As long as Nifty stays above 7,800, it will be bullish
We had mentioned in last week’s closing report that Nifty, Sensex will struggle but if Nifty does not breach 7,700, it is likely to head higher. The major indices in the Indian stock markets were in the red on Monday and Tuesday, but rallied on Thursday and Friday, after a holiday on Wednesday. The central government's efforts to get a key economic legislation passed during the winter session of parliament cheered the Indian equity markets on Friday. The government’s initiatives in economic reforms have been keeping the markets stable for around two weeks. The weekly trends of the major indices through the week’s trading are given in the table below:
Heightened chances of a US rate hike coupled with the upcoming stormy winter session of parliament and derivatives expiry subdued Indian equity markets on Monday. The upcoming winter session of parliament and derivatives expiry subdued Indian equity markets on Tuesday. The government needs to get the Goods and Services Tax (GST) bill passed in the Winter session to meet the 1 April 2016, roll-out deadline. The US Fed held an 'unscheduled' meet on Monday. The meet precedes the Federal Reserve policy meet in December, when a rate hike is expected to be announced. The US central bank has given signs that it might go in for a series of gradual rate hikes starting from December. However, in the short term, higher interest rates in the US are expected to lead away FPIs (Foreign Portfolio Investors) from emerging markets such as India.
Japanese life insurer Nippon Life Insurance will increase its stake in Reliance Life Insurance to 49% by acquiring 23% stake from Reliance Capital for Rs2,265 crore, the two groups said on Tuesday. In line with the new shareholding structure, the name of the company will also be changed to Reliance Nippon Life Insurance Company Ltd.
Admitting that there were still a number of regulatory and taxation issues in India, Prime Minister Narendra Modi on Tuesday tried to hard sell the country's business potential to Singapore's corporate community and assured that he will do the hand-holding when they come to India. Wednesday was a market holiday for the Indian stock markets. Moody's Investors Service on Wednesday said the failure to implement reforms by passing the GST and land bills in parliament could potentially hurt investments amid weak global growth and prove to be a "downside factor" for Indian companies. "It seems highly unlikely that the major reforms will get enacted by the upper house of the Indian parliament where the ruling coalition is in minority. A failure to implement these reforms could hamper investment amid weak global growth," Moody's vice president Vikas Halan said in a report. "The government is unlikely to win a majority in the upper house if it keeps losing state elections like it did recently in Delhi and Bihar. Opposition parties are unlikely to allow key reforms to go through," he added. The constitution amendment bill for Goods and Services Tax (GST) has been passed by Lok Sabha, and is pending in the Rajya Sabha, where the ruling NDA does not have majority. Minister of State for Finance Jayant Sinha told reporters on Monday that the government is making efforts to convince the opposition about the GST bill.
Heightened chances of key economic legislations getting passed during Parliament's winter session coupled with hopes of a stimulus package in European Union buoyed the Indian equity markets on Thursday. Initially, both the bellwether indices of the Indian equity markets opened on a weak footing but gained strength in line with their Asian and European peers. Furthermore, better-than-expected outcome of the derivatives expiry cheered investors.
The government on Thursday announced indirect tax incentives for India's stressed shipbuilding industry in a bid to give a push to the sector. The finance ministry notified it had exempted all raw material parts used in the manufacture of ships, vessels, tugs and pusher crafts and the like from customs and central excise duties. The export oriented units (EOUs) too will be eligible for this incentive. These benefits were earlier available if the manufacture was in a customs bonded warehouse, which condition is being withdrawn, the statement said. "Instead, these exemptions will now be subject to actual user conditions," the ministry said. The shipping ministry told parliament late last year that it had asked the Reserve Bank of India and the finance ministry to relax some of the financial regulations on banks engaged in corporate debt restructuring (CDR) of shipyards. Shipping is highly capital intensive and depends largely on the debt market to finance its acquisitions.
On Friday, GST hopes buoyed the stock markets and there is a feeling that the winter session of Parliament will be productive for legislation related to economic reforms. The stock markets promptly rallied and the gains of the indices on a daily basis were around 0.65%-1.96%.
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were: