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Will the bull-run sustain?

Monday, July 17, 2017
By Dominic Rebello

Four out of five days last week the the markets closed in the green and the BSE Sensex crossed the psychological mark of 32,000 level points. The Nifty managed to hit the 9900 level mark, but could not sustain above it.

Last week, the Sensex zoomed 660.12 points to finish the week at 32,020.75, while the Nifty surged by 220.55 points to close at at 9,886.35. This is the biggest weekly gain for the indices since mid-March. The total turnover during the week on BSE rose to Rs 26,550.34 cr as against last weekend's level of Rs 17,400.21 cr, while on NSE it fell to 1,13,681.02 compared to Rs 1,14,537.79 cr previously.

The drop in the June Retail Inflation (CPI) data and subdued May Industrial output (IIP) data boosted the prospects of a rate cut by the Reserve Bank Of India which will be meeting in the first week of August for its policy meet.

Apart from that, the smooth roll out of GST, the progress of Monsoon and US Federal Reserve Chair Janet Yellen, signal that Feds approach on rate hike would be gradual also boosted the sentiments of the market. Capital inflows and widespread buying by domestic institutional and retail investors also helped the markets.

“The cheering factor for the market is the progress of the monsoon across the country has been good. The India Meteorological Department (IMD) in its weekly weather report on said that for the country as a whole, cumulative rainfall during this year's southwest monsoon season has so far up to 12 July 2017 is 1% below Long Period Average (LPA),” said Vijay Singhania, Founder-Director, Trade Smart Online

"In absence of any key economic data release, focus will shift to upcoming monsoon session of Parliament and ongoing earnings season where heavyweights like Reliance Industries, Bajaj Auto, ACC, Ultratech Cement, Wipro and Kotak Mahindra Bank are scheduled to release their quarterly earnings," he added.

The monsoon session of Parliament starts from July 17, which is also the scheduled date for the Presidential election.

“Stocks are expected to turn volatile just before and after the results, as this time due to run up to the GST, many companies’ number would not be strictly comparable. Nifty50 is trading at 25x trailing earnings, which is not cheap by any standards. Sentiments are approaching extreme levels, there is little margin of safety at current levels. For investors these are not times for fresh investments, but for traders these are best times to make money as the market momentum is swift and fast.  Trading momentum will be very rewarding provided it is done with strict risk management,” said Jimeet Modi, CEO, SAMCO Securities.

In the near term, corporate margin & profitability is expected to be under pressure due to GST rollout. The Q1FY18 earnings may not match the current premium valuation due to a tepid start of result season. Investors are giving more weight to the prevailing positive macros which will help to maintain a positive vibe in the market. Nevertheless, upcoming results will also determine the way forward, said Vinod Nair, Head of Research, Geojit Financial Services.

FPIs stay bullish on India; pour Rs 11,000 cr in July so far
Foreign investors have pumped in nearly Rs 11,000 crore in the capital markets in the first two weeks of this month, enthused by the trouble-free rollout of GST and stimulating Indian economy.

The latest inflow comes following a net infusion of over Rs 1.62 lakh crore in the previous five months (February-June) on several factors. Prior to that, such investors had pulled out over Rs 3,496 crore from debt markets in January.

Dinesh Rohira, Founder and CEO, 5nance.Com has attributed the latest inflow to stimulating Indian economy. Besides, he said, investor sentiments remained due to the trouble-free rollout of the Goods and Services Tax on July 1.

He said however that the recent development on incoming global macro data indicates a sign of revival in some developed countries which is expected to poise hurdle for Indian market as FPI may shift their investment avenue. Further, the inflow from FPI is expected to remain subdued with depreciating US currency against the Indian rupee, Rohira said.

"There is a growing concern among foreign investors that an economic recovery in the USA and other major economies could necessitate central bankers to unwind the highly accommodative monetary policy," Sharekhan Head of Research Gaurav Dua said. According to latest depository data, FPIs invested a net Rs 498 crore in equities during July 3-14, while they poured Rs 10,405 crore in the debt markets during the period under review, translating into a net inflow of Rs 10,903 crore (USD 1.7 billion).

With the latest inflow, total investment in capital markets (equity and debt) has reached Rs 1.6 lakh crore (over USD 24 billion) this year.

Nine of 10 most valued cos add Rs 67,754 cr in m-cap
Nine of the 10 most valued companies in the country together added Rs 67,754.53 crore to their market valuations last week, with RIL and TCS emerging as the best performers. ONGC was the only one from the top-10 list to suffer erosion from its market capitalisation (m-cap) in the week ended Friday. The gainers include HDFC Bank, ITC, HDFC, SBI, Hindustan Unilever Ltd (HUL), Maruti Suzuki India and Infosys.

The market valuation of RIL, the most valued company, surged Rs 13,113.65 crore to Rs 4,97,857.07 crore. IT major Tata Consultancy Services (TCS) saw its m-cap soar by Rs 12,749.16 crore to Rs 4,59,199.31 crore and SBI added Rs 9,840.54 crore to Rs 2,51,710.59 crore. In the ranking of top-10 firms, RIL stood at number one position followed by TCS, HDFC Bank, ITC, HDFC, SBI, HUL, Maruti, Infosys and ONGC.

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