Weekly Big Picture – Market Recovers Losses of Recent Weeks; Closes Near All-Time High

 

MarketSmith India _ Weekly Big Picture.MARKET PULSE
Status: Confirmed Uptrend

Highlights:
Three up days, two down days

Weekly Market Review
In the first week post the rollout of the GST, India’s landmark indirect tax reform, the bulls were back in action. The key benchmark indices almost scaled new highs on Thursday, before a mild sell-off pulled back the indices in the final hour of the day’s trading. By the close of today’s session, the Nifty and the Sensex closed 0.5% off their all-time highs.

The week started with automobile companies’ sales numbers for June. The country’s leading car maker, Maruti Suzuki, saw its sales volumes increasing 7% y/y, to 106,188 units, as export volumes almost doubled last month, coming in at 13,131 units. Eicher Motors witnessed a 25% increase in sales volumes, while Ashok Leyland, registered a growth in sales volume of 11%

Reports that came out during the week pegged the additional recapitalization funds required by public sector banks on account of the RBI’s directive on higher provisioning, at INR 25,000 crore. With the government likely to provide only up to INR 10,000 crore, the rest will have to be raised by the banks themselves.

Demonetization, and the introduction of the Real Estate (Regulation and Development) Act (RERA), has led to a sharp slowdown in the real estate sector in the first half of 2017, as per Knight Frank India’s half-yearly report titled “India Real Estate”. New residential real estate launches in the first half of 2017 crashed almost 41%, the lowest in seven years, while sales volume also declined 11% y/y, recording the lowest first-half sales in the past five years. Office property transactions also fell 10% to 18.1 million square feet during the same period.

The Nifty started the week at 9,587.95 and traded in the range of 9,543.55-9,700.70. The index finally closed at 9,665.80, up 1.52% from last Friday’s close.

After opening the week at 31,156.04 points, the Sensex closed for the week at 31,360.63, gaining 1.42% from previous Friday’s closing price. During the week, the Sensex traded in the range of 31,017.11-31,460.70.

The distribution day count for both the Sensex and the Nifty remains unchanged from last week and now stands at 2.0. The Indian markets continue to trade in a Confirmed Uptrend.

The Nifty Midcap and Smallcap indices outperformed the headline indices, gaining 2.11% and 3.09%, respectively, during the week.

The MarketSmith IND 47 Index, which lists the top 47 stocks in chart and fundamental characteristics, gained 3.01% this week.

On the sectoral front, barring the Nifty IT index, which lost 0.66%, all indices emerged with gains during the week. The Nifty Realty, Energy, and Metal indices were the top three gainers, with increments of 6.07%, 3.93%, and 3.22%, respectively.

Talking about the market action during the week, the benchmark indices made impressive gains on Monday, which was expected to remain volatile due to concerns over the implementation of the Goods and Services Tax (GST). However, the rollout of the landmark tax reform was largely smooth, which was reflected in the buoyant mood seen on the Street.

After two quiet sessions on Tuesday and Wednesday, the market witnessed a run-up in yesterday’s session, with the benchmark indices coming within touching distance of their all-time highs. After a mild sell-off in the final hour of trading, the Sensex recorded a fresh closing high, while the Nifty ended less than a point shy of its all-time closing high. However, the exuberance seen in the frontline stocks was not reflected in the broader markets, as the Nifty Midcap and Smallcap indices did not outperform the headline indices.

Today, the market could not build on the momentum from yesterday’s session, as the headline indices faced resistance at higher levels. The benchmark indices traded in red for most part of the day before the headline indices finally settled flat, with minor losses.

The following events could serve as market movers in the coming week:
– The May 2017 India Industrial Production: July 12, 2017
– The June 2017 India Consumer Price Inflation: July 12, 2017
– The June 2017 India Wholesale Price Inflation: July 14, 2017
– Infosys Q1 FY 2018 Earnings: July 14, 2017

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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