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IIP DATA, Q4 RESULTS TO DRIVE MARKETS THIS WEEK

Monday, August 07, 2017
By Dominic Rebello

Last week, the BSE Sensex rose for the fifth straight week by gaining 15.53 points, or 0.04%, while the Nifty gained 51.90 points, or 0.51%.  After opening the week at 32,412.20 points, the Sensex registered record high at 32,686.48, while the Nifty  touched new peak at 10,137.85.

While RBI’s 25bps rate cut to 6% was in line with market expectation, there was nothing to cheer and profit booking dragged the indices lower. However, good earning results in some of bluechips, policy reforms underpinned by confidence in economy attracted domestic fund buying and shortcovering cushioning the market fall.

Surprise savings account interest rate cut decision by State Bank of India, the country’s largest PSU bank attracted investors to the banking stocks on expectation of improvement in margins. Additionally, good set of monthly auto sales numbers attracted investor’s interest. Oil & Gas sector outperformed the bench mark indices due to government continued focus on reform process for removing subsidies and merger of PSU oil companies.

"Markets will keep a constant watch over the remaining set of quarterly numbers and any further movement is expected to be largely stock specific, depending on results meeting expectations or any important news flow. Domestically, GST impact is being felt on most of the manufacturers and is likely to persist till Q2FY18 before the benefits of the shift from unorganized to organized start flowing in. Ironing out of issues related to e-way bill is likely to be closely watched out for," said Teena Virmani, Vice President, PCG Research, Kotak Securities.

Globally the focus will be on non-farm payrolls data to gauge the chances of further rate hikes by US Fed. Any indications on liquidity tightening from global banks is likely to impact markets negatively as markets are currently trading at fair valuations, she added.

This week, Tata Steel, Tata Motors, SBI, Aurobindo Pharma, NHPC, NMDC, BHEL and GAIL are all lined up for results announcement.

"We continue to have a cautious view in the near term, given the premium valuation and strong price performance in the last 6-9 months. It is time to be stock specific as the vulnerability to the domestic market is high at a premium valuation and global risk," said Vinod Nair, Head of Research, Geojit Financial Services.

The government is set to release the Index of Industrial Production (IIP) data this Friday. "We believe this week to remain majorly driven by the corporate earnings as well as IIP data," said Abnish Kumar Sudhanshu, Research Head, Aadya Trading and Investments.

“Corporate results season is nearing an end, market will watch for any global clues for any decisive moves.  Valuations and sentiments are at alleviated levels. IPO of Cochin Shipyard drew record over subscription of 288 times. Such levels of oversubscription are signs of overheated market. Investors should refrain from making fresh investments but hold on to their portfolio in the alternate selective profit booking could be done, said Jimeet Modi, CEO, SAMCO Securities.

FPIs pour Rs 5,000-cr in debt markets in just 4 trading sessions
Foreign investors have pumped in a staggering over Rs 5,000 crore in the country's debt markets in last four trading sessions helped by a stable outlook for the rupee. However, in view of higher stock valuations amid surging markets, foreign portfolio investors (FPIs) pulled out more than Rs 1,500 crore from equities during this period.

According to latest depository data, FPIs invested a net sum of Rs 5,181 crore (USD 811 million) in debt markets during August 1-4.

This comes following a net inflow of Rs 1.16 lakh crore in last six months from February-July 2017. Prior to that, they withdrew more than Rs 2,300 crore. With the latest inflow, total investment in debt markets has crossed over Rs 1.2 lakh crore (USD 18 billion) this year.

"FPI investments in debt have been robust for the last few months. While the run-up to the monetary policy saw some tepid flows, as investors remained cautious in the event of a no rate cut stance by RBI; FPI flows picked up right after the the 25 bps rate cut on August 2," Vidya Bala, head of MF research at FundsIndia.Com said.

Markets regulator Sebi, in early July, increased the FPI limit in central government securities, which provided a longer rope for them to pump in money. "With the spread between US 10-year bond and 10-year India gilts at a good 4.2 percentage points even now, FPIs continue to seek opportunities in the Indian debt market with the rupee-dollar equation stable," she added.

Echoing similar views, Alok Agarwala, senior vice- president and head investment analytics at Bajaj Capital said: "Indian real policy rates as well as real treasury yields remain the highest among major economies except probably Brazil and Russia. Besides, a stable currency gives an added incentive to foreign investors".

The RBI in its latest monetary policy statement, accepted downside risks to growth and inflation hinting that their next action would be data dependent.

Agarwala said data is unlikely to improve in the very short term as the temporary adverse impact of GST implementation on growth is visible in the contraction in manufacturing and service sectors for July.

"In this scenario, Indian treasuries seem an attractive choice for FPIs. The Indian G-Sec yield curve is pretty steep (and hence attractive for term spread plays) barring the benchmark 10-year bond," he added.

Seven of top-10 cos add `40,799 cr in mcap
Seven of the top-10 most valued Indian firms together added Rs 40,799.71 crore in market valuation last week, led by RIL that emerged as the biggest gainer. Reliance Industries Ltd (RIL), TCS, HDFC Bank, SBI, HUL, Maruti Suzuki India and ONGC witnessed addition in their market capitalisation (m-cap) for the week ended Friday, while ITC, HDFC and Infosys suffered losses.

The m-cap of RIL surged Rs 9,186.15 crore to Rs 5,27,594.19 crore, emerging as the biggest gainer among the top-10 entities. The market valuation of Hindustan Unilever Ltd (HUL) jumped Rs 8,181.68 crore to Rs 2,57,982.53 crore and that of Tata Consultancy Services (TCS) soared Rs 7,657.15 crore to Rs 4,82,926.90 crore.

SBI's m-cap advanced by Rs 5,395.03 crore to Rs 2,63,665.98 crore and Maruti added Rs 4,735.11 crore to Rs 2,34,979.02 crore. The valuation of HDFC Bank gained Rs 3,270.44 crore to Rs 4,61,272.48 crore and that of ONGC went up by Rs 2,374.15 crore to Rs 2,13,737.53 crore.

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