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Events to watch this week
Trump agenda tougher sell after Comey firing
Macron cruises to French presidency
South Korea elects new president
Volatility touches multi-decade lows
IMF expected to rejoin Greek bailout
The Week ahead:
China reports retail sales and industrial production data on Monday, 15 May
US industrial production is released on Tuesday, 16 May
Japan releases its Q1 gross domestic product figures on Wednesday, 17 May
The United Kingdom releases its April retail sales report on Thursday, 18 May
For the week,Global equities were little changed on the week amid presidential elections in France and South Korea and fresh political turbulence in Washington. The yield on the US 10-year Treasury note, at 2.34%, saw scant net change on the week. West Texas Intermediate crude oil firmed modestly, to $47.50 a barrel from last week’s $45.50.
CRUDE OIL-Rs 3,062 barrel
GOLD-Rs 28,015 gram
MARKET ROUND UP
Key equity benchmark indices registered strong gains in the week ended Friday, 12 May 2017. The barometer index, the S&P BSE Sensex and the Nifty 50 index scaled record highs on the back of domestic and global cues.
The market sentiment was boosted by chief of the India Meteorological Department (IMD) reportedly commenting that India may likely receive higher monsoon rainfall than previously forecast. A good monsoon would positively impact rural incomes which in turn could give a boost to mass consumption sectors like FMCG, two-wheeler industry etc. A substantial part of the country derives income from agriculture and allied sectors.
The Sensex rose 329.35 points or 1.1% to settle at 30,188.15. The Nifty 50 index advanced 115.60 points or 1.24% to settle at 9,400.90.
The BSE Mid-Cap index rose 0.92%, under performing the Sensex. The BSE Small-Cap index advanced 1.12%, outperforming the Sensex.
Macro Economic Front:
On the Economic Front,the government will announce industrial production data for the month of March 2017 after market hours on Friday, 12 May 2017. The data on inflation based on consumer price index (CPI) or retail inflation for April 2017 will also be announced after market hours on that day.
The data on inflation based on wholesale price index (WPI) for April 2017 is also slated to release after market hours on Friday, 12 May 2017. India's trade data for the month of April 2017 is scheduled on Monday, 15 May 2017.
Major Action &Announcement:
Asian Paints declined 1.21%. The company's consolidated net profit rose 10.4% to Rs 462.22 crore on 8.9% rise in revenue from operations to Rs 4416.23 crore in Q4 March 2017 over Q4 March 2016. The result was announced after market hours on Thursday, 11 May 2017.
TCS advanced 1.86%. The company announced that it has opened its first Drones Research Lab in the US at its Seven Hills Park Innovation center located in Cincinnati, Ohio to address the rapidly expanding demand for unmanned aerial vehicles and business solutions across industries. The announcement was made after market hours on Friday, 5 May 2017.TCS announced that South Africa's Mercantile Bank successfully transformed its banking operations with TCS BaNCS Digital. The announcement was made during market hours on Wednesday, 10 May 2017.
Power Grid Corporation of India (PGCIL) was down 1.32%. The company said that Department of Telecommunications, Ministry of Communications, Government of India has granted unified license dated 2 May 2017 to the company with national long distance and internet service provider-category A service authorizations for providing telecom services. The license is valid for 20 years. The announcement was made during market hours on Tuesday, 9 May 2017.
Lupin rose 0.29%. The company issued clarification to the media news after market hours on Tuesday, 9 May 2017. The company said that recently its Aurangabad facility underwent an inspection by the USFDA. The inspection was completed on 26 April 2017, subsequent to which, the USFDA issued Form 483 citing eight observations. The company is in the midst of putting together a response to address the observations.
DrReddys Laboratories declined 0.66%. The company's consolidated net profit rose 175.37% to Rs 337.60 crore on 5.32% decline in net sales to Rs 3498.50 crore in Q4 March 2017 over Q4 March 2016. The result was announced during trading hours on Friday, 12 May 2017.
Tata Motors was up 2.54%. Tata Motors Group global wholesales including Jaguar Land Rover (JLR) declined 4% to 73,691 units in April 2017 over April 2016. The announcement was made during market hours on Wednesday, 10 May 2017.
In Overseas Markets,centrist candidate Emmanuel Macron won the French presidential election with about 66.1% of the votes, against 33.9% for rival Marine Le Pen. The victory on Sunday, 7 May 2017 for the 39-year-old Macrona staunch supporter of the European Union is likely to placate anxious global market investors, who have fretted for weeks that far-right candidate Le Pen would win and make good on promises to yank France out of the EU, potentially unsettling the eurozone and world markets.
The International Monetary Fund said Asia's economic outlook faces significant uncertainty and downside growth risks from any sudden tightening in global financial conditions or rise in protectionist trade policies. The IMF, which in April raised its 2017 Asia-Pacific growth forecast to 5.5% from its previous October forecast of 5.4%, said loose monetary and fiscal policies across most of the region would underpin domestic demand. India's growth is expected to rebound to 7.2% in the FY 2018 and 7.7% in FY 2019 after disruptions caused by demonetization, the IMF said.
Global Economic News:
Legislative calendar grows more challenging for Trump
President Donald Trump’s health care reform and tax cut agenda have faced significant legislative headwinds for some time, but those headwinds stiffened considerably after the president removed from office embattled Federal Bureau of Investigation director James Comey. Measures that require a 60-vote majority in the 100-seat United States Senate will be extremely difficult to enact given the charged political environment. Republicans, with 52 senators, hold a slim majority.
Macron outperforms expectations
Centrist Emmanuel Macron was expected to easily beat right-wing populist Marine Le Pen in the second round of the French presidential election, but his margin of victory proved to be even larger than expected. Macron received 66% of the vote to Le Pen’s 34%. He must now forge a governing majority in the National Assembly, with two-round parliamentary elections scheduled for 11 June and 18 June.
South Korea’s president aims for warmer North Korea relations
Newly-elected South Korean president Moon Jae-in took office on Wednesday and vowed to resolve the security crisis on the Korean peninsula as soon as possible, including by traveling to Pyongyang, under the right conditions. On the economic front, Moon is expected to push for the reform of South Korea’s conglomerate system, as well as to seek higher corporate taxes.
Greek bailout may secure IMF backing
Concerns over the sustainability of Greek debt have caused in the International Monetary Fund to bypass the past several rounds of funding for the indebted Euro zone member. But the IMF looks likely to rejoin the bailout in the weeks ahead, and continues to push European authorities to grant Greece debt relief. An agreement is expected at a meeting of Euro group finance ministers on 22 May.
US consumer perks up
US retail sales expanded at the fastest rate in three months in April, while prior months’ data were revised higher. Strong labor markets and modestly rising wages are supporting consumption. Consumer prices in the US remain subdued, rising 0.2% in April after falling 0.3% in March. Core CPI rose 0.1% in April, and was up 1.9% versus a year ago.
Bank of England leaves policy untouched, lowers outlook
The Bank of England left interest rates unchanged at their rate-setting meeting on Thursday but the Monetary Policy Committee slightly downgraded its economic growth forecast for 2017 to 1.9% from an earlier 2% outlook. Governor Mark Carney allowed in a press conference that the BOE “has not modeled” for a disorderly Brexit process. Carney also said that if the Brexit process goes smoothly, the Bank may need to hike interest rates faster than the market expects.
GLOBAL CORPORATE NEWS
VIX bounces from 24-year lows
Volatility, as measured by the Chicago Board Options Exchange Index (VIX), fell to its lowest level since 1993 this week amid unusually calm equity trading conditions. The VIX, at 10.6 on Friday morning 12 May, is running at roughly half of its twenty-year average, according to Reuters. Analysts are struggling to explain the unusually placid market environment, with one well-known pundit this week pinning the blame on social media. The VIX slipped as low as 9.7 on Monday 8 May.
As of 11 May, with 457 of the S&P 500 companies having reported, earnings are expected to increase 14.7% in Q1 versus a year ago. Excluding energy, earnings are expected to grow 10.4%. Revenues are expected to grow 7.3%, or 5.3%, excluding energy. The next-twelve-months P/E ratio is 17.8%, according to Thomson Reuters I/B/E/S.
NEW 52-WEEK HIGH BSE (A):
NEW 52-WEEK LOWS BSE (A):
MAJOR WEEKLY GAINERS IN BSE A CATEGORY(%):
MAJOR WEEKLY LOSERS IN BSE A CATEGORY:
Eyes will be set on the certain US economic data releases are:
Housing Market Index
Tuesday (16 May)
MBA Mortgage Applications
No Major Data
Fundamental Pick of the week:
Buy Majesco Ltd For Target Rs. 556.00
STOCK IN FOCUS
* Majesco’s stock rose by 2.4% yesterday, while the BSE Sensex was flat. While the company reported a disappointing 4QFY17, with revenue down 6.2% QoQ in USD terms, we believe underlying industry fundamentals and the key IBM partnership will enable Majesco to boost revenue growth in FY18E.
* Under-penetrated and significant market opportunity, highly rated products - Total addressable market for Majesco stands at ~US$ 25bn. Within this, the addressable market size for the US P&C market stands at US$ 9.25bn.
Majesco has also developed products for the L&A market; of the total estimated addressable market of US$25bn for Majesco, around US$15-16bn relates to the L&A market. We currently have a target price of Rs 556 on the stock.
NIFTY began the session on lifetime- high tracking positive cues from Asian markets, but later index remained sideways during the day. Finally, after oscillating in 9,451-9,411 range, NIFTY closed the day at 9,422 mark with gain of 15 points.NSE Cash segment reported turnover of Rs25,387crore as compared to Rs24,298 crore earlier.Overall market breadth remained negative, where 672 stocks advanced against 986 declined stocks.Mixed trend was observed across all the sectoral indices during the day, where Media index emerged as a top gainer with the increase of 3.4% respectively. However, none of the sectoral indices reported loss of more than 0.5%
Bank Nifty made high of 22977 doing our target of 22940 and now holding 20700 we can move towards 23110.Bearish only below 22500. Hope traders are Enjoying this wonderful ride we are having in market. Dance till the music lasts. Bank Nifty finally closed below 22700 suggesting bulls are near the gann angle support holding the same we can again see an upmove towards 23000/23110.Bearish below 22500 for a move towards 22350/22100
Indian equity market following a breather in the last week regained its upward journey. With the statement from IMD that projected a normal monsoon provided the required impetus to push Nifty to pierce 9450 mark for the first time ever. Post a big rally, the market invariably faces a hurdle in the form of resistance at higher levels. This is a normal phenomenon in a bull market, which was very much in play during this week’s trade. In addition, Friday sell-off led by Banking stocks saw markets giving away some of the gains. Yes Bank, ICICI Bank and Axis Bank stocks declined sharply on wide divergence between reported NPA and RBI assessed NPA. Pharma stocks remained under pressure as earnings continue to disappoint with latest Glenmark results reporting a wide miss on estimates.
Interestingly, BankNifty under performed against the benchmark index, and was the main reason for slowdown in index action post the breakout session on Wednesday. Furthermore, records kept tumbling on indices even as the global market rally and an historical low VIX contributed towards the gains.