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Published on 15/04/2019 9:39:45 AM | Source: LKP Securities Ltd

Markets likely to make cautious start amid weak IIP, CPI data - LKP Securities

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

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Domestic Market View

Markets likely to make cautious start amid weak IIP, CPI data

Indian markets ended choppy trading session in green territory on Friday mainly on the back of late buying. Today, the start of a holiday-shortened week is likely to be cautious amid weak macro-economic data. The Ministry of Statistics and Programme Implementation data has showed that industrial growth fell to its lowest in 20 months in February, barely rising from a year ago as manufacturing contracted following muted consumer demand, and public investment slowed toward the fiscal year-end. The index of industrial production (IIP) rose 0.1%, the slowest since a 0.3% contraction in July 2017. Besides, the Central Statistics Office (CSO) data showed that India’s retail inflation saw a marginal rise of 2.86% in March on account of increase in prices of food articles and fuel. The inflation based on Consumer Price Index (CPI) was 2.57% in February this year. On yearly basis, it was 4.28% in March 2018.

Also, there will be some cautiousness with Reserve Bank of India (RBI) Governor Shaktikanta Das’ statement that the biggest risk facing emerging market economies is growing evidence that global growth and trade is weakening. At the same time, emerging markets face a wave of global spillover risks leading to capital outflows, currency and asset price volatility besides tightened financial conditions, posing risks to growth and inflation. However, some support may come in with firm global cues. Traders may take note of better-thanexpected earnings from Tata Consultancy Services (TCS) and Infosys. TCS ended fiscal 2019 with double digit revenue growth as the company reported a 11.4% growth in constant currency terms in the fiscal ending March 31. This is TCS’ fifth straight quarter of year-on-year double-digit revenue growth in constant currency terms. Infosys reported a net profit of Rs 4,074 crore for the quarter ended March 31, 2019, a growth of 10% year-on-year, helped by strong growth in its key financial services segment and large deal wins during the period. There will be some buzz in the steel industry stocks with report that India’s finished steel exports fell more than a third in the 2018/19 fiscal year after the United States and Europe imposed safeguard duties in the past one year. There will be some result reactions too, to keep the markets in action.

tember, as against about 5 lakh tonnes shipped in the entire 2017-18. Further, tyre stocks remained in focus, amid rating agency ICRA’s report showing that the domestic tyre demand is expected to grow in the range of 7-9 per cent over the five year period between 2018-19 to 2022-23.

 

Domestic Market Overview.

Last hour buying helps markets to end higher

Last hour buying helped Indian equity benchmarks to end the Friday’s trading session on higher note, with Sensex and Nifty garnering gains of around 0.40% each. The start of the day was positive, amid reports that the Reserve Bank of India (RBI) has injected a total liquidity of Rs 2.98 lakh crore in the market in 2018-19. The First Bi-monthly Monetary Policy Statement, 2019-20 stated that from a daily net average surplus of Rs 27,928 crore during February 1-6, 2019, systemic liquidity moved into deficit during February 7-March 31, reflecting the build-up of government cash balances. But, key indices turned volatile during middle of session, with a private report stating that after 108 economists and former RBI Governor Raghuram Rajan, International Monetary Fund’s (IMF) Chief Economist Gita Gopinath expressed doubt over India’s growth rate, saying that there are still some issues with the way India calculates it.

However, markets erased all of their losses in last hour of the trade to settle in green terrain, following firm European markets. Traders took encouragement with the RBI’s data showing that that banks closed fiscal 2018-19 (FY19) with robust disbursals. The data showed that bank credit rose 13.24% to Rs 97.67 lakh crore for the fortnight to March 29, while deposits grew by 10.03% to Rs 125.72 lakh crore during the same period. This is the second consecutive double-digits credit growth after the same had declined to 4.54% in FY17 at Rs 78.41 lakh crore, which was the lowest since 1963. Some relief also came after the Ministry of Rural Development made recommendations to the Finance Commission to foster higher inclusive growth, equity, efficiency and transparency. The Ministry made a case for additional resources for Rural India.

Stocks related to the metal industry ended higher, even though India’s finished steel exports fell more than a third in the 2018-19 fiscal year. Finished steel exports between April 2018 and March 2019 fell 34 percent from the previous year to 6.36 million tonnes. However, sugar stocks fell, despite the All India Sugar Trade Association’s (AISTA) report stating that the country’s sugar exports surged to 17.44 lakh tonnes so far in the current marketing year ending September, as against about 5 lakh tonnes shipped in the entire 2017-18. Further, tyre stocks remained in focus, amid rating agency ICRA’s report showing that the domestic tyre demand is expected to grow in the range of 7-9 per cent over the five year period between 2018-19 to 2022-23.

 

Global Market Overview

Asian markets end mostly higher on Friday

Asian markets ended mostly higher on Friday as positive US data and optimism over a potential US-China trade deal helped offset growth worries to some extent. Japanese shares settled at four-month high as investors braced for earnings and an upcoming 10-day holiday in Japan. Meanwhile, Chinese shares ended flat, as better-than-expected exports brought some relief to investors looking for signs of stabilization in the world’s second-largest economy. Chinese trade data proved to be a mixed bag, with exports rebounding to a five-month high while imports fell more than expected. Official data showed that China’s exports rose 14.2 percent in March from a year earlier, beating expectations and marking the strongest growth in five months. Imports dropped an annual 7.6 percent, worse than forecasts for a 1.3 percent fall and widening from February’s 5.2 percent fall.

US markets end higher as bank earnings provide lift

The US markets ended higher on Friday after a series of strong bank earnings, led by JPMorgan, boosted confidence in the US economy. JPMorgan kicked off the earnings season by reporting record first quarter earnings and revenues that exceeded street estimates. The better than expected results from JPMorgan partly offset some of the recent concerns about corporate results for the quarter.  JPMorgan Chief Executive James Dimon underlined  that even amid some global geopolitical uncertainty, the US economy continues to grow, employment and wages are going up, inflation is moderate, financial markets are healthy and consumer and business confidence remains strong.  Shares of JPMorgan rose 4.7% for their best earnings day since the release of second quarter 2012 results. Meanwhile, shares of Disney (DIS) also surged up by 11.5 percent after the entertainment giant initially priced its streaming service well below Netflix (NFLX).

On the economic front, reflecting another spike in prices for fuel imports, the Labor Department released a report showing US import prices increased by more than expected in the month of March. The Labor Department said import prices climbed by 0.6 percent in March after jumping by an upwardly revised 1.0 percent in February. Street had expected prices to rise by 0.4 percent compared to the 0.6 percent increase originally reported for the previous month. Prices for fuel imports showed another jump, soaring by 6.4 percent in March after skyrocketing by 9.7 percent in February. Meanwhile, the report said prices for non-fuel imports edged down by 0.2 percent in March after rising by 0.2 percent in the previous month. Falling prices for capital goods, consumer goods, and non-fuel industrial supplies and materials more than offset an increase in prices for foods, feeds, and beverages.

Besides, after reporting a notable improvement in US consumer sentiment in the previous month, the University of Michigan released a report showing sentiment has deteriorated by more than anticipated in the month of April. The preliminary report showed the consumer sentiment index dropped to 96.9 in April from the final March reading of 98.4. Street had expected the index to edge down to 98.0. The bigger than expected decrease by the headline index reflected less optimism about the economic outlook, as the index of consumer expectations slid to 85.8 in April from 88.8 in March.

Dow Jones Industrial Average surged 269.25 points or 1.03 percent to 26412.30, Nasdaq gained 36.81 points or 0.46 percent to 7984.16 and S&P 500 was up by 19.09 points or 0.66 percent to 2907.41.

 

Technical View

Index closed a week at 11643 with minimal loss of 23 points and formed hanging man kind of candle pattern on weekly chart suggesting indecision in the markets. Now index has formed strong base near 11590-11550 zone holding these levels we may see some more upside in index towards immediate resistance of 11700-11760 zone. Nifty bank has support near 29750-29550 zone and resistance is coming near 30150-30250 zone.

 

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