Nifty may decline from the current levels, a bit, but the trend is up
The S&P BSE Sensex closed the week that ended on 19th June at 27,316 (up 891 points or 3.37%), while the NSE’s CNX Nifty closed at 8,225 (up 242 points or 3.03%). Previous week we had mentioned that 50-stock Nifty may rally a bit if it manages to hold above last week’s lows.
On Monday, the Indian stock market on Monday was range-bound and closed marginally higher. Inflation data and the index of industrial production (IIP) announced by the government today were positives. Both Indian benchmarks, the NSE’s CNX Nifty and S&P BSE Sensex closed Monday at 8,013.90 or 0.39% up and at 26,586.55 or 0.61% up, respectively.
While inflation data is positive for the economy, monsoon and agriculture news is less encouraging. India's farm economy could contract this fiscal year for the first time in over a decade because of drought, threatening Prime Minister Narendra Modi's drive to lift millions in the countryside out of poverty and bolster his party's support.
On Monday, there was news that the US government was investigating an outsourcing contract involving utility firm Southern California Edison and India's largest software exporters, Tata Consultancy Services (TCS) and Infosys, similar pacts signed now or recently are coming under the scanner, say reports. This reinforces analysts’ view that IT stocks are not growing as much as they used to some years ago in the stock market.
On Tuesday, Indian markets opened flat and were down for most part of the day. At around 2 pm the Sensex and Nifty hit the lows of the day and started shooting up, ending up for the second successive day.
India's trade deficit narrowed to a three-month low in May 2015, helped by lower gold imports, bolstering the outlook for its current account balance. But in a worrying sign, weak global demand as well as persistent domestic bottlenecks led to a sixth straight annual fall in merchandise exports. Exports account for about a fifth of India's $2-trillion economy. The trade deficit shrank to $10.41 billion last month from $10.99 billion in April 2015, data released by the Commerce Ministry showed on Tuesday.
The benchmark opened Wednesday higher however, it started moving lower. After reaching ear previous day's close, Nifty started moving in a range. After 1.21pm, the 50-stock benchmark gained momentum and moved up to hit a four day (including today) high. After hitting the day's high, Nifty made a quick plunge and closed near to the dip it made.
On Thursday morning, Nifty made an early surge and maintained its upmove throughout the day. It closed near the day’s high at 8,174.60, up 1.03%. Finance minister Arun Jaitley has assured global investors that efforts are being made to reduce their concerns on expediting reform process, tax regime and policy stability by the Narendra Modi government. Jaitley, who began his 10-day trip to the US on Wednesday, met investors and said while there is "a lot of excitement and a lot of buzz" about India, there are concerns about the pace of reform process and policy stability also.
Fitch Ratings does not expect India to increase customs duties on steel imports to alleviate much of the pressure on steel producers, which have been challenged by cheap imports and weak domestic demand. Higher customs duties will result in only a marginal increase (between Rs500-Rs1,100 a tonne) in the landed costs of imported steel products, which in the short term will help close the gap between domestic output and the cheaper imports.
As expected on Friday, the Nifty remained on an upmove with its day’s low near the opening mark. Sensex, Nifty and Bank Nifty closed in the green. Nifty closed the week at 8,224.95.
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were: