Daily Big Picture – Major Markets End Flat; Broader Markets Outperform for Third Consecutive Day


Today’s Action:

The Nifty and the Sensex end the day flat, closing ~0.35% off their recent high. The broader markets trimmed their losses and ended the day with a decent gain for third day in a row.

Daily Market Review

The key composites started the month on a negative note after the GDP growth rate slowed down to 6.1%, failing to meet the analysts’ expectations of ~7.1%. This was the lowest rate posted in the last nine months. The major markets ended the day flat on a second consecutive day. The broader markets continue to outperform the street.

Opening slightly above the key levels of 9,600 at 9,603.55, the Nifty traded in a narrow range of 9,589.90 – 9,634.65.  Having witnessed a mild distribution yesterday, in the form of stalling day, the index lost 5 points or 0.05% to end the day nearly flat at 9,616.10.

The Sensex opened on a lower note at 31,117.09 and lost 8 points or 0.03%, to end the day flat at 31,137.59. The index traded in a narrow range of 31,062.02 – 31,213.12. It continues to trade well above its 50-day moving average and 0.38% off its recent high of 31,255.28.

Both the indices traded on low volumes as compared to yesterday’s volume.

The broader markets outperformed the markets for a third straight day in a row. The Nifty Midcap and Smallcap added gains of 0.62% and 1.19%, respectively. However, they continue to trade below their 50-day moving average and nearly 5% below their off highs and remain under pressure.

The MarketSmith India IND 47 Index, which lists the top 47 stocks in chart and fundamental characteristics, closed at a decent gain of 0.95% in today’s trading session, outperforming the benchmark.

Talking about the sectoral composites, 60% of them closed in a positive territory. The top three gainers of the day were Nifty FMCG, Pharma, and Media adding 1.25%, 0.88%, and 0.65%, respectively. And the top three sectors to close in red were Nifty Energy (-1.08%), Metal (-0.88%) and Private Bank (-0.53%).

The recent ban by the government on mass trading of cattle for meat has attracted criticism from several economists.  India is the second largest exporter of beef in the world, with an annual turnover of $4 billion.

The three components of the agricultural sector are crops, livestock, and fisheries. Due to erratic monsoons, more and more farmers have been shifting from cultivating crops to livestock farming. In 2002-2003, the monetary contribution from livestock to the Indian economy surpassed that of food grains. Since then livestock’s contribution has remained higher by 5-13%, according to economists at the National Centre for Agricultural Economics and Policy Research.

The ban will not only affect the export revenues but also, affect the farmer’s incomes and cause unemployment. Following protests, across a few states, the environment ministry hinted that the government could re-think the policy.

Yesterday, India lost its tag of the world’s fastest-growing major economy. India registered an annual growth of 6.1% in the January-March quarter, as opposed to 6.9% of the Chinese economy.

The U.K’s GDP growth rate slumped to 0.2% for the first three months of 2017 on account of Brexit, marking the lowest growth rate amongst the G7 group of advanced economies.

The manufacturing sector growth in India slowed down to a three-month low in May 2017. The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI), an indicator of manufacturing activity, declined from 52.5 in April 2017 to a three-month low of 51.6 in May 2017.

The Indian market outlook stays at Confirmed Uptrend as the Nifty and the Sensex are trading near their all-time highs. The distribution day count stands at 1.0 and 4.0, for the Nifty and the Sensex, respectively.

So, what should be your action plan in the current market?

With a distribution day count of 1 in the Nifty, the Indian market remains to be in a Confirmed Uptrend. The broader markets ended in positive today, for the third consecutive day, however, it remain below their 50-DMA. They continue to remain under pressure. Investors are advised to move ahead with caution and be selective in picking stocks, especially in the Smallcap and Midcap stocks.

Taking positions in fundamentally strong stocks with breakouts on good volumes can help investors fetch optimal returns in the least possible time. These stocks would ideally be those that meet the CAN SLIM attributes such as strong earnings and sales growth, growing institutional sponsorships, and the rising demand for the stock.

With the Q4 earnings season coming to an end, investors can update their watchlist with the stocks that posted strong quarterly and annual results. Watch out for their technical breakout on above average volumes, as the right entry point. One should restrain from taking positions in the stocks that are to release their results in the next few days. Also analyze the results of your holdings to gauge their future performance. Timely action against bad results will help preserve capital.

Leaders Up on Volume: {VIJAYABANK} (+9.98%), {FEDERALBNK} (+4.17%), {MOTILALOFS} (3.80%)

Leaders Down on Volume:  {IOC} (-3.63%), {500298} (-0.4%)

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