May 1, 2017

Market Week Ahead : Nifty To Touch 9400 or Consolidate? 8 Factors that may decide that

Market News
Market Week Ahead : Nifty To Touch 9400 or Consolidate? 8 Factors that may decide that :

The market hit record highs in the passing week (Sensex at 30,184.22 and Nifty at 9,367.15 intraday) on better-than-expected earnings (by cement, auto and midcap banks) and likely PSU banks' recapitalisation. Global factors like easing of political risk in Eurozone post favourable French elections results, and expectations of US tax reforms also boosted market sentiment. The Nifty gained 2 percent (at 9,304.05) during the week despite consolidation in later part of the week due to extended weekend and mixed global cues.
On the monthly basis, the market continued northward journey for fourth consecutive months. In fact, the year so far has been good, with Nifty posting 13.66 percent gains year-to-date (up 1.42 percent in April, 3.31 percent in March, 3.72 percent in February and 4.6 percent in January).

Such a stellar performance is unlikely to continue in the coming truncated week as well as in May. With expensive valuations at current level, the market has to consolidate more before moving towards another psychological 9,400 mark on the Nifty and volatility index also indicated the same trend, experts say.
The market will remain shut on May 1 (Monday) — Maharashtra Day.
They expect minor correction and every dip is likely to be bought. Major correction, according to them, is unlikely due to favourable domestic factors like consistent buying by domestic institutional investors despite FIIs' selling, better-than-expected earnings so far (indicating faster recovery in FY18) and stability in economic reforms after recent state & municipal elections. Lower crude oil prices also played supportive role for the market.
Following the recent run up, Indian VIX i.e. volatility Index, has reached the lower end of the range currently placed at 10.87. As VIX has a tendency to revert back to mean, a reading so low warrants a rise in the volatility in the coming sessions, which could lead to minor corrections.
While movement at the Index level could remain muted, stock specific movement on account of the ongoing earnings season could be seen, he adds.
The option data continued to suggest a strong support at 9000 with an open interest of 44 lakh shares in put options. On the upside, 9500 has the highest open interest of 42 lakh shares in call options.
We expect some volatility in global market also due to its influence on next week's Federal Reserve policy. Currently, domestic market is amongst the expensive market in the world with a P/E of 18x on FY18 basis, he says.
According to experts, the only negative factor that can stall the rally (in near term) would be the crisis between US and North Korea due to missile tests by the latter. If that intensified then the Nifty can break 9,000 level, they feel.
Here are eight factors that will chart market direction next week:
In the coming week, we will enter in the second month of March quarter earnings season. ICICI Bank (on May 3) and HDFC (May 4) earnings would be important ones to watch out for.
Bharat Financial will be closely watched not only for its earnings but also for likely announcement related to merger & acquisition.
Dabur and Bharat Financial will announce quarterly earnings on May 1.
On May 2, Marico, RBL Bank, Inox Leisure, Kansai Nerolac and Shriram City Union Finance will release their earnings report while ICICI Bank, Ajanta Pharma, DHFL, Alembic Pharma, Agro Tech Foods, L&T Technology, Tribhovandas Bhimji Zaveri and Zenotech Laboratories will come out with results on May 3.
HDFC, Emami, Exide Industries, Apollo Tyres, Godrej Properties, HCC, IIFL, Greaves Cotton, L&T Finance Holdings, L&T Infotech, Bank of Maharashtra, MCX, MRF, Oberoi Realty and Tata Communications will announce numbers May 4.
On May 5, Equitas Holdings, GE Shipping, Monsanto India, NIIT Technologies, Sanofi, Shankara Building Products, Shoppers Stop, SPARC and Transformers and Rectifiers are expected to declare earnings for the quarter ended March 2017.
D-Mart operator Avenue Supermarts will announce its earnings on May 6.
Auto sales
April sales data by auto companies will also be announced next week. Hence, Maruti Suzuki, Tata Motors, Ashok Leyland, Mahindra & Mahindra, Escorts, Hero Motocorp, Bajaj Auto, Eicher Motors and TVS Motor Company will be in focus.
Passenger vehicle segment will continue its growth momentum and outperform the auto industry growth in April while 2-wheeler and commercial vehicle volumes are expected to decline YoY and MoM, Motilal Oswal says.
It further says channel check suggests, retail off-take in 2-wheeler segment is expected to remain weak followed by pre-buy of BS-3 vehicles in the previous month.
Technical Outlook
Technical analysts expect 9200 will act as a support level in near term and on the upside, 9400 will be major resistance.
The maximum downside levels to be watched for this correction is around 9180-9150 for the next 1-2 weeks and Nifty could eventually bounce back and could register new all-time highs, he feels.
Macro ecomonic data
Nikkei Markit Manufacturing PMI will be announced on May 2 and Services PMI on May 4.
Manufacturing sector activity jumped to a five-month high in March at 52.5 (from 50.7 in February) with increased production and new orders while services PMI rose to 51.5 in March (up from 50.3 in previous month).
Stocks in Focus
Coming Monday, Ambuja Cements, Raymond, Uttam Galva, Kitex Garments, Navin Fluorine, Deepak Nitrite, Kesoram Industries and RPG Life Sciences will react their earnings that announced after market hours on Friday.
Other stocks that will react to earnings would be Dabur, Bharat Financial, JSW Energy, Indowind Energy, Astra Micro Wave and Morepen Labs which are expected to declare results over the long weekend.
UP sugar stocks will be in focus on Monday as CNBC-TV18 reports say UP government has asked sugar mills will pay 15 percent interest on cane arrears for 2016-17.
Dr Reddy's Labs, Aurobindo Pharma and Strides Shasun will react to USFDA actions.
US Food & Drug Administration has issued Form 483 with 11 observations for Dr Reddy's plant 3 at Bachupally and completed inspection of Strides Shasun's oral dosage unit in Puducherry with zero 483 observations while sources told that Aurobindo unit IV injectables unit received 6 observations from the US health regulator.
Thermax may react positively to its export contracts worth USD 157 million received in Africa.
Tata Motors will also be in focus as US auto sales data is expected to release on May 3.
Domestic institutional investors so far have been supportive to the market as according to provisional data, they have bought more than Rs 9,000 crore worth of shares in April.
At the same time, foreign institutional investors were net sellers to the tune of more than Rs 2,000 crore as per actual data available on the SEBI. However, they had made highest ever monthly buying worth Rs 33,781 crore in March.
Corporate Action
Beardsell share price will adjust on May 4 for its bonus issue (in the proportion of one share for every five shares held) and sub-division of face value (from Rs 10 to Rs 2 each).
Mishtann Foods will consolidate face value of its share price at Rs 10 from Re 1.
Global Cues
Globally experts will closely watch geopolitical concerns like stand-off between US and North Korea due to missile tested by the latter.
The outcome of two-day Federal Reserve policy meeting on May 3 and US jobs report for April on May 5 will also be in focus. Economists do not expect any change in policy rate but the focus would be on indications for further rate hikes.
Europe's Manufacturing PMI for April and Bank of Japan's core CPI will be announced on May 2 while Europe's Q1 GDP and US Markit Composite & Services PMI data will be released on May 3.

Europe's Markit composite and services PMI and US' Q1 non-farm productivity data is expected on May 4.