Market Outlook

Equity benchmarks continue to trade with high volatility and closed the week lower by more than 1% on back of weak global cues as concern over global growth lead to decline in global equities. Broader markets also witnessed profit booking after recent outperformance as the Nifty Midcap and Nifty small cap indices to close lower by 1% and 0.6% respectively. The S&P BSE Sensex closed at 35695, down by 381 points or 1% while the NSE Nifty closed at 10727, down by 133 points or 1% for the week. Among the Nifty Constituents, Asian Paints, Sun Pharma, Infratel and Bharti Airtel were the top gainers. Whereas Bajaj Finance, HCL Technology, Hindustan Unilever, L&T, ONGC, Reliance, Tech Mahindra, Ultratech Cement, Metals and Auto stocks were major draggers on the index. The weekly price action resulted in a bear candle with a long lower shadow signaling continuation of the consolidation and buying demand at lower levels. The index has been maintaining the rhythm of not correcting for more than 61.8% retracement of the last up move and time wise not correcting for more than three sessions, since October low 10005. In the current scenario, the Nifty on Friday’s session rebounded after 61.8% retracement of the last up move (10534-10923) along with two consecutive sessions of decline. So we expect the Nifty to maintain the same rhythm as in the current scenario and witnessed a pullback in the coming week. Nifty in the last three weeks has been consolidating with positive bias in the broad range of 10500-11000, lack of faster retracement in either direction makes us believe that going ahead the Nifty would continue with its current consolidation in the broader range of 11000-10500 with a positive bias amid stock specific action as we are entering the Q3FY19 result season. The broader trend in the index remains firmly bullish as index is seen forming higher bottom at the 61.8% retracement of the previous up move since October 2018 low (10005). We believe any intermediate breather towards 10550-10500 should be used as incremental buying opportunity for up move towards 11000 levels in the coming weeks being the upper band of the last three weeks’ consolidation and high of December 2018 placed at 10985. Going ahead, we believe the Nifty has strong support near the key value area of 10535-10480 region. Thus, sustenance above 10535 (on a closing basis) would aid the Nifty to form a higher base, as it is confluence of:   upward sloping trend line drawn adjoining subsequent lows of October and December of 10005 and 10334, respectively, is placed around 10530 last week's low is placed at 10535 despite multiple attempts, the Nifty has managed to end above 10480 since November 2018 amid elevated volatility The broader market consisting of Nifty midcap and small cap extended its breather after the recent outperformance We believe the corrective decline is a sign of healthy consolidation that offers a fresh entry opportunity. The improving price structure of the Nifty midcap and small cap makes us believe the broader markets would form a higher base that would augur well for next leg of up move. Results during the coming week: TCS, Infosys, Indusind Bank, Tata Elxsi, Bandhan Bank.

Important data releases in next week:

US: FOMC Meeting Minutes, Core CPI (MoM) (Dec), ISM Non-Manufacturing PMI (Dec) EU: Unemployment Rate (Nov), ECB Meeting Minutes UK: GDP (MoM) (Nov), Manufacturing Production (MoM) (Nov) Japan: Nikkei Japan PMI Services (Dec) India: Industrial Production YoY (Nov)

Previous Week Highlights

Growth for Eight core industries in November 2018 came in at 3.5%, lower than 6.9% YoY growth in November 2017. The slower growth was largely on account of a higher base decline in output of crude oil and fertiliser by -3.5% and -8.1%, respectively. The RBI has allowed a onetime restructuring of MSME loans in default as on January 1, 2019 with overall exposure per borrower not exceeding 25 crore. Banks/NBFCs will have to provide 5% additionally on the restructured loans while the restructuring has to be done by March 2020. According to media reports the central government is to announce direct benefit transfer scheme for farmers, where farmers will receive  4,000 per acre per season plus interest free crop loan up to 1 lakh per farmer. The scheme is estimated to cost the government ~230,000 crore on annual basis. The government is working on a 18,000 crore subsidy scheme to revive gas-based power plants under which it proposes to offer imported gas at subsidized rates to stranded and underutilized projects. The government is looking at subsidizing electricity tariffs by around 1.75 per unit to make it affordable at about  4.50 per unit. At present, all the nearly 25,000 MW of operational gas-based capacity is stressed because of fuel supply constraints. Brent Crude prices closed higher at about US$ 57.11/barrel as compared to previous week’s close of US$ 53.48/barrel. Gold prices ended higher at $ 1293/ounce as compared to last week's closing price of $ 1281/ounce. Bond yields also ended higher at 7.45% as against last week's closing of 7.39%. MORE WILL UPDATE SOON!!