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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:

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):

NEW 52-WEEK LOWS BSE (A):

MAJOR WEEKLY GAINERS IN BSE A CATEGORY(%):

MAJOR WEEKLY LOSERS IN BSE A CATEGORY:

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:

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