Alliance Research Weekly Report 20.08.2018

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Alliance Research

20 AUG 2018 Weekly Report

Markets extend gains for fourth straight week

Passing week turned out to be a roller coaster ride for Indian equity markets, where frontline gauges managed to end in green terrain, despite Turkey’s financial crisis and rupee hit its record low. Markets started the holiday truncated week on pessimistic note as sentiments remain dampened with Fitch Ratings’ latest report that its outlook on the Indian banking sector is likely to remain negative until the banks address their weak core capital positions against mounting bad loans and poor financial performance. On the very next day, markets pare all their first day losses as traders took encouragement with better-than-expected macro-economic data. The Central Statistics Office’s (CSO) data showed that India’s Retail inflation fell to nine-month low of 4.17% in July on account of slowdown in prices of vegetables and fruits. Its previous low was in October 2017 at 3.58%. Retail inflation, measured by Consumer Price Index (CPI) had hit a five-month high of 5% in June. Adding to the optimism, wholesale price index (WPI) inflation eased to 5.09% in the month of July 2018, supported by fall in the prices of minerals, crude petroleum & natural gas. However, sentiments once again turned bearish and key gauges witnessed steep cut as cautiousness crept in with report that India’s trade deficit soared to a near five-year high of $18 billion. The country’s exports rose by 14.32% to $25.77 billion in July mainly on account of better performance of gems and jewellery sector as well as petroleum products, while imports during July were valued at $43.79 billion, a growth of 28.81% compared to $33.99 billion in the year ago period. But, it was the final day of trade which helped markets to settle the week in positive trajectory, as sentiments turned jubilant with private report that India's economy is expected to grow at a healthy 7.5% in the first quarter (Q1) of 2018-19 (FY19), lower than a seven-quarter high of 7.7% in the fourth quarter (Q4) of 2017-18 (FY18).

NSE movement fhe Nifty surged 41.25 or 0.36% to 11,470.75. On the National Stock Exchange (NSE), Bank Nifty was up by 4.30 points or 0.02% to 28,128.55, Nifty IT gained 447.15 points or 3.05% to 15,126.40, Nifty Mid Cap 100 increased 307.05 points or 1.60% to 19,443.00 and Nifty Next 50 was up 72.95 points or 0.24% to 29,940.70.

Weekly Report

Outlook for the coming week

Indian equity markets, in the previous holiday truncated week, ended in green with Nifty and Sensex posting decent gains on the back of better-than-expected macro-economic data.

In the next week, on the economy front, investors will be eyeing the Consumer price index inflation data for Agricultural Labourers/ Rural Labourers, which is slated to be released on August 20.

Meanwhile, traders for the coming week would be tracking progress of monsoon. Market-participants would also continue to trace the momentum of rupee and FII investment.

Investors will look also forward to a Small Business Summit hosted by the Union County Chamber of Commerce at the Indian Trail Town Hall on August 23.

On the global front, market-participants would watch key macro-economic data from US starting from Redbook on August 21, followed by Existing Home Sales and FOMC Meeting Minutes on August 22, Jobless Claims, House Price Index, Manufacturing PMI, Markit Composite PMI, Services PMI and New Home Sales on August 23 and finally, Core Durable Goods Orders and U.S. Baker Hughes Oil Rig Count on August 24.

In the coming week, global investors would be eyeing a meeting of German Chancellor Angela Merkel and Russia’s President Vladimir Putin. They will be meeting on August 18, 2018 in Berlin and the topics will include the civil war in Syria, the conflict in Ukraine and energy questions.

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