Indian markets despite gaining momentum in the final days of the week could not extend their last week’s gaining streak. Traders remained concerned about the global growth, while some major earnings disappointments kept weighing the sentiments through the week. The start of the week which was also the start of the month witnessed some good macro data with the Manufacturing PMI surging to four-month high of 51.1 in January. India’s manufacturing sector growth bouncing back from last month’s contraction rose to a four-month high in January, driven by rising inflows of new business orders from domestic as well as export clients. Also, the Core sector output returned to positive territory in December 2015 by registering a 0.9 per cent growth after shrinking (-) 1.3 per cent in November last year. Though, traders overlooked the numbers and remained on sideline, booking some profit ahead of the RBI’s policy announcements. Markets suffered a major blow on the next day after the Reserve Bank of India (RBI) kept its key policy rates unchanged, opting to wait for the government’s annual budget statement at the end of February for further easing. Sentiments weakened further with Moody’s Investors Service’s report that RBI’s target to bring down retail inflation at 5 per cent by March 2017 will face some risks from monsoon uncertainty and execution of seventh Pay Panel recommendations. The markets remained under pressure on Wednesday as well and bourses extended their plunge after oil prices dropped to 12-year lows. The whole global markets came under pressure and the local markets too got embroiled in it, despite India’s Services PMI expanding at its fastest speed in 19 months in January. Markets regained their fervor on Thursday after the crude oil stabilized and despite some volatility recovered some of their losses. The final day witnessed the extension of the gains and markets buoyed by some good earnings and bargain hunting managed to prune their weekly losses.
BSE movement for the week
The Bombay Stock Exchange (BSE) Sensex declined by 253.72 points or 1.02% to 24,616.97 during the week ended February 05, 2016. The BSE Mid-cap index was down by 82.19 points or 0.79% to 10,335.07, while the Small-cap index down by 300.31 points or 2.76% to 10,569.53. On the sectoral front, FMCG up by 105.69 points or 1.42% at 7544.21, Consumer Durables up by 59.95 points or 0.49% at 12242.97, Teck up by 25.12 points or 0.42% at 5953.37, IT up by 31.20 points or 0.28% at 11196.25 and Metal up by 4.52 points or 0.07% at 6898.53 were the top gainers on the BSE sectoral space, while Power down 104.79 points or 5.70% at 1733.63, Oil & Gas down 359.97 points or 3.89% at 8898.09, Realty down 41.05 points or 3.40% at 1167.9, PSU down 190.36 points or 3.05% at 6044.18 and Bankex down by 430.55 points or 2.45% at 17173.34 were the major losers on the BSE sectoral front.
NSE movement for the week
The Nifty lost 74.45 points or 0.98% to 7,489.10. On the National Stock Exchange (NSE), Nifty Midcap 100 down by 86.30 points or 0.69% to 12,382.80, Nifty Next 50 down by 129.45 points or 0.70% to 18,269.55, Bank Nifty down by 360.35 points or 2.32% to 15,162.05 and Nifty IT was down by 8.60 points or 0.08% to 11,227.55.
FII transactions during the week
Foreign Institutional Investors (FIIs) were net buyer in equity segment in the week with gross purchases of Rs 20399.52 crore and gross sales of Rs 19795.12 crore, leading to a net inflow of Rs 604.40 crore. They stood as net buyer in the debt segment with gross purchases of Rs 6176.82 crore against gross sales of Rs 4211.88 crore, resulting in a net inflow of Rs 1964.94 crore.
Industry and Economy
Suggesting sweeping changes to the Companies Act, 2013 and making it easier for companies to raise funds and reward senior management and ensuring that steps to enhance shareholder democracy don't cripple the functioning of firms and the businesses they run, a committee set up by the government to review issues arising out of implementation of the Companies Act has suggested changes to improve ease of doing business, encourage startups and harmonise various laws. The committee, chaired by the corporate affairs secretary Tapan Ray held extensive consultations with stakeholders before making its recommendations and proposed easing regulations for shareholders’ approval to the managerial remuneration and removal of the restriction on layers of subsidiaries and investment companies, moves that could address concerns raised by corporate groups after the 2013 overhaul of the Act.
Outlook for the coming week
Markets after completely losing the momentum in mid of the week, made smart comeback in the final two sessions and managed to restrict the weekly losses to about one percent only. The next week trade will be mainly guided by the development in global markets, and the traders will first be reacting to the US employment data, which will state the further course of action for the Fed in the days to come. On the domestic front, earnings will continue to dominate the market movement during the week.
On the final day of the week, i.e on Feb 12, Index of industrial production (IIP) data for the month of December will be announced. In November IIP came at a four-year low of negative 3.2 percent, compared with 9.9 percent jump in the previous month. Consumer price index data for the month of January too will be announced on Feb 12, CPI inflation or Retail inflation scaled a 14-month high of 5.41 per cent in November. Retail prices of cereals and products moved up by 2.12 per cent in December from 1.7 per cent in November.
The steel stocks will be in action with the government likely to take a decision on fixing minimum import price (MIP) for steel. The government has been considering proposals (including MIP) to protect domestic steel manufacturers from cheap imports mainly from China.
In a result heavy week lots of major companies like, Balrampur Chini, Atul Auto, Bombay Dyeing, Geometric, Gujarat Gas, Inox Wind, JK Tyre, Polaris, SRF, TV Today, Usha Martin, Zicom, Apollo Tyre, Auro Lab, Britannia, Bharat Forge, Central Bank, CESC,Crisil, Dena Bank, Dhampur Sugar, Dr Reddy, EMCO, Eros Media, Essar Oil, GAIL, Hindalco, MOIL, MRPL, Motherson Sumi, PNB, SAIL, ACC, AxisCades, Bajaj Electrical, Bata India, Blue Dart, Cipla, Glaxo, Financial Technologies, India Cement, Maharashtra Bank, NBCC, NHPC, SCI, Tata Global Beverages, UCO Bank, Aditya Birla Nuvo, BEML, Coal India, HeroMoto Corp Hathway, J&K Bank, Jubilant Food, ONGC, SBI, Subex etc among many will be announcing their numbers.
On the global front from the US, traders will first be reacting to the Employment Situation reports released on Friday, then Labor Market Conditions Index data on Feb 8, followed by JOLTS on Feb 9, Treasury Budget on Feb 10, Jobless Claims data on Feb 11 and finally Retail Sales, Import and Export Prices, and Consumer Sentiment data on Feb 12. Traders will also be eyeing the Federal Reserve Chair Janet Yellen presenting semi-annual monetary report to House Financial Services Committee and Senate Banking Committee during the week.
Top Gainers
Yes Bank up by 15.71% was the top gainer on Nifty this week - YES Bank India’s 5th largest private sector bank has joined hands with the Indian Railways to provide safe and clean drinking water at Railway station by setting up 1000 community water purification systems across India by 2019. In the first phase of the project, the Bank will set up 100 such systems across D’ and ‘E’ category railway stations in the Konkan belt and other locations in Maharashtra by March 2016. This initiative from YES BANK caters to population in the lower strata of the society. In 2014-15, YES Bank had provided access to safe and clean drinking water to 62,500 individuals through household and community water purification systems across rural Maharashtra.
Hindustan Unilever up by 6.72% was another top gainer on the Nifty- Hindustan Unilever (HUL), one of the leading FMCG firms, is planning to enter into spices and seasoning mixes segment under the Knorr brand. This segment is currently dominated by domestic companies, of which many are regional and local players. The company is already testing the products in a few markets and will make a formal launch soon with a range of eight variants as Knorr Chef’s Masalas across India. This range will also come in a special packaging that will help in convenient storage.
Top Losers
NTPC down by 13.48% was top loser on the Nifty - NTPC has reported results for third quarter ended December 31, 2015. The company has reported 18.90% fall in its net profit at Rs 2492.87 crore for the quarter as compared to Rs 3074.00 crore for the same quarter in the previous year. Its total income too decreased by 8.84% to Rs 17657.99 crore for the quarter under review from Rs 19371.33 crore for the corresponding quarter of the previous year.
ICICI Bank down by 10.21% was another loser of the week on Nifty - ICICI Bank has reported 4.47% rise in its net profit at Rs 3018.13 crore for the third quarter ended December 31, 2015 as compared to Rs 2889.04 crore for the same quarter in the previous year. The bank’s total income increased by 13.11% to Rs 17562.95 crore for the quarter under review from Rs 15526.88 crore for the corresponding quarter of the previous year. On the consolidated basis, the group has reported 4.38% fall in its net profit at Rs 3122.35 crore for the quarter ended December 31, 2015 as compared to Rs 3265.32 crore for the same quarter in the previous year.
Technical viewpoints
During the week, CNX Nifty touched the highest level of 7600.45 on February 1, 2016 and lowest level of 7402.80 on February 3, 2016. On the last trading day, the Nifty closed at 7489.10 with weekly loss of 74.45 points or 0.98%. For the coming week, 7359.45 followed by 7229.80 are likely to be good support levels for the Nifty, while the index may face resistance at 7609.60 and further at 7730.10 levels.
US Market
The US markets continued its jubilant trade during the passing week with streets tracking fluctuations in crude-oil prices and expectations that the Fed will continue gradually raising interest rates. Federal Reserve Vice Chairman Stanley Fischer stated that the US central bank was worried the global market selloff could sap the strength of the US economy, suggesting the market’s expectations of barely any interest rate hikes this year could turn out to be right. Fischer added that at this point, it is difficult to judge the likely implications of this volatility. If these developments lead to a persistent tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States.
There were mixed reports on the economic front. The US economy is on track to grow 1.2% in the first quarter after government data showed it grew at a 0.7% pace in the final quarter of 2015, the Atlanta Federal Reserve’s GDPNow forecast model showed. Construction spending ticked up 0.1% after a downwardly revised 0.6% drop in November. Private-sector employment gains increased in January but at a slower pace than in the prior month. Employers added 205,000 jobs in January. ADP tweaked December’s gain to 267,000 from a prior estimate of 257,000. Initial jobless claims rose in the last week of January but remained at a very low level, suggesting the labor market is still sound despite a rocky start to 2016 for the US economy.
On the other hand, US manufacturing activity contracted for the fourth straight month, albeit at a slower pace in January than expected. The Institute for Supply Management’s manufacturing index rose to 48.2% in January from 48%, above forecasts but still below the reading of 50% that signals expansion. Consumer spending was flat in December as Americans mostly pocketed their income gains, but outlays in 2015 were the strongest in a decade. Investors aren’t the only ones running for safety as the market tumbles and the economy wobbles. Businesses, too, are indicating an unwillingness to take on risk as loan demand declined for the first time in about four years, according to the Federal Reserve’s Senior Loan Officer Survey released.
European Market
The European markets traded under pressure during the passing week after the European Commission estimated that euro zone economic growth will slightly accelerate this year and next but the pace will be slower in 2016 than previously forecast because of increased global risks. The gross domestic product (GDP) of the 19-country single currency bloc is expected to expand by 1.7% this year from 1.6% in 2015. The recovery will gain speed in 2017 with economic expansion of 1.9%. The growth estimate for this year is a slight downward revision of the 1.8% seen in the last set of forecasts in November. The 2017 figure was unchanged. External factors are seen as the main risks to the euro zone economy that will continue to grow mostly because of domestic consumption. European Central Bank President Mario Draghi enlightened that the risk of acting too late on ultra-low inflation is greater than that of acting too early suggesting more policy easing may be needed.
The Bank of England issued a fresh warning about the slowing economy as it hinted rates were unlikely to rise until next year. The bank slashed its forecast for economic growth over the next three years. Its prediction for 2016 was cut from 2.5% to 2.2%, from 2.7% to 2.4% in 2017, and from 2.6% to 2.5% in 2018. Meanwhile, the International Monetary Fund (IMF) chief Christine Lagarde stated that IMF does not wish to slap draconian measures on hard-up Greece but wants more government progress on pension reform.
The seasonally-adjusted unemployment rate in the Euro zone decreased slightly to 10.4% in December of 2015 compared with previous month’s unrevised level of 10.5% and from 11.4% reported a year earlier. This was the lowest rate recorded since September of 2011. The EU28 unemployment rate was 9%, stable compared to November 2015, and down from 9.9% in December 2014. This was the lowest rate recorded in the EU28 since June 2009. Compared with a year ago, the unemployment rate fell in twenty-three Member States, remained stable in Estonia and increased in four. Consumer prices in the Euro Area are expected to increase 0.4% year-on-year in January of 2016, higher than 0.2% in the previous two months and in line with expectations.
Asian market
Most of the Asian equity indices ended the weekly trade in negative terrain as investors opted to remain on sidelines ahead of the U.S. monthly jobs report that could provide further insights into the world's largest economy and its rate policy. Meanwhile, Malaysian benchmarks edged lower as country’s exports rose an annual 1.4 percent in December, much slower than the 4.9 percent growth expected by the investors.
Japanese Nikkei remained the top loser, down by around four percent as a stronger yen hit exporters. Seoul shares closed higher with a weekly gain of around one third of a percent on stimulus hopes after official data showed South Korea's exports shrank to nearly a seven-year low in January. Exports dropped 18.5 percent from a year earlier in their biggest drop since the depths of the global financial crisis in 2009.
Chinese shares edged higher by around a percent during the week after the People's Bank of China guided the yuan to its highest fix in almost a month and pumped more money into the financial system to avoid a possible cash crunch ahead of next week's Lunar New Year holidays. Meanwhile, reports showed that China's Caixin purchasing managers' index (PMI) for the services sector showing activity expanded at its fastest pace in six months in January. The index rose to 52.4 in January from a 17-month low reading of 50.2 in December. However, gains remained capped after China's official manufacturing PMI came in at 49.4 in January, slightly down from December's 49.7 reading and missing estimates for a score of 49.6 while growth in the services sector activity slowed from the previous month.
