Weekly Big Picture – Key Indices Retreat from Higher Levels, as GST Jitters and Global Weakness Drag the Market

MarketSmith India _ Weekly Big Picture.

MARKET PULSE

Status: Confirmed Uptrend

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.

Highlights:

Two up days, two down days

Weekly Market Review

In a holiday-truncated week (the market remained closed on Monday due to Ramzan Id), the headline indices came under pressure, weighed down by losses in global markets and worries of a temporary business disruption due to GST rollout. The global market sentiment was subdued as policy uncertainty heightened in the U.S., with the Senate Republicans being forced to delay vote on a crucial health care bill due to lack of support.

Back home, the Finance Ministry has started notifying various provisions relating to interest calculation, input tax credit, and valuation, under the GST regime. The government has set interest rate at 18% for delayed tax payment, and 24% for excess claim of input credit or undue/excess reduction in tax liability. Also appeals and revisions, transitional provisions, and anti-profiteering rules have been notified, which will become effective from July 1.

The battered IT sector heaved a sigh of relief during the week as the U.S. Citizen and Immigration Services (USCIS) announced that it was looking at the possibility of resuming premium processing of H1-B visas as ‘workload’ permits. The suspension of prioritized processing of H1-B visas in March had affected the market sentiment on the IT sector.

The Nifty started the week at 9,594.05 and traded in the range of 9,473.45-9,615.40. The index finally closed at 9,520.90, down 0.56% from last Friday’s close.

After opening the week at 31,194.68 points, the Sensex closed for the week at 30,921.61, losing 0.70% from previous Friday’s closing price. During the week, the Sensex traded in the range of 30,680.66-31,294.96.

The Nifty picked up a distribution day on Tuesday, in the midst of multiple negative cues. The distribution day count for both the Sensex and the Nifty is now at 2.0, after dropping a distribution day during the week, due to ageing. The Indian markets continue to trade in a Confirmed Uptrend.

The Nifty Midcap and Smallcap indices outperformed the headline indices, gaining 0.25% and 0.27%, respectively, during the week.

The MarketSmith IND 47 Index, which lists the top 47 stocks in chart and fundamental characteristics, gained 0.04% this week.

On the sectoral front, the Nifty Metal, FMCG, and Pharma indices were the top three gainers, with increments of 3.42%, 2.25%, and 1.35%, respectively, while Nifty PSU Bank, Media, and Financial indices were battered the most, with losses of 4.12%, 1.85%, and 1.56%, respectively.

Talking of the market action through the week, benchmark indices opened with gains on Monday. However, the indices could not sustain the gains amid lack of any positive global or domestic cues. The indices extended their slide in afternoon trade, as reports emerged that China accused Indian troops of crossing into its territory along the Sikkim border and demanded their immediate withdrawal. Nifty PSU Bank index plummeted 3.4% after the RBI directed banks to set aside 50% and 100% of secured and unsecured loan exposures, respectively, for accounts referred to bankruptcy courts. Probable supply chain disruptions due to the rollout of the GST also spooked the market.

Yesterday, on the expiry day of the June series, the bulls took control in the morning; however, by the close of trade, the benchmark indices gave up most of the gains, and ended flat with minor gains. In the June series, the Nifty lost a meager 5.65 points to end at 9,504.10, and the Sensex gained 107.49 points to close at 30,857.52.

Today, the Street has embraced a cautious stance ahead of the crucial switch to the new indirect tax regime, which is slated to happen today midnight. However, the market ended the day in green due to a bout of buying in the last hour of trade.

The following events could serve as market movers in the coming week:

– The June 2017 China Caixin Manufacturing PMI: July 3, 2017

– The June 2017 Nikkei India Manufacturing PMI: July 3, 2017

– The June 2017 China Caixin Services PMI: July 5, 2017

– The June 2017 Nikkei India Services PMI: July 5, 2017

– The June 2017 U.S. Non-farm payrolls data: July 7, 2017

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