Extending their northward journey for third straight week, Indian equity benchmarks posted gains of around half a percent in the passing week, recapturing their crucial 28,300 (Sensex) and 8,750 (Nifty) levels. Markets started the week on positive note with traders taking encouragement with Economic Affairs Secretary Shaktikanta Das' statement expressing confidence that the economy will grow upwards of 7 per cent next fiscal. He reiterated that there will be transient impact of demonetisation on the economy, but it will not spill over to the next fiscal. Afterwards, two days of profit booking was seen in the markets, as traders remained concerned with Commerce Minister Nirmala Sitharaman's statement that the proposed changes in the regime for issuing H-1B visas for skilled workers by the US government will have an impact on Indian companies and the Commerce Ministry will soon hold a meeting with the industry to discuss its strategy for dealing with it. Sentiments dampened after Reserve Bank of India (RBI) in the Sixth Bi-monthly Monetary Policy Statement, 2016-17 maintained status quo, keeping the policy rates unchanged. Though, final two sessions of trade helped key gauges to gain some ground with RBI governor's statement that there is further scope for banks to reduce lending rates as the Reserve Bank has already brought down its policy rates by 175 basis points since January 2015. Some support also came with reports that foreign direct investment into the country surged by 60 percent to $ 4.68 billion in November 2016, compared to $2.93 billion in November 2015. Traders also got some boost with a US think tank report stating that India will be the world's fastest growing economy during the next five years as China's economy cools and growth elsewhere sputters.
BSE movement for the week
The Bombay Stock Exchange (BSE) Sensex surged 93.73 points or 0.33% to 28,334.25 during the week ended February 10, 2017. The BSE Mid-cap index was up by 183 points or 1.38% to 13,468.41, while the Small-cap index rose 179.21 points or 1.34% to 13,601.31. On the sectoral front, S&P BSE Consumer Durables was up by 672.10 points or 5.20% to 13590.77, S&P BSE Information Technology was up by 371.74 points or 3.83% to 10070.34, S&P BSE Teck was up by 196.84 points or 3.63% to 5622.39, S&P BSE Realty was up by 47.96 points or 3.30% to 1499.85 and S&P BSE Capital Goods was up by 386.36 points or 2.56% to 15482.59 were the top gainers on the BSE sectoral front, while S&P BSE Metal was down by 195.08 points or 1.64% to 11694.63, S&P BSE Healthcare was down by 116.83 points or 0.77% to 15138.15, S&P BSE PSU was down by 15.21 points or 0.18% to 8636.48 and S&P BSE Oil & Gas was down by 5.50 points or 0.04% to 13094.98 were the top losers on the BSE sectoral space.
NSE movement for the week
The Nifty was up by 52.60 points or 0.60% to 8,793.55. On the National Stock Exchange (NSE), Nifty Next 50 rose 258.70 points or 1.08% to 24,201.85, Nifty Midcap 100 edged higher by 192.50 points or 1.20% to 16,227.70, Bank Nifty gained 17.10 points or 0.08% to 20,213.90 and Nifty IT was up by 362.05 points or 3.61% to 10,387.85.
FII transactions during the week
Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week with gross purchases of Rs 23329.45 crore and gross sales of Rs 22486.96 crore, leading to a net inflow of Rs 842.49 crore. They stood as net buyers in the debt segment with gross purchases of Rs 8858.60 crore against gross sales of Rs 6217.37 crore, resulting in a net inflow of Rs 2641.23 crore.
Industry and Economy
In a step forward to enhance logistics efficiency, the government is considering to develop economic corridors along with logistics parks on national highways. The economic corridors include Mumbai-Cochin-Kanyakumari, Bangalore-Mangalore, Hyderabad-Panji and Sambalpur-Ranchi to name a few. After completing the economic corridors, this will help to reduce the travel time and result in reduction in logistics costs. Minister of State for Highways Mansukh Lal Mandavia has said that the Ministry of Road Transport and Highways got a study conducted on logistics efficiency enhancement. He said that the study has made several recommendations including, inter alia, development of economic corridors, feeder routes and removal of choke points, along with the development of logistics parks on national highways. Minister noted that recommendations have been accepted and the work of developing logistics parks at identified locations in partnership with state governments has been assigned to National Highways Authority of India (NHAI). He added that a rough estimate suggests about Rs 3 lakh crore on the project and the scheme is being finalized.
Outlook for the coming week
The passing week was extension of jubilation for the Indian bourses, even though RBI’s status quo decision came as a mood dampener in the mid of the week, traders remained hopeful of growth story. The coming week will be guided by the macro factors domestic as well as global, while the final batch of earnings too will keep the markets buzzing.
On the economy front, Consumer price index (CPI) inflation data for the month of January will be announced on Feb 13. The December CPI came in at 3.4% over 3.63% MoM. CPI food inflation was at 1.37% in December as compared with 2.03% in November due to seasonal factors and the demonetisation drive.
Wholesale price index (WPI) inflation data for the month of January will be released on Feb 14. The Wholesale Price Index (WPI)-based inflation for December rose to 3.39 per cent from 3.15 per cent in November, with rising prices of petrol and diesel.
In the final leg of the third quarter earnings season, traders will be eyeing the important results of Adhunik Industries, AIA Engineering, Bajaj Hindusthan Sugar, AXISCADES Engineering Technologies, Balmer Lawrie, Britannia Industries, DCM Shriram Industries, GKB Ophthalmics, Hindalco, HOV Services, Max India, Minda Corporation, MMFL, MMTC, NBCC, NMDC, PFC, PFS, Sadbhav Engineering, SJVN, SKF India, Sunteck Realty, Tata Investment, Adani Enterprises, Adani Port, CMI, Cox & King, Fag Bearings, Godrej Industries, ITDC, Kalpataru Power, KRBL, MTNL, Vedanta etc will be reporting their numbers.
On the global front from the US, traders will first be eyeing the Producer Price Index and NFIB Small Business Optimism Index to be announced on Feb 14, followed by Consumer Price Index, Retail Sales, Empire State Mfg Survey, Industrial Production, Business Inventories and Housing Market Index on Feb 15, Housing Starts, Jobless Claims, Philadelphia Fed Business Outlook Survey and Fed Balance Sheet on Feb 16, E-Commerce Retail Sales on Feb 17. Apart from all the economic event, Federal Reserve Chair Janet Yellen will give her semiannual monetary policy testimony before the Senate Banking Committee on Feb 14.
During the week, CNX Nifty touched the highest level of 8,822.10 on February 10, 2017 and lowest level of 8715.00 on February 8, 2017. On the last trading day, the Nifty closed at 8793.55 with a weekly gain of 52.60 points or 0.60 percent. For the coming week, 8731.67 followed by 8669.78 are likely to be good support levels for the Nifty, while the index may face resistance at 8838.77 and further at 8883.98 levels.
The US markets got some relief during the passing week after Trump referenced a phenomenal announcement about his tax plan coming in the next few weeks. St. Louis Federal Reserve Bank President James Bullard said that US interest rates can likely remain low through at least 2017, with no clear sense yet of whether the Trump administration’s policies will spark higher inflation or growth. Bullard said he feels that the Fed will only need to raise interest rates once this year, and indicated a move probably will not happen when the central banks meets in March. There will not be enough information about the new administration’s possible spending and tax plans at that point. Bullard added that inflation expectations remain low despite administration talk of large tax cuts and infrastructure spending, actions that could stoke inflation in an economy considered near full employment.
There were some encouraging reports on the economic front. The number of Americans who applied for unemployment benefits in early February fell by 12,000 to 234,000, hitting the second-lowest level of an economic recovery that began nearly eight years ago. New jobless claims have registered less than 300,000 for 101 straight weeks, the longest streak in more than four decades. The less volatile four-week average of initial claims dropped by 3,750 and stood at 244,250, touching the lowest level in 44 years. The Federal Reserve in a quarterly survey reported that loan officers at US banks reported largely unchanged lending standards and slightly looser terms for business loans in the last three months of 2016. The survey results indicate the effect of the Fed’s recent interest rate increase may be falling differently across the economy.
Separately, the US trade deficit rose slightly in 2016 to $502.3 billion, marking the highest level in four years. The trade gap widened last year because exports fell faster than imports, the result of a weak global economy and a stronger dollar that made American products more expensive to foreign buyers. The deficit with Mexico, the biggest target of President Donald Trump’s wrath, rose 4.2% to $63.2 billion in 2016 to mark a five-year high.
The European markets were too sensed some relief during the passing week after European Central Bank (ECB) President Mario Draghi said that support from ECB’s monetary policy is still needed if inflation rates are to converge towards the 2 percent target in a sustained manner. Draghi noted that recent pick-ups in inflation were driven by energy prices while underlying inflation pressures remain subdued, and confirmed that the central bank is prepared to expand its record stimulus programme if the inflation outlook becomes less favourable. Draghi added that ECB has decided to extend the asset purchase programme beyond March 2017, with the intention of conducting purchases until the end of December 2017 or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.
IMF Managing Director Christine Lagarde said that the International Monetary Fund (IMF) tried to be ruthless truth tellers in its assessment that Greece needs to pursue further reforms to its pension and tax systems. Lagarde said that the fund would not back down from its views on Greece’s economic prospects despite protests from the Greek government that they were too pessimistic. The IMF said in its first annual audit of Greece’s economy in nearly four years that Greece’s debt was still unsustainable even after years of grinding austerity. It recommended that Greece’s pension system be refocused on supporting the poor, the tax base be broadened and tax rates lowered to help jumpstart economic growth.
Bank of England survey showed that British employers expect to offer less generous pay deals this year compared with 2016 despite rising inflation, probably putting pressure on consumer spending as the year goes on. The BoE said firms expected the average pay deal would offer staff a 2.2 percent rise, down from 2.7 percent in 2016, reflecting difficulties passing on rising costs after last year’s Brexit vote and a slowdown in the rate of increase in Britain’s minimum wage.
All the Asian equity benchmarks ended the week in green terrain, as investors cheered upbeat Chinese trade data and strong gains on Wall Street after US President Donald Trump promised to unveil a major tax announcement to lower the burden on businesses. Higher crude oil prices also boosted investors’ sentiments in the region.
Japanese Nikkei surged by around two and half percent during week, on the back of weakness in yen against the dollar that lifted shares of exporters. Sentiments remained jubilant on report showing that Japan's Core machinery orders rose 6.7 percent in December from the previous month, beating forecasts for an increase of 3.1 percent. Some optimism also came with official data showing that Japan's current account surplus increased an annual 25.8 percent to 20.65 trillion yen (183.86 billion U.S. dollars) in 2016, marking a nine-year high. Meanwhile, the M2 money stock in Japan was up 4.1 percent on year in January, standing at 961.6 trillion yen.
Chinese benchmark -- Shanghai Composite –too edged higher by around two percent during the week, after reports showed that China would step up supply-side reforms and reduce overcapacity in the construction material sector. Sentiments also got boost with China reporting an increase in both exports and imports in January. While exports saw a 7.9% year-on-year increase, imports showed a 16.7% jump. Both were higher than expectations and helped improve investors' confidence in the world's second largest economy. However, a private business survey showed growth in China's services sector lost momentum at the start of 2017. The Caixin China General Services Business Activity Index fell to 53.1 in January from December's 17-month high of 53.4.