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Events to watch this week
- US nonfarm payrolls rose 138,000; March/April revised
down
- Merkel: We have to fight for our own future ourselves
- Draghi suggests no immediate policy shift ahead
- UK polls show narrower lead for Conservatives
- US quits Paris agreement
The Week ahead:
|
Mon, 5 June
|
global
|
Service sector
purchasing managers indices
|
|
Tues, 6 June
|
Australia
|
Reserve Bank of Australia
interest rate decision
|
|
Tues, 6 June
|
eurozone
|
Retail sales
|
|
Wed, 7 June
|
China
|
Foreign exchange
reserves
|
|
Wed, 7 June
|
eurozone
|
Gross domestic
product
|
|
Thurs, 8 June
|
Japan
|
Gross domestic
product
|
|
Thurs, 8 June
|
United Kingdom
|
General election
|
|
Thurs, 8 June
|
China
|
Trade balance
|
|
Thurs, 8 June
|
eurozone
|
European Central
Bank rate decision
|
|
Fri, 9 June
|
Canada
|
Unemployment
rate
|
For the week,Led by
the United States, global equities extended gains this week amid moderate
global growth and restrained inflation data. All three major US indices set
all-time highs. After disappointing US employment data, the yield on the
10-year Treasury note slipped to 2.17% compared with 2.24% last Friday. Oil
continued its drop as well, with West Texas Intermediate crude falling to
$47.35 a barrel from $48.95 a week ago. Volatility, as measured by the Chicago
Board Options Exchange Volatility Index (VIX), remained historically muted,
falling to 9.9 from 10.8 last week.
NIFTY- 9,653.50
CRUDE OIL-Rs 3,080barrel
GOLD-Rs 28,905 gram
Rs/$-Rs 64.44
MARKET
ROUND UP
Market jumped on hopes of timely arrival of southwest monsoon rains.
Global markets remained mixed following a better-than-expected employment data
in the US, which triggered concerns that the US Federal Reserve may soon hike
rates this year. While commentary by foreign brokerages on India and benchmark
indices lifted investors' sentiment.
India's key reforms, including the impending Goods and Services Tax
(GST) and sticky loan resolution, may improve the country's credit profile,
Moody's Investors Service said on Thursday, 1 June 2017. A foreign broker,
meanwhile, rolled forward its Sensex target to 32,200 by March 2018 as against
the earlier target of 31,500 for December 2017. The broker said that
implementation of the GST, strong flows from domestic mutual funds and foreign
investors are positives, but a lot seems to be getting priced in with
valuations at 18 times estimated FY18 earnings.
In the week ended Friday, 2 June 2017, the Sensex jumped 245.08 points
or 0.79% to settle at 31,273.29, a record closing high. The index hit record
high of 31,332.56 in intraday trade on Friday, 2 June 2017. The Nifty 50 index
surged 58.40 points or 0.61% to settle at 9,653.50, a record closing high. The
index hit record high of 9,673.50 in intraday trade on Friday, 2 June 2017.
The S&P BSE Mid-Cap index rose 281.58 points or 1.94% to settle at
14,801.48. The S&P BSE Small-Cap index rose 224.91 points or 1.49% to
settle at 15,311.17. Both these indices outperformed the Sensex.
Macro
Economic Front:
On the Economic Front,data
released by Markit Economics during market hours on Thursday, 1 June 2017,
showed that Indian manufacturing sector stayed in expansion mode in May as a
further upturn in new business supported output growth. That said, the headline
Nikkei India Manufacturing Purchasing Managers' Index (PMI) dropped to a
3-month low of 51.6 in May from 52.5 in April.
India's Gross Domestic Product (GDP) rose at moderated pace of 6.1% in
Q4 March 2017, which is the lowest pace of growth in last nine quarters. The
GDP growth decelerated sharply from 7% growth recorded in the preceding last
quarter and 8.7% surge posted in the corresponding quarter last year. The data
was released by the government after market hours on Wednesday, 31 May 2017.
The Eight core infrastructure industries have showed 2.5% growth in output
for April 2017 over April 2016. Its cumulative output growth had stood at 4.8%
in FY 2017. The Base Year of the Index of Eight Core Industries has been
revised from the year 2004-05 to 2011-12 from April 2017. The shift is in line
with the new base year of Index of Industrial Production (IIP). The data was
released by the government after market hours on Wednesday, 31 May 2017.
Major
Action &Announcement:
Mahindra & Mahindra
(M&M) rose 6.13% to Rs 1,423. The company's total tractor sales rose 11% to
25,599 units in May 2017 over May 2016. M&M's total auto sales rose 3% to
41,895 units in May 2017 over May 2016. Total domestic sales grew by 11% to
40,602 units in May 2017 over May 2016. Exports fell 68% to 1,293 units in May
2017 over May 2016. The announcement was made during market hours on Friday, 1
June 2017.
Bajaj Auto rose 1.06% to Rs 2,846.10. The company's total sales declined 10% to 3.13
lakh units in May 2017 over May 2016. Domestic sales fell 15% to 1.74 lakh
units. Exports declined 3% to 1.39 lakh units. The announcement was made during
market hours today, 2 June 2017.
Maruti Suzuki
India rose 0.58% to Rs 7,114.25. The company's total sales rose
11.3% to 1.36 lakh units in May 2017 over May 2016. Domestic sales grew by
15.5% to 1.30 lakh units in May 2017 over May 2016. Export sales declined 36.3%
to 6,286 units in May 2017 over May 2016. The announcement was made during
market hours on Thursday, 1 June 2017.
Housing finance
major HDFC rose 4.02% to Rs 1,610.10. The company said
that HDFC Investments, a wholly owned subsidiary of the company subscribed 3.27
crore shares or 15% of share capital of First Housing Finance (Tanzania),
Tanzania's first housing finance company. Cost of acquisition is equivalent to
$1.5 million. The announcement was made after market hours on Thursday, 1 June
2017.
Coal India rose
0.17% to Rs 268.80. The company's consolidated net
profit declined 38.25% to Rs 2716.09 crore on 8.01% increase in total income to
Rs 25027.35 crore in Q4 March 2017 over Q4 March 2016. The result was announced
after market hours on Monday, 29 May 2017.
ONGC fell 1.08% to
Rs 173.90 after net profit declined 6.14% to Rs 4340.18 crore on 26.81% rise in
total income to Rs 26233.56 crore in Q4 March 2017 over Q4 March 2016. The
result was announced after market hours on Friday, 26 May 2017.
Global Front:
In Overseas Markets,data
released by the private payroll firm ADP on Thursday, 1 June 2017, showed that
private US companies hired at a blistering pace in May, accelerating from the
pause in April. Non-farm private employment surged 253,000 in May. An improving
labor market will likely support investors' expectations that the Federal Reserve
will raise interest rates further in the coming months.
Global
Economic News:
US adds fewer jobs than forecast
The May employment report was a disappointment save for a continued
drop in the unemployment rate. 138,000 new jobs were added last month, while
revisions to March and April data trimmed 66,000 from pervious totals.
Economists had expected a rise of 184,000 nonfarm payrolls. Wage gains were
steady at 2.5% versus a year ago. The bright spot in the report was the
continued fall in the unemployment rate, which edged down to a 16 year low of
4.3%. While weaker than expected, the data likely won’t dissuade the US Federal
Reserve from hiking rates later this month.
Merkel downplays past partnerships
Speaking at a campaign event inside a Bavarian beer tent shortly after
the Nato and G7 summits, German chancellor Angela Merkel said the times when
Europe could rely on others were over. She said while friendly relations with
the US and UK are needed, she added that “we have to fight for our own future
ourselves”. The German federal election takes place on 24 September.
Draghi: Not ready to unwind stimulus
Appearing before the European Parliament’s committee on economic
affairs this week, European Central Bank president Mario Draghi downplayed the odds
of any shift in policy at next week’s rate-setting meeting. Economic growth is
improving but inflation remains subdued, the central banker said, adding that
the economy still requires substantial stimulus. Some analysts had expected the
ECB to signal that it will begin tapering bond purchases later this year. Very
subdued eurozone inflation data (+1.4% year over year) released later in the
week further tamped down expectations of a policy shift.
UK polls tighten
Opinion polls ahead of next week’s UK general election have been all
over the map, with some showing the Conservatives with a lead as small as 3%
and others indicating a lead as wide as 15%. What is not in doubt is that the
race has tightened. Recall that the Conservatives held a 22% advantage on the
day the election was called back in April. Not helping the Conservatives, Prime
Minister Theresa May was criticized for skipping a BBC-sponsored debate,
choosing instead to send a surrogate. Labour Party leader Jeremy Corbyn pounced
on the decision. May tried to keep the focus on Brexit, saying Corbyn is ill
suited to lead those negotiations with the European Union.
US pulls out of Paris Agreement
Saying he was elected to represent the voters of Pittsburgh, not Paris,
US president Donald Trump this week announced that the United States would pull
out of the Paris climate deal. The agreement put the US at a disadvantage,
Trump said, highlighting its lack of enforcement mechanisms. Trump offered to
renegotiate the deal, though Germany, France and Italy balked at the notion.
Italy moving closer to early elections
Elections could come as early as this autumn if the Italian parliament
adopts a new election law resembling German’s proportional system, with a 5%
cutoff for smaller parties. If the law is approved in the coming weeks, as
expected, Italians could go back to the polls around the same time as Germany
votes on 24 September. The ruling Democratic Party and the eurosceptic Five
Star Movement are nearly tied atop the polls.
Europe continues to hog the growth spotlight
While manufacturing in the US and China moderated slightly in May,
Europe continues to show strength. The eurozone manufacturing purchasing
managers’ index firmed to 57.0 from 56.7 in April, the highest in six years. UK
PMI stayed robust at 56.7, down from April’s 57.3, while the US ISM
Manufacturing Index saw slight improvement to 54.9 In May from 54.8 in saw
slight improvement to 54.9 In May from 54.8 in April. China’s official PMI
stood unchanged at 51.2, though the Caixin PMI dipped to 49.6 from 50.3.
GLOBAL CORPORATE NEWS
Beige Book less upbeat
Optimism waned in a few districts, the Fed reported this week in its
Beige Book. Seven of the 12 Fed districts reported growth as “modest” since the
last report on 19 April, while four reported “moderate” growth and one district
— New York— was flat. Markets still expect the Fed to hike rates later this
month, but with inflation pressures moderating, future rate hikes are less
certain than they were earlier in the year.
NEW 52-WEEK HIGH BSE (A):
|
ADANITRANS
|
132.75
|
|
BALKRISIND
|
1615.00
|
|
BAYERCROP
|
5050.00
|
NEW
52-WEEK LOWS BSE (A):
MAJOR WEEKLY
GAINERS IN BSE A CATEGORY(%):
|
M&m FIN
|
24.34
|
|
BAYER CROPSCIENCE
|
16.46
|
|
ADANI TRANSMISSION
|
15.23
|
MAJOR WEEKLY
LOSERS IN BSE A CATEGORY:
|
RELIANCE
COMM
|
-19.96
|
|
VIDEOCON
INDUSTRIES
|
-22.30
|
|
SINTEX
INDS
|
-16.03
|
Eyes
will be set on the certain US economic data releases are:
Monday (05June)
PMI
Services Index & Factory Orders
Tuesday (06 June)
Week Bill Auction
Wednesday (07 June)
Consumer
Credit
Thursday (08 June)
Fed Balance Sheet& Jobless Claims
Friday (09 June)
Wholesale Trade
Fundamental
Pick of the week:
Buy Emami Ltd For Target Rs.1,260.00
Investment Rationale
* Emami is one of the leading players in the personal & healthcare
consumer products industry in India, with portfolio of household brand names
such as BoroPlus, Navratna, Fair &Handsome, Zandu Balm, MenthoPlus Balm and
Fast Relief. It has a portfolio of over 300 products with presence across 40lac
plus retails outlets through a network of 2,900 distributors.
* For FY18, the company is targeting double digit volume growth, likely
to be driven by revival in urban and rural consumption and launches in new
categories and brands extensions. Focus will remain on power brands. New
products are likely to contribute 2-3% of overall sales.
* After a subdued performance in FY17, the company expects its overseas
business to grow in double digits, led by ramp-up of demand in Middle East.
GST rates of 18% for personal
care and 12% for Ayurveda will benefit the company. Further the company expects
its debt to be re-paid by FY18.
Recommendation
Buy Emami Ltd @1135-1145 Stoploss 1065 CMP
1139.10 Target 1260
Domestic Market Overview
The Indian markets showing a
lackluster trade ended marginally in red again in last session, as slew of
disappointing economic reports on GDP, core sector output and manufacturing
stirred concerns about the state of the economy. Today, the start is likely to
see some recovery on positive global cues. Traders will be getting some support
with NITI Aayog Vice Chairman ArvindPanagariya’s statement that India will
regain the crown of the fastest growing major economy, overtaking China, as
early as the first quarter of 2017- 18. He said that India, on an annual basis,
is ahead of China and will regain the growth momentum soon on the back of host
of reforms initiated by the Modi government in the last three years. Meanwhile,
Finance Minister ArunJaitley while maintaining that the decline in fourth
quarter GDP print cannot be attributed to demonetisation alone has said that
India growing at 7-8 percent is 'fairly reasonable' in the current global
context. Also, the Moody’s Investors Service has said that India’s key reforms,
including the impending goods and services tax and resolution of sticky loans
may improve the country’s credit profile. Realty sector may see some action, as
the government has set a target of constructing 51 lakh houses by March 2018 to
reach halfway towards its goal of building 1crore houses by 2019.
TECHNICAL VIEW:
|
S3
|
S2
|
S1
|
NIFTY
|
R1
|
R2
|
R3
|
|
9,485
|
9,565
|
9,610
|
9,653.50
|
9,688
|
9,720
|
9,800
|
Till we are above 9610 we can
move towards 9669/9700/9767. Bearish below 9570 for a move towards 9500. Prices
cannot stay near gann angles for so long so brace for a trending move. Nifty
closed above 9610 on Friday and we finally had a gap up opening which did the
first target of 9669 now as long as bulls held on to 9610 we can march for
higher target of 9700/9779. Bearish below 9580 for a move towards
9520/9470.
Conclusion:
Jubilation
continues in the passing week as Nifty gained nearly half a percent and made a
new record high above 9650.Encouraging Q4 earnings along with positive global
cues and early arrival of monsoon helped the index to maintain its momentum for
the sixth consecutive week.The coming week will be again a crucial week wherein
RBI monetary policy is scheduled on 7th June.
Technically
speaking, we‘re in a bull run and we expect the prevailing momentum to extend
further. So, any intermediate dip should be considered as buying opportunity
but do maintain caution in stock selection