in the 2018 report. India is aiming to improve its ranking to the top 50th in the coming years. Outlook for the coming week In the passing week, Indian equity markets ended on a negative note with losses of around four percent, as some of the issues that have triggered the markets are the recent slump includes escalating trade war, foreign fund outflows, poor earnings and unpredictability over elections results. In the next week, traders will keep an eye on the sixth phase of election in 7 states for 59 seats which is schedule to be held on May 12. On the economy front, traders would be awaiting for the release of the wholesale price index (WPI) data for the month of April on May 14. India's annual wholesale price inflation accelerated to 3.18 percent year-on-year in March 2019 from 2.93 percent in the previous month and in line with market expectations. In the coming week, market-men would also keep a close watch on Consumer price index (CPI) data for the month of April which will be announced on May 14. India's retail price inflation rate rose to a five-month high of 2.86 percent year-on-year in March 2019 from 2.57 percent in the previous month, slightly above market expectations of 2.8 percent. In the ongoing earning season, market-participants would be majorly looking for earnings from industry’s big-wigs such as, Avenue Supermarts, Motilal Oswal Financial Services, Nilkamal, Parag Milk Foods, Andhra Bank, HDFC, Inox Leisure, ITC, Karnataka Bank, PTC India, Zee Media Corporation, Karur Vysya Bank, Just Dail, Lupin, Manappuram Finance, Shemaroo Entertainment, SRF, United Bank of India, CERA Sanitaryware, Edelweiss Financial Services, Endurance Technologies, IIFL Holdings, Lumax Industries, Pidilite Industries, Polycab India, Siemens, UCO Bank, Union Bank Of India, Welspun Corp, Central Bank Of India, Jubilant FoodWorks, Jammu & Kashmir Bank, Manappuram Finance, Bajaj Finserv, Bajaj Finance, Hindalco Industries, SKF India, Blue Dart Express, Hindalco Industries, JK Tyre & Industries, Bajaj Auto, Bajaj Holdings & Investment, Dr.Reddy's Laboratories, Indian Oil Corporation etc. On the global front from the US, traders will be eyeing important macro-economic data, starting with Import and Export Prices, Redbook on May 14, followed by Retail Sales on May 15, Jobless Claims, Fed Balance Sheet, Money Supply on May 16 and finally Consumer Sentiment and Baker-Hughes Rig Count on May 17. Top Gainers All the 50 Stocks on the Nifty remained on the losing side and none of the scrip managed a positive close on weekly basis. Top Losers Tata Steel down by 12.28% was the top loser of the week on Nifty - Tata Steel witnessed selling pressure on report that Thyssenkrupp is expecting the joint venture with Tata Steel to fail. Thyssenkrupp and Tata Steel in 2018 unveiled plans to combine their steel activities in Germany, the Netherlands and Britain to become the continent’s second-largest steelmaker after ArcelorMittal. But the landmark deal has not yet been approved due to concerns about its impact on competition. EU antitrust regulators are concerned that the deal would lead to less choice and higher prices for steel and were increasingly likely to block it unless the companies offered greater concessions.
Zee Entertainment Enterprises down by 11.29% was another top loser of the week on Nifty - Zee Entertainment came under pressure amid concerns over stake sale by its promoters and the audit of financial statements. Meanwhile, the company’s board board will consider standalone and consolidated results for fiscal 2018-19 on May 27, scotching “market rumours” that raised concerns about audit of the company’s financial statements.
Technical viewpoints During the week, CNX Nifty touched the highest level of 11,657.05 on May 7 and lowest level of 11,251.05 on May 10. On the last trading day, the Nifty closed at 11,278.90 with weekly loss of 433.35 points or 3.70 percent. For the coming week, 11,134.28 followed by 10,989.67 are likely to be good support levels for the Nifty, while the index may face resistance at 11,540.28 and further at 11,801.67 levels. US Market The US markets ended lower during the passing week after President Donald Trump threatened to impose tariffs on all Chinese imports. Trump said tariffs on $200 billion worth of Chinese goods would be increased to 25 percent on Friday and threatened to impose tariffs on the remaining $325 billion worth of Chinese goods shortly. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. The 10 percent tariff had been scheduled to rise to 25 percent at the end of last year, but the increase was delayed due to ongoing trade talks. Trump further claimed ‘the tariffs being paid by China for the past several months are partially responsible for our great economic results’. Meanwhile, China has said top trade envoys, including Vice Premier Liu He, will head to Washington on Thursday to resume negotiations. China’s diplomatic contingent had attempted to revamp a nearly 150-page draft trade agreement, as they were reluctant to agree to sign new trade terms into law, raising the ire of US negotiators. On the economic front, a report released by the Commerce Department unexpectedly showed a modest decrease in U.S. wholesale inventories in the month of March. The Commerce Department said wholesale inventories edged down by 0.1 percent in March after climbing by an upwardly revised 0.4 percent in February. Street had expected inventories to come in unchanged. The slight drop in wholesale inventories came as inventories of non-durable goods slid by 0.6 percent amid a sharp pullback in inventories of drugs. Besides, with imports rising by slightly more than exports, the Commerce Department released a report showing the U.S. trade deficit widened in the month of March. The report said the trade deficit widened to $50.0 billion in March from a revised $49.3 billion in February. Meanwhile, the report said the value of exports jumped by 1.0 percent to $212.0 billion in March from $209.9 billion in February. The increase in exports reflected a spike in exports of industrial supplies and materials as well as growth in exports of soybeans. First-time claims for U.S. unemployment benefits pulled back by less than expected in the week ended May 4th, according to a report released by the Labor Department. The report said initial jobless claims dipped to 228,000, a decrease of 2,000 from the previous week's unrevised level of 230,000. Street had expected jobless claims to drop to 220,000. Meanwhile, the Labor Department said the less volatile four-week moving average rose to 220,250, an increase of 7,750 from the previous week's unrevised average of 212,500. Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also climbed by 13,000 to 1.684 million in the week ended April 27th. European Market European markets ended the passing week in red terrain, amid mounting trade worries. The start of the week was lackluster, as Eurozone private sector grew to the slowest pace in three months in April, due to the weaker performance in both manufacturing and services sectors. The final data from IHS Markit's purchasing managers' survey showed that the final Eurozone Composite Purchasing Managers' Index, or PMI, fell to a three-month low of 51.5 in April from 51.6 in March. The flash reading was 51.3. The services PMI fell to 52.8 in April from 53.3 in the previous month. The flash reading was 52.5. Adding more worries, France's trade gap widened in March as the growth in imports outpaced that of exports. As per figures from the French Customs, the trade deficit widened to EUR 5.324 billion from EUR 4.131 billion in February. A year ago, the shortfall was EUR 3.902 billion. Markets extended their losses towards end of the week, after the European Commission slashed the growth forecasts for the euro area for this year and next, citing a more pronounced slowdown since the second half of last year, caused mainly due to weaker external demand, disruption in the automobile sector, policy uncertainty and Brexit worries. In its Spring 2019 forecast, the executive arm of the European Union trimmed the growth forecast for this year to 1.2 percent from 1.9 percent predicted in the Autumn forecast in February. Traders were also cautious, as Norway's industrial production declined further in March. The figures from Statistics Norway showed that industrial production declined 6.5 percent year-on-year in March, following a 5.7 percent fall in February. On the inflation front, Estonia's consumer price inflation rose to the highest level in four months. As per data from Statistics Estonia, the consumer price index rose 3.2 percent year-on-year in April, following a 2.3 percent increase in March. The latest reading was the highest since December, when the inflation was 3.4 percent. Besides, the Netherlands' consumer price inflation also rose for the fourth month in a row, though marginally, to the highest level in nearly six years in April. The data from the Central Bureau of Statistics showed that the consumer price index rose 2.9 percent year-on-year in April following a 2.8 percent increase in March. The latest reading was the highest since July 2013, when the inflation was 3.1 percent. Inflation based on the Harmonized Index of Consumer Prices, or HICP, accelerated to 3.0 percent from 2.9 percent in March. Asian market All the Asian equity indices snapped the week’s trade in the negative terrain, after U.S. President Donald Trump's tariff hike on $200 billion of Chinese goods took effect, raising tensions between the world's two biggest economies despite ongoing talks. Chinese Shanghai tumbled by over four and half percent, as country’s exports unexpectedly shrank 2.7 percent in April from a year earlier, while imports surprised with their first increase in five months. Some pessimism also came in with data showing that China's consumer price inflation rose to a six-month high in April, while producer price inflation increased at the fastest pace in four months. The consumer price index rose 2.5 percent year-on-year, following a 2.3 percent increase in March. The producer price index rose an annual 0.9 percent in the month, following a 0.4 percent increase in March. Malaysia's KLSE Composite index too edged lower by over one and half percent, as investors remained concerned after the country's central bank slashed its interest rate for the first time in nearly three years, citing several downside risks to the economic growth outlook.
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