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!!

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!!