Published on 11/02/2019 10:01:28 AM | Source: LKP Securities Ltd

Index closed a week at 10943 with gains of 50 points - LKP Sec

Posted in Market Outlook| #Market Outlook #LKP Securities Ltd

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Domestic Market View 

 Markets to make weak start of the new week

Indian markets ended sharply lower on Friday led by heavy losses in Tata Motors and renewed concerns over US-China trade tiff. Today, the start of new week is likely to be weak amid mixed global cues. Traders will be concerned about the International Monetary Fund warning governments to gear up for a possible economic storm as growth undershoots expectations. It said the bottom-line they see an economy that is growing more slowly than they had anticipated. There will be some cautiousness with asserting India’s fast economic growth is not without generation of jobs, Economic Affairs Secretary Subhash Chandra Garg said the country actually faces shortage of capital more than the scarcity of jobs.  However, traders may take some support later in the day with the Reserve Bank of India’s (RBI) data showing that the country’s foreign exchange reserves increased by $2.063 billion to $400.24 billion in the week to February 1, on account of rise in foreign currency assets.  

Some support may also come with report that the government has collected Rs 7.88 trillion from direct taxes in the first ten months of the current financial year. Besides, the commerce ministry said India’s exports to China has reached $12.7 billion during April-December 2018 on account of growth in shipments of marine products, chemicals, plastics, petroleum products, grapes and rice. Meanwhile, the finance ministry has sought from the Reserve Bank of India (RBI) Rs 27,380 crore that was withheld by the central bank towards risks and reserves in the previous years.  

There will be some reaction in banking sector stocks with the government’s statement that bad loans of public sector banks declined by more than Rs 31,000 crore to Rs 8,64,433 crore in the first nine months of the current fiscal as compared to end of March 2018. There will be some buzz in the power sector stocks with a recent ASSOCHAM-Grant Thornton joint study stating that investments worth over Rs 2.5 lakh crore in thermal sector projects, based on domestic coal, imported coal, and gas, are facing stress and immediate remedial measures need to be undertaken to ensure that they are revived in a time-bound manner. Also, there will be some reaction in micro, small and medium enterprises (MSMEs) stocks with report that the RBI’s restructuring package for small businesses announced last month will help recast Rs 1 trillion of loans for 700,000 eligible MSMEs. There will be lots of earnings reaction based on the performance of the companies.

Domestic Market Overview

Benchmarks witness bloodbath; Nifty breaches 11k mark

Friday turned out to be a horrendous day of trade for Indian equity benchmarks with frontline gauges losing over a percent, breaching their crucial 11,000 (Nifty) and 36,600 (Sensex) levels. Sentiments remained dampened since start of the trade as traders remained wary on renewed concerns over US-China trade tiff. Traders failed to take any sense of relief with Finance Minister Piyush Goyal’s statement that the rate cut by the RBI will give a boost to the economy by providing affordable credit to small businesses and homebuyers. The RBI has reduced repo rate (at which RBI lends to banks) by 0.25% to 6.25%, a move that will translate into softening interest rates. Traders also shrugged off report that India has jumped eight places to 36th position on the International Intellectual Property (IP) Index, which analyses the IP climate in 50 global economies, this year. India’s eight-point jump in 2019 from 44th position in 2018 is the highest increase among 50 nations mapped by the index. The report said the improvement reflects important reforms implemented by Indian policy-makers towards building and sustaining an innovation ecosystem for domestic entrepreneurs and foreign investors alike.

Markets extended losses as sentiment remained dull with disappointing third quarter number by Tata Motors. The company reported a consolidated net loss of Rs 26,960 crore for the third quarter of this fiscal due to asset impairment in its British arm Jaguar Land Rover (JLR). Domestic indices added losses to end near intraday low points, as sentiment on the street weakened further with report that India is unlikely to achieve its target of 100 gigawatt (GW) solar electricity capacity as it faces short-term uncertainty due to imposition of various taxes. Meanwhile, the RBI has increased the limit of collateral-free agricultural loans to Rs 1.6 lakh from the current limit of Rs 1 lakh. Earlier, in 2010, the collateral-free limit for crop loans and term loans was hiked to Rs 1 lakh from Rs 50,000. Keeping in view the overall inflation and rise in agriculture input costs since then, the RBI has decided to raise the limit for collateral-free agriculture loans to Rs 1.6 lakh.

Auto stocks edged lower on report that Domestic passenger vehicle (PV) sales declined 1.87 per cent to 2,80,125 units in January from 2,85,467 units in the same month last year. Domestic car sales were also down 2.65 per cent to 1,79,389 units as compared to 184,264 units in January 2018. Aviation stocks ended in red despite report that aviation sector has recorded 18.6 per cent annual increase in domestic market considering the rise in Indians preferring to fly across the country last year.

Global Market Overview

Asian markets end mostly lower on Friday

Asian markets ended mostly lower on Friday amid growth and trade worries after the European Commission lowered its growth forecasts for euro zone and US President Donald Trump said he did not plan to meet with Chinese President Xi Jinping before the March 1 deadline for reaching a trade deal. Japanese shares led regional losses to hit a one-month low as the yen strengthened on fresh worries about the US-China trade dispute. Weak earnings results also sapped investors’ appetite for risk. On the economic front, a government report showed that Japan posted a current account surplus of 452.8 billion yen in December, down 43.1 percent year on year. That was shy of expectations for a surplus of 458.5 billion yen and down from 757.2 billion yen in November. Japan’s trade balance in December showed a surplus of 216.2 billion yen, exceeding forecasts for 132.4 billion yen following the 559.1 billion yen deficit in the previous month. Meanwhile, markets in Taiwan and China remained closed for the Lunar New Year holidays.

US markets end mostly in green on Friday The US markets settled mostly higher on Friday, but The Dow Jones Industrial Average ending lower amid lingering concerns about a potential trade deal between the US and China.  Adding to the worries, a report which said that the US and China do not even have a draft accord that specifies where they agree and disagree. The report comes after President Donald Trump said that he would not meet with Chinese President Xi Jinping before a crucial March deadline. Tariffs on Chinese goods are currently set to jump automatically on the deadline.

Besides, Trump is expected to sign an executive order next week banning Chinese wireless equipment from US networks ahead of the MWC Barcelona conference at the end of this month. The move was aimed at protecting the US from cyber threats. Nagging global growth worries also weighed on the markets with investors concerned that China’s slowdown has hit Europe after weak data and forecasts from the region.

S&P 500 gained 1.83 points or 0.07 percent to 2707.88 and Nasdaq was up by 9.85 points or 0.14 percent to 7298.20, while Dow Jones Industrial Average dropped 63.20 points or 0.25 percent to 25106.33.  

Technical View

Index closed a week at 10943 with gains of 50 points and formed inverted hammer candle on weekly chart. Index has formed evening star candle pattern on daily chart which is bearish reversal by nature so below 10920 we may see some pressure in index. Index has immediate support near 10900-10850 zone and resistance is coming near 10990-11045 zone. Nifty bank has support near 27200-27060 zone and resistance is coming near 27400-27550 zone.

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