Market Outlook

  

Previous Week

Equity benchmarks extended losing streak for second week in a row despite sharp recovery in second half to settle lower by 0.7% during previous week as concerns over depreciating rupee and global trade war weighed on sentiments. Nifty started the week on a weak note and dragged lower in the first two sessions of the week to form a weekly low of 11393 levels. The index however recovered in the last two sessions to close the week off the low at 11515 levels. Broader markets underperformed benchmarks during the week as Nifty Mid cap and small cap indices declined by 0.9% and 1.7% respectively.
	The S&P BSE Sensex closed at 38090, down by 299 points or 0.8% while the NSE Nifty closed at 11515, down by 74 points or 0.7% for the week.
	Among the Nifty Constituents, Eicher Motors, NTPC, UPL and Powergrid were the top gainers
	Whereas Bajaj Finance, Hero Motocorp, Coal India, M&M, Reliance industries and Tata Motors were the major draggers on the index
	Indian benchmark indices came under pressure earlier in the week amid concerns on the depreciating rupee vis-à-vis the dollar
	However, markets staged a smart recovery and managed to close marginally lower for the week post reports that the Prime Minister would hold a meeting to discuss economic scenario and the volatile rupee situation over the weekend
	On the data front, IIP for July 2018 rose 6.6% YoY largely driven by the manufacturing sector, compared to an increase of 1% in July 2017, mainly due to GST related hiccups
	CPI inflation for August came in at 3.69% YoY, lower inflation in food & beverages of 0.85% helped pull down the headline reading
	On the news front, the government approved over 25% hike in the price of ethanol produced directly from sugarcane juice for blending in petrol in a bid to cut surplus sugar production and reduce oil imports
	The Oil Minister has announced discounts on royalties and cess for production of oil & gas from enhanced oil recovery (EOR) programmes
	The move is to incentivise the upstream oil & gas sector to unlock more resources and increase the country's production in the long term.
	Crude prices closed higher at about US$ 78.4/barrel as compared to previous week's close of US$ 76.4/barrel
	Gold prices also closed higher at $1210 /ounce as compared to last week's closing price of $1206 /ounce
	Bond yields increased to 8.09% from previous week's close of 8.01%. Week Ahead The price action for the week formed a Bullish Hammer like candle with a significant lower shadow indicating buying demand around earmarked support of 11200 levels. Index made a sharp recovery of 273 points from intra week low of 11250, thus, making current week's pull back larger in magnitude than prior week's pullback (210 points), indicating strengthening price structure. In coming week, we expect the Nifty to extend its pull back towards higher band of consolidation (11600-11200) placed at 11600 levels. Our strategy of buying on declines towards support around 11200 worked in last week as price action highlighted continued buying demand at lower levels We reiterate our stance of accumulating quality stocks as index undergoes a healthy round of consolidation and forms higher base around 11200 levels over coming weeks Structurally, index has entered a corrective phase after eight weeks of rally measuring +11%. We believe the Nifty would hold its strong support in the range of 11200-11250 as it is:   50% retracement of eight weeks up move (10807-11760) at 11283 The monthly low of August 2018 placed at 11235 lower band of the rising channel containing the entire price activity since June 2018 is also placed around 11185 levels and January 2018 peak at 11171 which is likely to reverse its role as support now The Nifty midcap index retraced 50% of last seven weeks' (13%) rally and seen forming higher base We believe the broader structure remains intact as the recent pullback off July 2018 low 17700 (of 2388 points) is larger in magnitude than previous pullback in March-May 2018 (2027 points) Hence, the index is likely to enter into a consolidation phase that would help Nifty midcap to form a higher base while focus remains stock specific Hence, one should focus on accumulating quality stocks in a staggered manner Important data releases in next week:   US: Markit US Manufacturing PMI (Sep), Markit US Services PMI (Sep) Eurozone: CPI YoY (Aug), Markit Eurozone Manufacturing PMI (Sep) UK: CPI YoY (Aug) Japan: BOJ Policy Balance Rate (19 Sep), Natl CPI YoY (Aug), Nikkei Japan PMI Mfg (Sep) MORE WILL UPDATE SOON!!