Weekly Big Picture – Benchmark Indices Make Record Highs; Financials Lead the Rally

MarketSmith India _ Weekly Big PictureMARKET PULSE

Status: Confirmed Uptrend

Highlights:

Two up days, three down days

 Weekly Market Review

 The benchmark indices continued their winning streak from last week. Both the Sensex and the Nifty started on a positive note on Monday after rallying more than 0.50% each. On Tuesday, the Nifty crossed the 10K mark intraday, but failed to hold the momentum and ended up in red. The Nifty observed its all-time highs on Wednesday after it closed above the 10K level. The expiry of F&O on Thursday observed some distribution in the Nifty, as a result of which the index traded flat, while the Sensex made an all-time high.

 The Nifty started the week at 9,936.80 and traded in the range of 9,919.60-10,114.85. The index finally closed at 10,014.50, up 1% from last Friday’s close.

 After opening at 32,035.88 points, the Sensex added 0.88% this week to close at 32,309.88. During the week, the Sensex traded in a range of 32,058.33-32,672.66.

 Meanwhile, the Nifty dropped a distribution day due to ageing, further strengthening its uptrend. The current distribution day count for the Nifty stands at 1.0, while the Sensex observed a distribution day today, taking its total distribution day count to 3.0. The market condition remains in a Confirmed Uptrend.

 The broader markets maintained healthy gains this week. The Nifty Midcap and Smallcap indices outperformed the headline indices with gains of 1.13% and 0.64%, respectively.

 The MarketSmith IND 47 Index, which lists the top 47 stocks in chart and fundamental characteristics, declined 0.32% this week.

 The sectoral chart was tilted towards the green quadrant as majority of the sectoral indices closed positive towards the end of this week’s trading. Financials clearly outperformed other sector indices, while pharma shares restricted market movement. The top three gainers this week were the Nifty Financial Services, PSU Bank, and Bank indices, with gains of 2.83%, 2.31%, and 2.28%, respectively. The Nifty Pharma, Media, and Auto sectors recorded losses of 3.78%, 1.64%, and 0.19%, respectively.

 The Cabinet approved the sale of the government’s stake in Air India on Monday. After Tata Sons and Indigo, famous private equity players such as Kohlberg Kravis Roberts and Warbug Pincus have also expressed their interest to buy the stakes of India’s third largest domestic player.

 The Competition Commission of India (CCI) approved the merger of Idea Cellular with Vodafone India. This deal will create the country’s largest mobile phone operator, worth more than USD 23B, with a 35% market share.

 Coal India informed the parliament about its decision to shut all its mines that fall under the high-risk category.

 This week, HDFC Bank earnings announced its Q1 FY 2018 earnings. The net interest income for the bank grew 20.4% y/y, while the asset quality deteriorated on account of farm loan waiver.

 Axis bank and HDFC bank have made additional provisions towards standard assets in iron & steel, power, infrastructure, and telecommunications. This higher provisioning will lead to more capital outgo, hurting the bank’s profitability in the upcoming quarters.

 The U.S. Federal reserve decided to keep interest rates unchanged after having raised rates twice this year.

 The following event could serve as a market mover in the coming week:

– The Reserve Bank of India is expected to meet on August 2 for deciding its bi-monthly monetary policy. Economists expect the central bank to cut interest rates to boost the inflation rate, which currently stands below target.

 Leaders Up on Volume: DEEPAKFERT (+15.18%), L&TFH (+11.45%), NOCIL (+10.25%)

Leaders Down on Volume: IGPL (-8.96%), INDIANB (-6.22%), FEDERALBNK (-3.11%)

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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