Nifty may try to head towards 7,400
We had mentioned in our last week’s closing report that Nifty, Sensex would struggle and that the indices were showing no strength and would struggle to come out of the doldrums. After the sharp market corrections of the recent past, the major indices of the Indian stock markets have been slowly recovering. On Friday, the major indices made small gain of about 0.25% over Thursday’s close. However, the market has not regained its levels prior to the sharp correction of last week. The trends of the major indices over the week are given in the table below:
Short-covering, coupled with value buying and positive global indices buoyed the Indian equity markets on Monday. The gains at the bellwether indices of the Indian equity markets came a week after they had plunged by more than 6.50% each. The massive corrections made prices attractive and triggered value buying. Initially, both indices opened on a positive note, following a major rise in the Japanese Nikkei and healthy gains recorded at the US markets on last Friday. Moreover, investors' confidence was restored after Finance Minister Arun Jaitley made comments on the upcoming budgetary announcements and expected banking sector reforms. The BSE market breadth favoured the bulls -- with 1,985 advances and only 673 declines.
Meanwhile, data on the index of industrial production (IIP) last week showed India's factory output declined again in December by 1.3%. There was a growth of 3.6% in December 2014. Although the December output growth continued to be in the negative as compared to 3.6% growth in December 2014, it was somewhat better than the 3.42% decline registered in the month before. December IIP was dragged lower by a 2.4% drop in manufacturing activity.
Also, official data on Monday showed that India's annual wholesale rate of inflation declined marginally to (-)0.90% for January from (-)0.73% for the month before. It was the 15th straight month since November 2014 that deflationary pressure persisted and wholesale inflation has remained in the negative zone.
Profit-booking, coupled with doubts over the central government's ability to push through key economic legislations during the upcoming parliament session, dragged the Indian equity markets lower on Tuesday. The weak exports figures for January 2016 and the dwindling rupee value also subdued investors' sentiments. The BSE market breadth favoured the bears -- with 1,967 declines and only 569 advances. Initially, both the indices of the Indian equity markets opened on a positive note, in-sync with their Asian peers and Monday's sharp gains. However, profit booking on the back of gains made on last Friday and Monday dragged the markets lower. Moreover, investors' confidence was eroded due to continuing conflict between the ruling NDA (National Democratic Alliance) and the opposition, which is seen as having a bearing on some key economic legislations. The upcoming session of Parliament assumes significance as major economic legislations like bankruptcy code and Goods and Services Tax (GST) Bill will be taken up for approval by the Rajya Sabha. In addition, dwindling exports numbers and a weak rupee dented the equity markets. The Indian rupee opened on a weak note, down seven paise to 68.14 against a US dollar from its previous close of 68.06-07 to a greenback. On the exports front, Monday's late evening macro data release showed a slump of 13.6% in January in dollar terms over the same month a year ago. Chinese shares surged on Tuesday and regained the 2,800-point mark, joining a rebound across global capital markets. The benchmark Shanghai Composite Index gained 3.29% to close at 2,836.57 points while the smaller Shenzhen index surged 3.89% at 10,045.37 points, Xinhua reported.
The Supreme court on Tuesday asked the Reserve Bank of India to furnish a list of the companies which are in default of loans by the banks and financial institutions in access of Rs500 crore or whose loans have been restructured under corporate debts restructuring scheme.
Positive European indices, steep rise in crude oil prices and value-buying buoyed the Indian equity markets on Wednesday. The late surge in the markets came after panic selling and the dwindling rupee value had depressed investor sentiments during most of the day's trade. Initially, both the indices of the Indian equity markets opened on a positive note, as a result of healthy gains made in the US markets on Tuesday. Notwithstanding the rise, caution on the back of rising non-performing assets (NPAs) levels of the banking sector dragged the markets lower. The BSE market breadth favoured the bears -- with 1,778 declines and only 612 advances.
In addition, a weak rupee dented the equity markets. The Indian rupee opened on a weak note, down 14 paise to 68.52 against a US dollar from its previous close of 68.37-38 to a greenback. During the intra-day trade, the Indian rupee touched its lowest level since late August-early September 2013 at 68.67-level on spot.
On Thursday, after the sharp corrections of the recent past, the stock markets rallied in line with global cues and good buying was observed in capital goods, healthcare, IT and TECK sectors. US agency Moody's Investors Service on Thursday forecast for India a "stable GDP growth at around 7.5% in 2016 and 2017", saying the country is relatively less exposed to external headwinds, like the Chinese slowdown, and will benefit from lower commodity prices. India is relatively less exposed to external factors, including China slowdown and global capital flows. Instead, the economic outlook will be primarily determined by domestic factors, Moody's said in its report "Global Macro Outlook 2016-17 - Global growth faces rising risks at time of policy constraint". "Together with Turkey and China among the G20 emerging markets, India benefits from lower commodity prices: In 2014, net commodity imports amounted to 5.9% of India's GDP, compared with net exports worth 1.3%, 3.3% and 4.3% for South Africa, Brazil and Indonesia respectively," it said on Thursday. "In the five years to the end of the decade, we expect GDP per capita (at market exchange rates) to increase by 34% in real terms in India, compared with only 3.6% in the G20 emerging markets, excluding China and India," the report added. Moody's said overall growth will fail to pick up steam over the next two years as the slowdown in China, lower commodity prices and tighter financing in some countries weigh on the economy.
On Friday, the market was listless and traded largely in the red. Short-cover aided a small rally in the afternoon. Absence of any fresh triggers has further subdued investors' sentiments.
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were: