Indian Stock Market Commentary - 15 Sept 2018

               Last week the market saw high volatility as it was expected from it. However, the later half of the week was expected to be choppy and flat but gave the bounce back which surprised bulls more than the bears as they were not expecting it so fast and swiftly, that too without those moves in biggies like Reliance Industries and the likes which have been moving the markets upwards since last 1000 points of NIFTY Index.
               This week and the previous week starting from the first of this month saw decline without any new news factor in Indian stock markets, which brought down NIFTY from the lifetime high 11750 levels to 11250 levels, about 500 points decline in 10 days time. However the news of PM Modi convening an emergency meeting regarding the situation and announcing possible moves made the oversold market cheer up and rise for last two days of the week and recover half of the correction or 250 points. 
              However we do not think that the friday gap up open can sustain and we might see selling back to that gap in next week as the market discounts the measures announced by PM Modi on monday morning open. When there is no sufficient buying the markets could again get back to backfoot until the friday gap is filled and biggies like Reliance Industries and the IT pack does not again start to lead the markets. The pharmas are good on the way up, but they don't have the fire power to run the benchmark Indices. 
                 The measures announced by the government are mainly targeted to arrest the falling rupee and the impact of which will be not significant on the stock market correction or rally perspective. So, for now the technicals will continue to rule for the short term traders in the equities. 

              It is interesting to understand that the market was rising, for parts of it, due to the fall in the Indian currency, and all the benefits it gives to the exporters, IT firms, the pharma companies; but when the fall became steep and worries about the high inflation due to higher fuel prices (fuel is biggest import of our country) and its domino effects, the Current Account Deficit situation and possible rating downgrades; made the market to look and think the other side of the coin. 
             Having said all these, we believe that the next week is going to be as difficult to trade for bulls esp. as it was the last week, and we do not think that it will be one way ride up again and time to take positional longs is yet little far away. The stock specific moves on both side will continut to be available in specific pharma, IT, banking names. The hetherto leaders like RIL, etc. will continue to languish and not lead the market up. IT is taking a breather and without this rupee fall panic getting in place, it is unlikely we can see buying coming back in it again, they should be waited to be baught when it does, and it will.
          

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Factors that will decide the market trend for the next week l Nifty50 l Sensex l Stock Trading India

Factors that will decide the market trend for the next week

After a week that saw equity indices Sensex and Nifty end on a subdued note, the domestic equity market has a strong booster in the form of a world-beating GDP growth print going into a new week. 
         While Sensex fell 45 points on Friday and Nifty inched up by 4 points, they still gained around 1 per cent each on a weekly basis, thanks to a rise in select heavyweights from financial, IT and pharma sectors. 

A steep plunge in the rupee, negative global cues, global trade war worries and expiry of August series F&O contracts continued to suppress investor sentiment on Dalal Street. The rupee breached the 71 level, marking the biggest monthly decline in three years. The week ahead, some of the same factors may keep the pressure, but there are also a few positions. Here are a few of them.

Strong macros promise some action 
           Macroeconomic data should be steering the equity market next week. On Friday, official data released after market hours showed India’s GDP expanded faster than expected at 8.2 per cent in June quarter compared with 5.6 per cent growth in the year-ago period and 7.7 per cent in March quarter. Fiscal deficit stood at Rs 5.40 lakh crore for April-July, which was 86.5 per cent of the Budgeted figure, compared with 92.4 per cent around this time last year. Eight core sectors -- coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity – expanded at an impressive 6.6 per cent in July against 2.9 per cent in the year-ago period. An improvement in government finances is expected to bring some optimism to the market next week. Investors will also keep an eye on the Nikkei Manufacturing PMI and Nikkei Services PMI for August, which will be released next week. 

Trade front remains tense 

The global trade front, the US is preparing to impose fresh tariffs on $200 billion worth of Chinese goods and President Donald Trump is threatening to pull the US out of the World Trade Organisation. Talks to revamp the North American Free Trade Agreement (NAFTA) are in progress for four days now and Trump has expressed his intention of moving ahead with Mexico even as talks with Canada continue. 

No respite likely for the rupee 
The rupee is on a free fall. After breaching the 71 level on Friday, the domestic currency has declined 3.3 per cent in August and nearly 10 per cent so far this year, emerging as the worst-performing currency in Asia. Higher crude oil prices and sustained demand for the US dollar have been causing the rupee to fall. Trade deficit – mostly because of a spike in oil prices – has been a major reason behind the decline in the rupee. RBI’s restrained intervention in using its reserves is also adding pressure on the currency. “The threshold limit (for the intervention) has increased from 69 a month back to around 70.6 now,” TOI reported HDFC Bank chief economist Abheek Barua saying so. Investors will keenly observe how the rupee moves next week. While a fresh fall will be bad for the sentiment of the overall market, select IT and pharma stocks will take advantage of it. 

Monsoon performance below average 
Latest data from the India Meteorological Department (IMD) showed a deficient monsoon in the country. Till August 30, overall rainfall for the country remained 6 per cent below IMD’s long-period average. Now it is the time of monsoon's retreat. “As of now, there are indications that monsoon withdrawal may begin from the extreme parts of northwest India during the second week of September, but the withdrawal cannot be declared in haste. One has to keep in mind the spatial continuity during the process,” TOI quoted an IMD official as saying. How monsoon fares in its last leg will be an important cue for market sentiment. 

Auto stocks to be in focus 
Stocks of automakers will be in focus next week following their August sale numbers. Automakers, including Maruti Suzuki, Tata Motors and Mahindra & Mahindra, released their sale numbers on Saturday. M&M reported a 14 per cent increase in total sales at 48,324 units, while Tata Motors reported a 27 per cent increase in domestic sales at 58,262 units. But, biggest carmaker Maruti Suzuki’s sales dropped 3.40 per cent. 

Nifty technical charts indecisive 
The Nifty50 on Friday settled flat after briefly rising above the 11,700 level in morning trade, suggesting indecisiveness among traders. Negative closing in last three days has raised concerns about the continuity of the uptrend, especially since the psychologically important 12,000 mark is within striking distance. While key levels remain intact, we are betting on a broadening wedge pattern formed on the hourly charts to propel Nifty to the 11,800 level next week. Markets likely to continue the uptrend without any major correction in if there is no stress from the US equity markets on the back of the recent news factors from there, as Dow Jones Index has still not scaled its old highs unlike the tech indices such as Nasdaqs. 

US jobs number 
US jobs data for August will be released on Friday. US job growth declined in July. However, the rate of unemployment fell. Major markets around the world will track the hiring trends in the world’s largest economy in the wake of the trade disputes that the US has kicked off with major economies.  However, we do not believe this is a major datapoint that will drive the market. It could determine one day US markets moves.

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Indian Stock Market update as on 17 July 2018

Market update as on 17 July 2018

In our last week’s market update, we mention how Indian markets can touch 11000, the NIFTY life time high in the coming week and languish there. We saw that till the week ended 13^th july, the market scaled to those highs with the help of Infosys, tcs, reliance industries, the hdfc twins and ITC with erratic individual stock moves in other stocks. We also foretold about the due bounce back in some frontline midcap and smallcap stocks. However that rally doesn’t seem to be holding at least as of now (as of this writing on Tuesday 17^th july).

We continue to hold the same view that the market should rally due to 5 individual stocks which will continue to rally along with the IT sector. We believe traders should do positional trading in them by taking delivery or buying call options for July or may be now august month. The bounce back rallies in beaten up NBFCs and other counters fads fast so be careful to trade in them. We believe new highs can be made if 10950 level is sustained, in a couple of week only. We are fortunate that Dow and other global markets are also languishing and not tanking for reasons whatsoever. The usual suspects like IT, RIL, some autos and some specific stocks from different sectors which are strong and rising, will continue to perform so take long in them is prudent advice instead of advising to short in the already too much beaten up and oversold PSU, NBFCs, Infra, cement and such counters.

The given views are subject to change depending on changing market and global economic conditions. Become member to benefit from market and individual stock moves.

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Indian & World Stock Markets Update & Status As On 7 July 2018

Indian & World Stock Markets Update & Status As On 7 July 2018

The Indian stock markets continued to remain sideways, during the week ended on 7 July 2018. The lack of sell off helped the new listings like RITES, FINE ORGANIC and VARROC to give 5-20% gains.

The global markets also remained sideways with erratic up and down moves of 1-2% on up and down both sides. One can argue that has been the behaviour of the market since last 2 months at least.

The lack of trend on either side across the financial markets had been due to the international and domestic factors like that of change in RBI stance regarding interest rates, USA central bank rate hike, Donald Tump implementing his tariff threats over China, China retaliation measures and further counter action threats, the upcoming 2019 Loksabha election in Indian and the toughness faced by the incumbent PM Narendra Modi. As far as the ‘uncertainty sell off’ is concerned, we have been witnessing it for almost last 5-6 months, which has digested; at least the initial panic orinigated by them factors.

Amid all these and the sideways or what we call a languishing market; the Chinese mainland market has corrected below 3000 mark which it was trying to hold on since many years. The present bear market which has been persisting since almost last 6 months, which had its roots in Trump Tariff Tantrum; is expected to continue in the second half of the calendar year 2018 as well. It is however noticeworthy and a sigh of relief for the investors that the Dow Jones (benchmark index of USA stock markets) has maintained its critical 200 DMA thrice after that. However, the other important indicators still signs towards vulnerabilities in the technical chart set up. Our research suggests that any strong upmove is not going to happen in near term in this global trend setting equity indice and this 9^th year since bull market began is going to be a year of profit booking and uncertainty which is likely to be followed by the global counter parts, be it the developed ones of the EMs like India.  We also believe that the present non-stop upmove rally in USA markets is due to mainly factors such as 1). The very low base of 2008 crash 2). The liquidity flood post USA financial crisis provided by the developed central banks 3). The improving macro economic data in USA and Europe 4). The election of Trump government which promised and implementing as well upon its corporate tax cuts, and ‘america first’ economic agendas.

We believe that the rally is taking a breather this year. The stocks rally in Europe could be backed by its own strength of macro and micro economic indicators. While the Asian economies, as usual and as always, continue to remain non-trending and non-decisive in whole global ball game of equity markets and vulnerable as they were to foreign funds flow, of which India has seen as much as USD 1 billion and USD  6 billion in debt markets, the highest in first half of any years in a decade. This clearly says something about the world markets changing trends and global investors’ changing portfolio settings.

We, however believed that there has to be a small cap and mid cap as well as large cap stock technical bounce back rally, of which some already started in last week trade. We believe this should be taken as an opportunity for longer term investors to invest in cement, entertainment, oil gas, real estate and some select stocks as they are available at cheap valuations.

Indian economy is just coming out of two huge economic disruptive events of note ban and GST while the LTCG also impacted and continue to impact the investments fraternity’s decision making esp.the FPI ones.

We think that the Indian markets would continue to languish around the present life time highs of NIFTY 11000 and SENSEX 36500 during the time until Mr. Modi is likely re-elected as PM. We have seen many jokes doing rounds in social networking that NIFTY is at 10800 but the portfolio of investors looks like NFTY of 8000. This has happened due to the sell off in mid cap and small caps while few large caps like HDFC, RIL, Maruti etc. continued to drive the benchmark indices up or at least maintained it near the life highs. So, this irony would continue to remain, and that is why we always suggest the lay investors to take advice of professional experienced investment advisory for their ventures into stock investing and trading.

The given views are subject to change d
epending on changing market and global economic conditions. Become member to benefit from market and individual stock moves.

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News For Next Week : 1 July 2018 : What Would Impact The Indian Stocks Markets In Next Week l Indian Stock Markets For Next Week Analysis

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 

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. 

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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News You Can Use This Week 24 July 2017

News You Can Use This Week

The data this week is expected to confirm what many investors have come to assume.  The US economy accelerated in Q2.   The eurozone economy is enjoying steady growth, but the momentum appears to be slowing.  The UK economy was unable to recover much after a soft Q1.  The Japanese economy is still not generating price pressures, but growth, led by the export/industrial production capex, is also fueling somewhat better consumption.  

The Federal Reserve meeting is not live in the sense that anyone expects a change in the policy of any kind.  For reasons beyond our ken, the Federal Reserve insists on making changes only at the half of the FOMC meetings which are followed by a press conference. Since there are several workarounds, including, as we have suggested,  holding press conferences after every meeting, which the ECB and BOJ already do, for example.  

In any event, the market understands full well where the Fed is.   It is getting close to allowing its balance sheet to begin shrinking.  After raising rates in March and June, officials are not ready to go again:  Not in July and not September.  December is a closer call.   The softer price pressures rather than, the weaker growth impulses become the focal point in Q2.  It will take a few months of data to assuage these concerns.  The main argument that what the headwind on prices is transitory seems to assume that decline in prices is narrow.  Breadth indicators of price changes, therefore, be more important than usual in the current context.  Sure enough, the diffusion indicators for the CPI were narrow, until the recent June reading.  

When the balance sheet issue was being discussed, NY Fed President Dudley suggested that the central bank may have a brief pause in its efforts to normalize the Fed funds target rate around the time that it decides to begin allowing the balance sheet to shrink.  This still seems the most likely scenario. Given the apparent consensus to begin not reinvesting in full the proceeds from maturing issues sooner rather than later, the September FOMC meeting is a compelling venue to make such an announcement.  Deferring a rate decision until the December meeting, by which time the inflation picture may clarify, seems prudent.  

One of the consequences of this scenario is that it would allow Fed officials to talk more about why the core inflation measures have weakened.  An FOMC statement that does not show more puzzlement, if not a concern, risks a more dramatic reaction a couple of days later when the first estimate of Q2 GDP is reported.  The GDP price deflator is expected to slow to 1.3% from 1.9%, and, potentially of greater importance; the core PCE deflator may slow more dramatically–to below 1% from 2.0% in Q1.  At the same time, these GDP figures are reported, the US will release its Q2 estimate for Employment Cost Index, a broader measure of labor costs (includes wages and benefits), which is also expected to show no acceleration in what is understood to be a key driver of core inflation.  

US earnings season kicks into high gear with nearly 20% of the S&P 500 reporting in the week ahead.  Among the highlights include Amazon, Facebook, Alphabet, Caterpillar, GM, and Chipotle. With about a third already reporting, it appears that earnings growth is on track for around a 10% pace.  Fund managers who push back against claims that the market is overvalued point to the strong earnings growth underpinning prices.   Despite investors’ preference for European shares over the US, we note that the S&P 500 has begun outperforming the Dow Jones Stoxx 600–5.75% over the past three months.  

Meanwhile, the summer drama will continue in Washington, as President Trump’s son, son-in-law and former campaign manager are set to testify before Senate committees next week.   News that Exxon was fined $2 mln last week for violating sanctions against Russia, while Secretary of State Tillerson was the CEO is an additional distraction from the economic agenda that is beginning to press.  Leaving aside health care reform, the infrastructure initiative, and tax reform, the constraints of the debt ceiling are already evident in the T-bill market, and the FY2018 fiscal year begins in a little more than two months.  

ECB President Draghi signaled that central bank would reconsider policy at the September meeting when officials return from summer holidays, and new staff forecasts will be available. Draghi’s suggestion that the market over-interpreted his “reflation” comment at the Sintra conference implies that the ECB may have been somewhat surprised by the market’s reaction.  Nevertheless, Draghi showed barely any concern about the rise in European interest rates and the euro’s appreciation.  

Money supply growth (M3) is expected to have expanded at a steady pace of 5% over the past year. through June. The Bank Lending Survey, released on July 18, confirmed that improvement in credit conditions.  Lending is slowly improving, and there has been a small pickup in demand from non-financial businesses.  The flash PMI for the eurozone will also be released.  It is expected to soften slightly. 

Country-data may be more interesting than the aggregate data.  In particular, Germany, France, and Spain offer preliminary looks at July inflation.  On a monthly basis, consumer prices may have eased, but the year-over-year rates are expected to be little changed at 1.4%, 0.8%, and 1.6% respectively.  Only the German reading is changed from the June pace and by 0.1%  at that.   

France and Spain also report early estimates of Q2 GDP.  A 0.5% quarterly expansion in France would lift the year-over-year rate to 1.6% from 1.1%, which would be the quickest pace since Q3 11. Spain’s economic growth remains among the strongest in the OECD.  A 0.9% Q2 expansion would translate to a little more than a 3% year-over-year pace.  

The German 10-year Bund yield will begin the new week carrying over a six-day decline.  The yield has returned to the breakout level of 50 bp.  The technical indicators of the September 10-year Bund futures contract warn of additional gains (lower yields) in the period ahead.  We suspect there is potential toward 40 bp.  

The UK reports Q2 GDP.  It is expected to remain lackluster.  After a 0.2% pace in Q1, the British economy may have expanded by 0.3% in Q2.  Still, the year-over-year pace would still slow from 2.0% in Q1 to 1.7%.   A weak US dollar environment may conceal sterling’s underlying weakness.  Since the middle of the month, it has depreciated two percent on a trade-weighted basis.  The euro has returned to the GBP0.9000 area, having had finished Q1 below GBP0.8500.  Sterling also appears to be rolling over against the yen.  It was turned back from JPY148 around the middle of the month, which is where turned from in May as well.  Sterling fell every day last week against the yen, and technical potential extends toward JPY144.  

The market will likely learn very little from Japan next week.  Headline inflation and the core rate, which excludes fresh food, likely remained unchanged in June at 0.4%.   However, excluding fresh food and energy, the rate may have dipped to -0.1% from zero.  Contrary to the claims, the truly stable price environment does not necessarily preclude consumption.  In fact, if the consensus is right, overall household spending will turn positive for the first time since in 16 months. Meanwhile, the labor market remains tight.  The unemployment rate is expected to tick down to 3.0% from 3.1%, and the jobs-to-applicant ratio may edge higher.  

Lower yields would seem to favor the yen playing some catch-up.  The dollar fell 0.7% against the yen before the weekend, its largest single-day decline since early June.  There is scope for a third consecutive week of a little more than 1% fall, which would take the dollar toward JPY110.  The euro may have reversed lower against the yen before the weekend after having found offers in front of the high seen earlier this month.  

OPEC’s monitoring committee meets in Russia at the beginning of the week.   Private estimates point to increased  OPEC output, not all of which is coming from Libya and Nigeria, which were excluded from the quotas.   Efforts to coax them into capping output seem to have fallen on fallow fields.   Ecuador’s decision to drop out of the quota system, though not significant in terms, it is a timely reminder that the agreement to cut output is finite, fragile, and does not appear to be particularly effective.  

An Update for US Dollar ,Euro ,GBP ,CAD ,AUD ,CRUDE 4 June 2017

An Update for US Dollar ,Euro ,GBP ,CAD ,AUD ,CRUDE

The technical indicators warn that the US dollar is stretched, but the combination of disappointing auto sales and jobs report may deny it the interest rate support needed to facilitate a resumption of the bull market. While there are many observers talking about the abdication of the US from its global leadership role given the decision to pull out of the Paris Accord and the TPP, we think the dollar’s performance can be explained by changing perceptions about the pace of US economic activity, the direction of inflation, and prospects for significant tax reform and infrastructure spending. 

There is a light US economic calendar in the week ahead, and the quiet period ahead of the June 13-14 FOMC meeting means that investors are unlikely to get much guidance from officials.  The focus will be squarely on Europe with the ECB meeting and the UK election. 

The Dollar Index finished the week at new lows for the year, and just above the 61.8% retracement objective of the rally from the lows seen in May last year (96.45).  A convincing break brings two technical levels into view.  The first is around 95.20.  It is a measuring objective of the old head and shoulder pattern that had been formed between December 2016 and March 2017.  The second is near 94.20.  It is the 38.2% retracement objective of the Dollar Index’s 2012-2014 lows near 78.60. 

The euro appreciated for the sixth week of the past eight.  Nearly three-quarters of the 0.7% gain on the week were scored on the back of the disappointing US jobs report.  Before the weekend, it posted its highest close since last September, as works its way closer to the spike high last November ($1.13).  The strength of the close warns of risk of a gap higher opening in Asia on June 5.  Given the proximity of $1.1300, current volatility, and momentum, an upside break cannot be ruled out.  A break of $1.1300 could signal a move to $1.1400-$1.1425. 

The dollar has fallen against the yen for five of the last six sessions.  Before the weekend, it was trading on either side of the previous day’s range (outside day) and closed below the previous day’s low. Indeed, the early in the session it made a new high for the week.  Then in response to the jobs’ disappointment, it made a new low for the week.   Support is expected in front of JPY110, and a break could see JPY109.40-JPY109.60.  However, if US yields do not find better traction, a return to the JPY108 area seen in mid-April is possible. 

Sterling was range-bound last week (~$1.2770 to $1.2920).  The outside up day posted in the middle of the week did not see follow-through buying, but rather back-to-back inside days.  The technical indicators look constructive, but that may be a reflection of a heavy dollar.  Sterling continues to trade heavily against the euro.  It fell on the cross for the sixth consecutive week.  The euro look to be headed into the GBP0.8800-GBP0.8850 area that marked the highs in mid-January and mid-March.  Against the dollar, the $1.3000-$1.3055 needs to be overcome to be anything technically significant. 

The US dollar snapped a two-week decline against the Canadian dollar and rose 0.4% on the week. The Slow Stochastics have turned higher, and the MACDs are about to, but the price action itself is more worrisome.  After reaching its best level since May 19, which corresponded with a 38.2% retracement of the US dollar’s fall since the May 5 key reversal, the greenback sold off before the weekend and settled on its lows.  Initial support is seen in the CAD1.3450-CAD1.3480 area, but the potential is to re-test the May 25 low below CAD1.3400.

A good part of the technical damage inflicted on the Australian dollar as it declined in five of six sessions was repaired on before the weekend with its nearly 1% advance.   It recovered off the $0.7375 area on the back of the poor US jobs report, recouped half of what it lost over those five sessions (~$0.7445). A weaker US dollar environment and soft US rates can help lift the Aussie back into the $0.7500-$0.7700 area.   Near-term potential extends toward $0.7525 and then $0.7600. 

The US 10-year yield fell nine basis points.  It was the second time in three weeks that a decline of that magnitude was recorded.  A new low yield print was recorded (~2.14%) since last November. With falling core PCE deflator, disappointing jobs and auto sales, and doubts over the legislation of the economic agenda, there does not seem much in the way of a further decline toward 2.0%. Though stretched, the technical indicators for the 10-year Treasury note futures do not suggest a top is imminent.  The 127-04 area corresponds to a 50% retracement of the sell-off since last November. The 61.8% retracement is 128-03. 

From the May 25 high through the pre-weekend low, the July light sweet crude oil futures contract fell more than 10%.  The contract briefly dipped below $47 before recovering, leaving a possible bullish hammer candlestick in its wake.  A move above $52 is needed to be of technical significance.  The technical indicators point to continued risk on the downside.  There is little support below $46 until $44, where prices had spiked on May 5.  The price of oil has fallen for four of the five months this year.  After falling 9.4% in Q1, it is off another 6%  in the first two months of Q2.

 Neither weak macro data nor valuation concerns have held back the S&P 500.  It is participating in what is a global rally.  Although conventional wisdom was that European equities would rally more than US shares, so far this year, the S&P 500 has held its own.  It is up 8.8%, just nosing ahead of the Dow Jones Stoxx 600 (~8.6%).   The Nikkei 400, which the BOJ buys ETFs on, is up almost 5.7% year-to-date. The technical indicators are not particularly stretched. The note of caution comes from bumping against the upper Bollinger Band.   Last week began by breaking a seven-day advance, but the week finished on a firmer note with new record highs.  

Top 10 factors which are likely to chart direction for market this coming week

NEWS FOR NEXT WEEK

The Nifty created history this week as it climbed 9,600 and hit a fresh record high of 9,604.90. It rallied 1.7 percent for the week ended May 26 to close at 9,595.

As D-Street celebrated 3 years of Modi-led government in office, the index regained strength to take out key resistance levels this past week. The index is now trading in uncharted territory.

The S&P BSE Sensex rallied 564 points this week to hit a record closing high of 31,028.21. It hit an intraday high of 31,074.07.

However, there was some correction in the broader market. The S&P BSE Midcap index closed 124 points lower, while the S&P BSE Smallcap Index ended 140 points down.

Sensex attaining 31,000 level is one more milestone in this up move with the latest rise of 1000 points taking just one month. Sensex grew 20% from its recent bottom in just 5 months. We seem to be headed higher with or without some intermittent corrections thrown in.

The market might tread with caution or consolidate in the coming week after a sharp rally. But, the long-term trend still remains intact. Investors are advised to use any dip to accumulate quality stocks and not bother about valuation too much.

People believe that valuations have run up too high and earnings are yet to catch. This is when they look at the issue with historical perspective and low PE multiples in a low growth and high-interest era. But the new normal of PE will be much higher because PE starts with reciprocal of interest rate and you add growth and reduce risk. That is the theoretical framework but as interest rates head down, PE multiples will get stabilised at a higher level.

Below are the list of ten factors which are likely to chart direction for the market this coming week

Nearly 2,000 companies will report Q4 results this week

As much as 1,850 companies are scheduled to report their results from May 29 to May 31 this coming week which includes prominent names like BPCL, Coal India, NTPC, L&T, Power Finance Corporation, Power Grid Corporation of India, Hindalco Industries and Mahindra & Mahindra.

GDP data for Q4

The government will unveil GDP figured for the quarter ended on May 31, Wednesday.

Gross domestic product (GDP) had grown marginally lower, at 7 percent, in the third quarter of FY17, down from 7.4 percent in the second quarter.

India’s economy is expected to grow at 7.1 percent in the fourth quarter of FY17, as remonetisation has gained steam, Icra said in a note earlier this week.

Global investment bank, Nomura in a note said that the new series for industrial production and wholesale prices suggest that the GDP numbers for the financial year 2016-17 could be revised up from 6.7 per cent to 7.4 per cent.

The Central Statistical Office (CSO) revised India’s wholesale price index (WPI) and industrial production (IP) series last week, changing the base year to 2011-12 (from 2004-05).

May Auto Sales numbers

Four and two-wheeler stocks will be in focus in the coming as auto sale numbers for the month of May will be announced starting from June 1. Stocks like Maruti Suzuki, Hero MotoCorp, Bajaj Auto and Ashok Leyland will be on the watch list.

India Macro Data

Market Economics will announce the India Manufacturing Purchasing Managers' Index (PMI) data for May 2017 on Thursday, 1 June 2017. The Nikkei Manufacturing PMI in India stood at 52.5 in April 2017, the same as in March.

Eye on Monsoon

The India Meteorological Department (IMD) has assessed that conditions are favourable for the South-West monsoon to enter South Kerala and the North-Eastern States on May 30-31.

The arrival of monsoon rains and its progress will be closely watched. The South-West monsoon is likely to make its onset over South Kerala during May 30-31, around the time earlier predicted by India Met Department (IMD.

The June-September South-West monsoon is critical for the country's agriculture because a considerable part of the country's farmland is dependent on the rains for irrigation.

Global Cues

On the global front, China Caixin manufacturing PMI data for May 2017 will be announced on Thursday, 1 June 2017. US Market Manufacturing PMI for the month of May 2017 is slated to be released on Thursday, 1 June 2017. US nonfarm payrolls data for May 2017 is scheduled to be released on Friday, 2 June 2017.

BSE to delist 61 companies from May 29

Leading stock exchange BSE (Bombay Stock Exchange) will delist as many as 61 firms from its platform from 29 May as they have remained suspended for more than 13 years.

Among the firms to be delisted are Binaca Synthetic Resins, Canvay Chemicals, Chetak Spintex, Global Industries, Karan Finance, Mahendra Cements, Manav Pharma, Maruti Organics, Rams Transformers, Regent Chemicals, Rohini Strips, Sarla Credit & Securities, Sunrise Zinc, Thapar Exports and Vishal Chairs.

PSP Projects to list on bourses on May 29

PSP Projects IPO was oversubscribed 8.58 times, with the qualified institutional buyers (QIBs) portion getting oversubscribed 8.38 times, non-institutional investors 10.39 times and retail investors’ portion 6.47 times.

It had fixed a price band of Rs. 205—210 per share for the offer, which was open from May 17—19.

Technical Outlook

The Nifty had formed a bullish wedge pattern on the hourly chart over the last few sessions, which had broken out on the upside in the last session.

On Friday, the index witnessed a sharp follow through on the upside. Investors are advised to hold their long positions as long as Nifty hold 9,300-9,340.

On the way up the all-time high of 9532 has been surpassed and the benchmark index tapped at the 9600 mark. In terms of wave structure, Nifty formed fourth wave correction, which got over at 9341 & it is now forming the fifth leg of an impulse on the upside.

On the weekly chart, Nifty has formed a bullish outside bar, which reinforces the uptrend. Thus there is scope for Nifty to extend beyond the short term target of 9655 & head towards the medium-term target of 9,850. On the flip side, 9,340-9,300 will continue to act as a major support area.