Weekly Big Picture -Key Indices Rebound After Trading Flat in Three Sessions

MarketSmith India _ Weekly Big Picture.


Status: Confirmed Uptrend


Three up days, two down days

Weekly Market Review

The major markets started the day on a strong note, trading sideways in the past four sessions. The week marked the overall strength in the market, with the Nifty Midcap outperforming them all. The Nifty and the Sensex rose for the fourth straight week, whereas broader markets trimmed some of the losses posted over the previous two weeks.

Over the last week, India, the U.S., and the U.K. reported a few key macroeconomic indicators. India’s Q4 FY 2017 GDP rate came in lower-than-expected at 6.1% on an annual basis, whereas 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.

Consolidating in the past four sessions, the Nifty opened at a record high of 9,657.15 in today’s session, and scored as high as 9,673.50. Gaining 0.61% over the week, the Nifty ended the week in the upper half of the trading range at 9,653.50. The range observed for the week was 9,547.70-9,673.50.

After trading nearly flat in the past two sessions, the Sensex closed up for the week, posting decent gains of 0.44% today. Starting the week on a weak note at 30,944.38, the index managed to close above 31,000 levels at 31,273.29, gaining 0.79% or 245 points. The index traded in a wide range of 30,869.90-31,190.40.

Both the Nifty and the Sensex clocked record highs of 9,673.50 and 31,332.56 today, respectively, and continue to trade well above their 50-DMA. The Nifty and the Sensex currently stand 0.21% and 0.19% off their highs, respectively. None of the indices picked up a distribution day this week; however, subtle distribution in the form of a stalling day was observed on May 26, 2017.

The Indian market outlook stays at a 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.

The broader markets revived this week with Nifty Midcap outperforming the markets. The Nifty Midcap and Smallcap added 1.04% and 0.77%, respectively. Trading slightly above 50-DMA, and 4% and 4.7% off their highs, the Midcap and Smallcap continue to be under pressure.

The MarketSmith India IND 47 Index, which lists the top 47 stocks in chart and fundamental characteristics, gained 0.51% this week.

Talking about the sectoral composites, the Nifty Pharma, after correcting heavily last week, gained back some strength and closed at a gain of 2.14%. The other top performing sectors for the week were Nifty FMCG and Nifty Auto, adding 3.51% and 2.15%, respectively. On the flip side, the top three underperforming sectors were Nifty Metal (-2.48%), IT (-1.18%), and Energy (-0.85%).

The U.S. consumer spending grew at its slowest pace in more than seven years in the first quarter of 2017. The U.S. economy showed signs of recovery, with consumer spending, which accounts for about 70% of the GDP, increasing 0.4% in April 2017. The annual y/y consumer spending rate is estimated to be approximately 3%. The strength in the economy is leading to expectations of an interest rate hike, when the Fed’s Open Market Committee meets on June 13-14.

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 among the G7 group of advanced economies.

President Trump pulled out of the historic Paris agreement dealing with climate change, attracting widespread criticism across the world. The President claimed that the agreement would give an unfair advantage to rival economies like India and China, and cost the U.S. 6.5 million jobs and $3 trillion in lost GDP. The decision by the President sits in line with the Republican party’s view and stance on climate change.  Following the withdrawal, oil prices continued to tumble on expectations of increased drilling and production of shale oil.

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

– RBI monetary policy: June 06, 2017.

Leaders Up on Volume: {MOTILALOFS} (10.61%), {KEC} (4.88%) , {500298} (+4.76%),

Leaders Down on Volume:  {524598} (-16.68%), {DAAWAT} (-4.59%), {SESHAPAPER} (3.80%)

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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