Spooked by trade war
worries, a sinking rupee and rise in crude oil prices, Dalal Street investors
joined their global peers in a sell-off exercise. Although, the bulls made a
comeback on Friday, the week belonged to the bears. Equity benchmarks Sensex
shed 0.74 per cent during the week to end at 35,423 while NSE's Nifty bled 1
per cent to settle at 10,714.
Indian markets continued to remain mostly sideways amid the expiry week
technicalities and continueing lack of triggers from world or domestic sphere. Midcap
and smallcap as well as largecaps from most of sectors continued to remain weakish
and corrective excepting few stocks that are strong the likes of IT majors and
minors as well as few index and non index counters which saw bounce back. It is
an irony for the investors, both short, and long term that the benchmark
indices are almost around the lifetime highs, and that too despite the
lustreless global markets movement; but their portfolio looks like that of 20%
or more correction type valuation. Anyways, we expect the markets to continue
to languish for this month as well just like we predicted about May and June
month about ‘erratic moves’, ‘intraday trades’, ‘1-2% gains trades’, and ‘range
trading’ type of sideways market.
Trade Tariffs: Import tariffs announced by the US President Donald Trump on Chinese products will come into effect on July 6. Earlier in June, Trump laid out a list of more than 800 strategically important imports from China that would be subject to a 25 per cent tariff starting on July 6, including cars. In response to it, China’s Commerce Ministry had said it would respond with tariffs “of the same scale and strength” and that any previous trade deals with Trump were “invalid. Reuters reported China would impose 25 per cent tariffs on 659 US products, ranging from soyabeans and autos to seafood. Canada has also vowed to impose retaliatory tariffs on US imports from July 1
Trade Tariffs: Import tariffs announced by the US President Donald Trump on Chinese products will come into effect on July 6. Earlier in June, Trump laid out a list of more than 800 strategically important imports from China that would be subject to a 25 per cent tariff starting on July 6, including cars. In response to it, China’s Commerce Ministry had said it would respond with tariffs “of the same scale and strength” and that any previous trade deals with Trump were “invalid. Reuters reported China would impose 25 per cent tariffs on 659 US products, ranging from soyabeans and autos to seafood. Canada has also vowed to impose retaliatory tariffs on US imports from July 1
Rupee: The domestic unit
touched its nadir in the week gone by. Although, it made a sharp recovery on
Friday, it is still Asia's worst-performing currency this year.
According to Moody’s Investors Service, RBI's efforts to tighten the availability of rupees in the market and halt a slide in the currency may squeeze profitability of the country’s lenders as it raises their funding costs, Bloomberg reported.
According to Moody’s Investors Service, RBI's efforts to tighten the availability of rupees in the market and halt a slide in the currency may squeeze profitability of the country’s lenders as it raises their funding costs, Bloomberg reported.
Crude prices: Oil posted biggest
weekly rise in more than two months on shrinking stockpiles and supply
disruptions from Canada to Libya. Futures advanced 8.1 per cent last week in
New York, above London-traded Brent crude’s gain of 5.1 per cent, Bloomberg
reported. The world’s two most important oil benchmarks - Brent and WTI are
diverging as Saudi Arabia’s pledge to lift output weighs on the European
market, the report said
Macro data: India's
manufacturing sector data for June is slated to release on Monday. The Nikkei
India Manufacturing Purchasing Managers Index (PMI) fell from 51.6 in April to
51.2 in May. Services sector data for June will be unveiled on Wednesday.
Services activity witnessed a slowdown in May as the Nikkei India Services
Business Activity Index fell to 49.6 from 51.4 in April.
Auto stocks: Shares of auto
companies will be in focus as the automakers will start releasing sales numbers
for June from Sunday. Auto companies continued to register robust sales in May,
driven by rural demand and government's infra push. Maruti Suzuki NSE 0.62 %
India, a leader in passenger vehicles, sold a total of 172,512 units in May, an
increase of 26 per cent while Tata Motors NSE 2.26 % registered a strong growth
of 58 per cent YoY at 54,295 units, against 34,461 units.
Stock-specific actions: Last week saw some big-ticket developments in
individual names. First, IRDAI approved LIC’s plan to buy 51 per cent stake in
IDBI Bank. The life insurer is expected to invest Rs 10,000-13,000 crore in tranches
in the state-run lender. This apart, Tata Steel NSE 3.52 % and Germany’s
Thyssenkrupp signed final agreement on Saturday to establish a long-expected
steel joint venture. In addition, state-run Punjab National Bank (PNB) sold its
entire stake in ratings firm Icra for a consideration of Rs 109 crore.
New kids on the block: Shares of RITES and
Fine Organic Industries will list on the bourses on Monday. Initial public
offerings of both the companies, which ran from June 20 to June 22, saw huge
investor demand. While Railways consultancy firm RITES' public offer was
subscribed a mega 67 times, Fine Organics issue was subscribed nearly 9
times.
Tech factors: The Nifty50 index on
Friday settled above its 50-day moving
average. In the process, it formed a large bullish candle on the daily
chart, similar to a ‘Long White Day’ and would face resistance at other key
short-term moving averages in the 10,730-10,750 range. If Nifty continues to
show similar strength in the next session, then the possibility of bottom
formation at Thursday’s low of 10,557 will be much higher. The same can be
confirmed with a close above 10,785
However, VK Sharma,
Head - Private Client Group & Capital Markets Strategy, HDFC Securities,
believes it would be too early to define it as a bullish trend reversal.
Traders should only take aggressive longs once Nifty closes above 10,850,
Sharma advises.
US jobs data: Investors across the
globe will keep an eye on the US jobs data for June, which is scheduled to be
released on July 6. The US economy continued to add jobs at a solid pace in
May, with nonfarm payrolls rising 223,000 and the unemployment rate falling to
an 18-year low of 3.8 per cent.
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