Today’s Action:
Nifty and Sensex extend new-year winning streak; Broader market disappoints.
Daily Market Review:
The stock indices continue to make record highs, extending a superb start of the year. While the Sensex certainly led the way rising almost 0.51% to hit a new high of 35,260.29, the Nifty rose 0.26% topping the crucial 10,800 level for the first time on the back of a wide rally from private banking and financial stocks. The private banking and financing sector has around 25% weightage on the benchmark index Nifty.
The gains in the private banking sector was triggered majorly due to media reports indicating that Indian government may propose to hike foreign direct investment (FDI) limit in the banking sector. Reports suggest that the government may allow 100% FDI in private banks.
On the contrary, the leading index of 2017 Nifty Midcap and Smallcap feels the heat as the indices tumbled 1.94% and 2.49%, respectively.
Apart from private banking and financing sector, the majority of the sectors lagged. The Nifty Metal (-2.89%), Realty (-3.92%) and PSU Bank (-1.61%) were among the most lagging sectors.
The market breadth was also negative as 237 shares only advanced against a decline of 1333 shares. A total of 53 shares remain unchanged.
Our proprietary list, MarketSmith India IND 47 fell 2.24% leading to high growth stocks sinking back to their proper buy points.
After a strong 2017 for stocks (the Nifty roared 28.65%), buyers do not seem to be letting up. Distribution days are minimal, and leading stocks are performing for the most part. Yesterday, the Nifty shed one of its distribution days, leading to distribution count to two whereas no change is observed in the Sensex distribution count of one. Since both the benchmark indices hitting a record high and constructively trading above its 50-DMA and 200-DMA line, we are comfortable in keeping the Indian market status at a Confirmed Uptrend.
On the earnings front, Yes Bank profit came at INR 1,077 crore, an increase of 22% in Q3 FY 2018. Net interest income was up 27% y/y at INR 1,889 crore. The concern is provisions and contingencies, which jumped 265% to INR 421.32 crore. However, asset quality has improved with percentage of gross non-performing asset (GNPA) declining 1.72% compared with previous quarter. Net NPA also declined 0.93% from the earlier 1.04%.
Investors should keep an eye on blue chip stocks, as heavyweights like HDFC Bank, ITC Limited, Wipro, Reliance, and Kotak are expected to report their earnings tomorrow. These five blue chip stocks account for 25-30% of the benchmark index Nifty.
Current Outlook:
– Market environment conducive for new purchases, but remain selective.
– Focus on fundamentally strong stocks breaking out of strong technical patterns.
– Stay disciplined and exercise sound buy and sell rules.
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