Published on 26/04/2019 9:47:15 AM | Source: LKP Securities Ltd

Markets likely to make cautious start of new series - LKP Securities

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

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Domestic Market View

Markets likely to make cautious start of new series

Indian markets witnessed bloodbath on the back of heavy sell-off in the dying hours of the trade amid F&O expiry falling on Thursday. Today, the start of the new series is likely to be cautious amid mixed cues from the global markets. There will be some cautiousness with a report that the US placed India on its Priority Watch List alleging lack of sufficient measurable improvements to its Intellectual Property (IP) framework on long-standing and new challenges that have negatively affected American right holders over the past year. The report said over the past year, India took steps to address intellectual property challenges and promote IP protection and enforcement. Though, many of the actions have not yet translated into concrete benefits for innovators and creators, and longstanding deficiencies persist. India remains one of the world’s most challenging major economies with respect to protection and enforcement of IP. Meanwhile, the India’s crude oil production fell over 4 per cent in the financial year 2018-19 after aging fields of state-owned Oil and Natural Gas Corporation (ONGC) and Oil India (OIL) missed the target. The Ministry of Petroleum and Natural Gas data showed that India produced 34.2 million tonne of crude oil in the fiscal year ended March 31, down from 35.7 million tonne in the previous year. However, traders may take some support later in the day with the Reserve Bank of India’s (RBI) data showing that bank credit rose by 14.19 percent to Rs 96.45 lakh crore while deposits grew 10.60 percent to Rs 125.30 lakh crore in the first fortnight ended on April 12. In the year ago fortnight, deposits were at Rs 113.29 lakh crore and advances stood at Rs 84.46 lakh crore. There will be some buzz in the power sector stocks with ICRA’s report that the power ministry’s second auction for procuring 2.5 GW of thermal power in medium term at a higher tariff of Rs 4.41 per unit compared to Rs 4.24 per unit in the first round is positive for power producers, but signing of sale agreements with discoms remains crucial. There will be lots of important earnings announcements too, to keep the markets in action.


Markets end near day’s low points

Indian bourses ended Thursday’s session near their day’s low points. After a cautious start, the markets traded firmly for the most part of the day, amid reports that giving relief to composition scheme taxpayers under the GST, the Finance Ministry has allowed such businesses to file self-assessed tax return on quarterly basis in a simplified form. In yet another simplification, the Goods and Services Tax (GST) Council has added flexibility into the way a company can utilise the available input tax credit. Any company would now be eligible to use credit available against paid integrated GST (IGST) to set off tax liabilities of state GST (SGST) and central GST (CGST) in any proportion and in any order. Traders also remained positive, as the Finance Ministry introduced several changes in the electronic way or e-way bill system, ranging from auto calculation of distance based on PIN codes for generation of e-way bill to barring businesses from generating multiple e-way bills based on one invoice, as it seeks to cracks down evasion in the GST framework. However, in the last hours of the trade, key indices failed to hold their heads in green terrain and turned negative to end the trading session in red terrain, on the account of weak cues from global markets. Trading sentiments worsened amid a private report stating that Indians are becoming increasingly worried about the economy’s condition, with fewer citizens believing that the local economy is getting better. Adding more worries among market participants, the World Bank forecasted slowdown in East Asia and Pacific economies in 2019. Growth of East Asia and the Pacific (EAP) will remain at 6.0 per cent in 2019, which is down from 6.3 per cent in 2018. Different factors marred slow growth in major economies which suffered due to economic policies.

Stocks related to the metal industry ended lower, as the data from the India’s Engineering Export Promotion Council (EEPC) showed that the value of India’s copper products exports declined 70 percent in the year ended in March 2019. Exports of copper and copper products, including cathodes, were $1.07 billion in the period from April 2018 to March 2019, down from $3.48 billion in the 2017-18 fiscal year. Besides, textile sector stocks remained in focus with Textile Secretary Raghavendra Singh’s statement that there is great potential for the technical textiles sector but the industry was yet to tap it. He added that another major need was skilling the people in the sector.


Global Market Overview

Asian markets end mostly lower on Thursday

Asian markets ended mostly lower on Thursday as surprise deterioration in German business morale rekindled global slowdown fears. A mixed batch of US earnings, worries over China putting policy-easing measures on hold and caution ahead of US first-quarter gross domestic product data due on Friday also kept investors on the sidelines. Chinese shares ended lower on fears of easing stimulus. Further, South Korean shares ended lower on growth worries after data showed the country’s economy unexpectedly contracted in the first quarter in the biggest fall since the financial crisis. South Reports showing South Korea’s gross domestic product was down a seasonally adjusted 0.3 percent sequentially in the first quarter of 2019. That follows the 1.0 percent increase in the three months prior. However, Japanese shares ended higher after the Bank of Japan revised its forward guidance and said it would keep extremely low interest rates until spring 2020.

US markets end mostly lower on Thursday

The US markets ended mostly lower on Thursday as manufacturing-related sectors logged big losses. A double-digit decline in 3M Company’s stock following disappointing earnings weighed on markets. However, Nasdaq settled higher with gain of around quarter percent on the bank of jumps by shares of Facebook (FB) and Microsoft (MSFT). The social media giant and the software giant surged up by 5.9% and 3.3%, respectively, after both reported quarterly results that exceeded Street estimates on both the top and bottom lines. On the economic front, reflecting a significant rebound in orders for transportation equipment, the Commerce Department released a report showing new orders for US manufactured durable goods jumped by much more than expected in the month of March. The Commerce Department said durable goods orders surged up by 2.7% in March after tumbling by a revised 1.1% in February. Street had expected durable goods orders to climb by 0.8% compared to the 1.6% slump originally reported for the previous month. The bigger than expected rebound in durable goods orders came as orders for transportation equipment shot up by 7.0% in March after plunging by 2.9% in February.

Meanwhile, after reporting first-time claims for US unemployment benefits at a nearly fifty-year low in the previous week, the Labor Department released a report showing initial jobless claims rebounded by more than anticipated in the week ended April 20. The report said initial jobless claims climbed to 230,000, an increase of 37,000 from the previous week’s revised level of 193,000. Street had expected jobless claims to rise to 200,000 from the 192,000 originally reported for the previous week. The bigger than expected increase came after the number of jobless claims in the previous week represented their lowest level since hitting 182,000 in September of 1969. The Labor Department said the less volatile four-week moving average also rose to 206,000, an increase of 4,500 from the previous week’s revised average of 201,500. Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also inched up by 1,000 to 1.655 million in the week ended April 13.

Dow Jones Industrial Average declined 134.97 points or 0.51 percent to 26462.08 and S&P 500 was down by 1.08 points or 0.04 percent to 2926.17, while Nasdaq gained 16.67 points or 0.21 percent to 8118.68.


Technical View

Index closed a day at 11642 with loss of 84 points on Thursday session and formed dark cloud cover candle pattern on daily chart which is bearish in nature. Index has support near 11600-11550 zone, holding above said levels we may expect some consolidation in market but if fails to hold then we may see sharp cut in index towards 11450 zone and resistance is coming near 11680-11735 zone. Nifty bank has support near 29450-29300 zone and resistance is coming near 29650-29900 zone.


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