NEW DELHI: Everyone knew it was coming; the only uncertainty was the quantum of debacle.
Although, the fall was imminent given the lack of any solid reasons behind the market’s rise and rich valuations, last week’s ‘carnage’ left everyone including market pundits nonplussed.
On Friday, the 30-share Sensex pack of BSE hit a five-week low during the day, shedding 318 points or 1 per cent to close the session at 31,214 while NSE Nifty tumbled 109 points to settle at 9,711. On a weekly basis (Aug 4-Aug 11), the BSE’s Sensex lost a whopping 1,111.82 points or 3.43 per cent while broader Nifty shed 355.6 points or 3.53 per cent.
Among the key highlights, Q1 earnings of bluechips such as Tata Motors, State Bank of India and Sun Pharma turned investors into a disgruntled lot, especially Sun Pharma, which reported its first loss in at least 12 years. The drug major on Friday reported a consolidated loss of Rs 424.92 crore (after taxes, share of profit of associates and JVs) for the quarter ended June 30 on account of a one-time loss of Rs 950.50 crore on antitrust litigation related to a product Modafinil.
Tata Motors, on the other hand, posted a 42 per cent increase in first-quarter consolidated net profit, with a large one-time gain on account of changes to the automaker’s pension benefit plans masking a poor operational performance. Its profit rose to Rs 3,200 crore in the quarter through June from Rs 2,260 crore a year earlier, with the one-time gain of Rs 3,609 crore boosting the latest number. Although, the numbers look decent, it was way below the expectations. “… the first quarter results have not met our expectations,” chief executive Guenter Butschek was quoted as saying by Reuters.
India’s largest lender State Bank of India on Friday reported a threefold jump in net profit (after minority interest) at Rs 3,031.88 crore for June quarter compared with Rs 2,817 crore estimated by analysts in an ET Now poll. However, what spoiled the party for the bank was its gross non-performing asset which rose to 9.97 per cent of gross advances in June quarter from 6.9 per cent in March quarter.
Pharma stocks continued to face headwinds with the S&P Healthcare index losing 7.8 per cent during the last week. (see table below)
Let’s check out what all might influence investors on Dalal Street in the forthcoming holiday-truncated week. The market will remain closed on August 15 on account of Independence Day.
Macroeconomic Data: The ‘Big Three’ indicators, viz IIP data, WPI inflation and retail inflation are likely to have a major say during the coming week. Among these, IIP data has already been released and the numbers are nothing but a total disappointment. Industrial output entered the negative territory in June, contracting 0.1 per cent mainly due to decline in manufacturing and capital goods sectors, reported PTI. Factory output, measured in terms of Index of Industrial Production, grew 8 per cent in June 2016. This is the first time in the current fiscal that the industrial output has shown a decline. The IIP grew by 3.4 per cent in April and 2.8 per cent in May as per the revised estimates released on Friday.
The inflation data based on wholesale price index (WPI) for July 2017 will be announced during market hours on Monday, August 14, 2017. WPI had eased sharply to its lowest level this year to 0.9 per cent in June from 2.17 per cent in May.
Retail inflation or consumer price-based inflation (CPI) for July 2017 will also be released on Monday after market hours. CPI had slowed to 1.54 per cent in June from 2.18 per cent in May.
Geopolitical tensions: The war of words between the US and North Korea escalated during the week as North Korea on Saturday said its army was on standby to launch attacks on the US.
North Korea’s state-run newspaper said its leader Kim Jung Un’s revolutionary army is “capable of fighting any war the US wants,” reported New York Post.
Last leg of Q1 results: Although, majority of companies have announced their Q1 numbers, there are a few prominent names, which are slated to unveil their report card in the coming week. These include Coal India, Grasim Industries and Tata Power Company, all of which are scheduled to release their numbers on Monday. Shares of Adani Ports and Special Economic Zone will react to its Q1 results, which were announced on Saturday. The company’s PAT for the quarter under review came in at Rs. 710 crore, YoY decline of 13.7 per cent, according to a report by IIFL.
What the tech charts say: “The coming week is likely to see Nifty50 facing stiff resistance at 9,770 and 9,890 levels. Downside may extend up to 9,530 levels, which is the 100-DMA, and a major support to look at in the event of continued weakness, says Milan Vaishnav, CMT.
On the weekly chart, the Nifty has formed an engulfing bear with a big real body confirming the change in the trend in the intermediate term. The correction phase of the market has begun.
“Indeed the smallcap index, which captures the mood of retail public, had formed an ending diagonal pattern, which is a powerful trend reversal pattern,” says Jimeet Modi, CEO, Samco Securities.
“Traders should wait for a bounce to sell. Currently the market is oversold,” advised Modi.
Fed minutes: The Federal Open Market Committee will issue minutes of its last monetary policy meet held on 26 July 2017, on Wednesday (August 16, 2017). As expected, the US Federal Reserve kept the policy rate unchanged at its latest meeting.
The Fed remained accommodative of monetary policy stance. However, it signalled the start of a reduction in balance sheet ‘relatively soon’ ((most likely in September). The movement of US dollar, precious metals and global indices will be keenly watched after the release.
These apart, progress of monsoon rains, global macro data, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs), the movement of rupee against the dollar and crude oil price movement will steer the market in the coming days.