Weekly Big Picture – Key Indices end the volatile week on a positive note

MarketSmith India _ Weekly Big Picture.

MARKET PULSE

Status: Confirmed Uptrend

Highlights:

Three up days, two down days

Weekly Market Review

Continuing with solid gains last week, the markets started the week with a bang. However, with the news of a crisis in the White House flowing in, the markets took a breather and corrected on Thursday, and discounted some gains from the rally. On Friday, the key indices observed a gap up opening, on account of new rates for GST, however, closed flat by the end of the session, with the Sensex posting a marginal gain of 0.10%.

Gaining about 1.33% in the first half of the week, the Nifty gave up 1% on Thursday, and finished the week at a gain of 0.29%. During the week, it made an all-time high of 9,532.60. With an opening and closing of 9,433.55 and 9,427.90, respectively, it traded in the wide range of 9,390.75 – 9,532.60.

After a gap up opening of the week at 30,287.37, the Sensex rallied 1.56% in the first half of the week, and slipped by 0.73% on Thursday. During the week, it added 277 points or 0.92% and made a fresh high of 30,692.45. With a closing of 30,464.92, it traded in the range of 30,273.62 – 30,692.45.

The Nifty and the Sensex are trading 1.1 % and 0.81% off their all-time highs, respectively. Both the indices are trading comfortably above their 50-Day moving averages.

Despite witnessing a steep slump on Thursday, the Nifty escaped the week without any additional distribution days, owing to lower trading volumes. However, the Sensex picked up a distribution day and one is likely to expire on Monday. The current distribution day count for the Nifty and the Sensex remains at 2.0 and 5.0, respectively. The market condition remains in a Confirmed Uptrend.

The week has been quite stressful for the broader markets as the Nifty Midcap and Smallcap shrugged off 1.75% and 2.13% from their earlier gains, respectively.  The week began on a bullish note, with the Nifty Midcap coining a fresh high of 18,511.55 on Tuesday, but saw a deep correction on Thursday on heavy volumes. The Nifty smallcap ended its nine-week long winning streak.

The William O’Neil IND 47 Index, which lists the top 47 stocks in chart and fundamental characteristics, lost 0.34% this week.

Talking about the sectors, the Nifty FMCG, PSU Bank and Metal were the top three gainers with increments of 1.61%, 1.15%, and 1.07%, respectively, while Nifty Media, Realty, and Energy were the top three losers with losses of -2.29%, -1.86, and -1.86%, respectively.

The indices scaled their all-time highs this week, boosted by macroeconomic data, government policies, and positive earnings. Several stocks in our portfolio reported earnings surprises. Despite the demonetization blues, from 2016 to 2017, India’s exports grew at its fastest pace in five years by 4.7% to $274.65 billion. Inflation softened, some of the key inflation indices are on a three-month low.

Owing to the positive macro data, the rupee hit a fresh 21-month high against the U.S. dollar.

On the policy front, the Cabinet approved a coal linkage policy named SHAKTI or the Scheme to Harness and Allocate Koyla (Coal) Transparently in India. The long-term coal linkages to power companies will be auctioned, which is expected to revive 30,000 MW of power plants in India. The GOI also seeks to reduce dependence on imported coal. Hence, the policy will help in reducing the trade deficit.

Axis Bank continued the trend in lowering interest rates for housing finance. It announced its decision to cut home loan interest rates by 30 basis points to 8.35 percent for loans up to INR 30 lakh, the lowest in the industry.

The Wallstreet saw a black market on Wednesday as Nasdaq suffered the biggest one –day losses since the day after the U.K. vote to exit from the European Union. The turmoil was due to saga regarding the shock firing of former FBI Director James Comey. The U.S. markets are Under Pressure.

On the IPO front, IRB Infrastructure Developers Ltd’s infrastructure investment trust (IRB InvIT) fund today, gaining a mellow 1.2% in the early trade. Today, HUDCO, a techno-financing company listed on the bourses with a 21.5% premium.

Despite the ongoing efforts led by OPEC to tighten the oil market by cutting production, the oil prices continued to dip, due to a supply glut in the market.

Today, the GOI has categorized 1,211 items (98 categories of goods) so far under various tax slabs. The biggest takeaway is that food items will become cheaper.  The cost of energy generation is likely to come down as the tax burden on coal will reduce to 5% from the current 11.7%. Most services split up into the 12% and 18% tax bracket.

The GST Council last week, finalized tax rates on 80-90% of goods and services under the four-slab structure with essential items slotted in either the tax-free or the lowest tax bracket of 5%.  By and large, a capital goods tax rate of 18% will help improve the operating margins of certain manufacturing and capital intensive firms. The economists reckon that the overall impact on retail inflation will be determined by the tax on services.

Motherson Sumi System’s Q4  FY 2017 consolidated net profit rose 12% y/y, to INR 475 crore on a 15% y/y increase in revenues to INR 11100 crore.

The following events could serve as a market mover in the coming weeks:

– RBI data on deposit and loan growth: May 26, 2017.

– Q4 FY 2017 earnings results for Godrej Industries, Bank of India, Voltas, Tata Motors, Torrent Power,  Future Retail, Novartis India,  HCL Technologies, Dish TV India, Amara Raja Batteries,  Adani Enterprises, Bosch, Cipla, Trident, Page Industries, Honeywell Automation, Crompton Greaves Consumer Electrical, Divis Labs, NBCC, and ITC, among others.

Leaders Up on Volume: {CAPLIPOINT} (+26.08%), {GEOJITFSL} (+6.67%), {KEC} (+5.51%)

Leaders Down on Volume:  {MAITHANALL} (-11.35%), {NILKAMAL} (-7.45%), {MEP} (6.74%)

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