Weekly Big Picture – North Korea Spoils the Party on D-Street

MarketSmith India _ Weekly Big PictureMARKET PULSE

Status: Confirmed Uptrend

Highlights:

One up day, four down days

Weekly Market Review

On Monday, the benchmark indices started the week on a bullish note, as the Nifty crossed its previous all-time high after a gap of 30 sessions. The Nifty registered a fresh closing high on Monday and extended the gains intraday on Tuesday. However, the market rally stalled thereafter, as the benchmark indices closed with minor losses on Tuesday, Wednesday, and Thursday, in the absence of any major cues. Today, the benchmark indices slumped in line with the global indices, as North Korea announced that it may detonate a hydrogen bomb in the Pacific Ocean.

The Nifty started the week at 10,133.10 and traded in the range of 9,952.80-10,178.95. The index closed for the week at 9,964.40, down 1.20%. After opening at 32,361.37, the Sensex lost 1.09% this week to settle at 31,922.44. The index traded in the range of 31,886.09-32,524.11.

This week, the Nifty and the Sensex both dropped two distribution days and picked up a distribution day in today’s session. This takes the current distribution day count to 4.0, for both the benchmark indices. The Nifty and the Sensex are down 2.11% and 2.34%, respectively, from their all-time highs. The Indian market condition remains in a Confirmed Uptrend.

Broader extended sold off this week, as the Nifty Midcap and the Smallcap indices lost 2.94% and 2.86%, respectively.

The MarketSmith IND 47 Index, which lists the top 47 stocks in chart and fundamental characteristics, lost 1.66% this week.

On the sectoral front, all the sectors, barring two, posted losses for this week. The Nifty Realty, Metal, and PSU Bank indices bore the maximum brunt of the selling, as they lost 4.81%, 4.68%, and 3.83%, respectively, during the week. Only the Nifty Pharma and IT indices managed to swim against the tide, ending with gains of 1.36% and 0.31%, respectively, for the week.

In domestic news, the government is mulling a stimulus package to boost the economy, in the wake of GDP growth slumping to 5.7% in the quarter ending June 2017. This was the sixth consecutive quarter of declining GDP growth rate. The Finance Minister has also hinted at accelerating the recapitalization of PSU banks in order to bolster their lending capacity. Economists, however, have warned that the government following the path of the then Finance Minister Pranab Mukherjee post the 2008 crisis would end up causing more damage to the economy than good.

Telecom sector was in focus this week as the Telecom Regulatory Authority of India (TRAI) slashed the interconnect usage charge (IUC) for all mobile-to-mobile calls to 6 paise per minute from 14 paise currently. The revised charge will be effective from October 1. The regulator has also announced that IUC will be abolished starting January 1, 2020. Analysts expect that TRAI’s decision will lead to the incumbent players such as Bharti Airtel, Idea Cellular, and Vodafone India to accelerate their VoLTE network rollout across the country to cut call costs.

Giving further impetus to the affordable housing sector, the government this week announced a new public-private-partnership (PPP) policy for the sector. The policy, announced by Hardeep Singh Puri, the Minister of Housing and Urban Affairs, provides eight PPP options for the private sector to invest in the affordable housing segment.

Pharma sector attracted buying interest this week, resulting in the Nifty Pharma index hitting a seven-week high in today’s session. The surge in the sector happened on account of positive news flow for Divi’s Laboratories and Dr Reddy’s Laboratories, as the USFDA gave clearance to the facilities of the two companies.

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

– German federal election to be held on September 24

– India government budget value for August 2017, to be released on September 29

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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