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Events to watch this week

• Payroll rebound boosts June Fed rate hike chances
• Macron poised to win French presidential election
• Brexit battle lines harden
• European growth picks up

The Week ahead:

• The French presidential election takes place on Sunday, 7 May
• China reports foreign exchange reserves on Sunday, 7 May
• China reports its trade balance on Monday, 8 May
• ECB president Mario Draghi addresses the Dutch parliament on Wednesday, 10 May
• The Bank of England meets to set interest rates on Thursday, 11 May
• The US reports retail sales and its Consumer Price Index on Friday, 12 May

For the week,Global equities extended their gains this week against a backdrop of improved economic growth, particularly in Europe. Slumping commodity prices may prove worrisome down the road, however, with the price of West Texas Intermediate crude falling to nearly a six-month low, ending the week near $45.50, down from $49.00 last Friday. The yield on the US 10-year Treasury note rose modestly, to 2.35%, up 4 basis points on the week. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), held steady near 10.

NIFTY- 9,285.30
CRUDE OIL-Rs 2,970barrel
GOLD-Rs 28,070 gram
Rs/$-Rs 64.38

MARKET ROUND UP

Key indices settled with small losses as profit booking emerged after indices hit record highs in the recent past. The Sensex settled below the psychological 30,000 mark after regaining that mark during the week. The Nifty had hit record closing high on 4 May 2017.

Key indices had posted decent gains on 4 May 2017 that saw Nifty scaling record closing high on that day after witnessing listless trade in first two sessions of the week. However, drop on the final session of the week tracking weak global stocks caused indices to wrap the week with minor losses.

The market fell in two out of four sessions in truncated trading week. The market remained closed on Monday, 1 May 2017, on account of Maharashtra Day.

The Sensex declined 59.60 points or 0.19% to settle at 29,858.80. The Nifty 50 index skidded 18.75 points or 0.2% to settle at 9,285.30.

The BSE Mid-Cap index dropped 0.54%. The decline in the index was higher than the Sensex's drop in percentage terms. The BSE Small-Cap index shed 0.1%. The decline in the index was lower than the Sensex's fall in percentage terms.

Macro Economic Front:

On the Economic Front,data released by Markit Economics during market hours on 4 May 2017 showed that the rate of increase in Indian service sector activity weakened in April 2017. The headline seasonally adjusted Nikkei Services PMI Business Activity Index was down at 50.2 in April, from 51.5 in March.

Market Economics in a press release issued during market hours on 2 May 2017, said that manufacturing conditions in India improved for the fourth straight month in April. However, the headline Nikkei India Manufacturing Purchasing Managers' index (PMI) remained unchanged at 52.5 in April as in March.

Meanwhile, the combined index of eight core industries comprising nearly 38% of the weight of items included in the Index of Industrial Production (IIP) stood at 202.9 in March 2017, which was 5% higher compared to the index of March 2016. The data was released by the government on 1 May 2017.

Major Action &Announcement:

Tata Steel was down 3.53%. The company announced that Tata Steel UK has completed the sale of its speciality steels business to Liberty House Group for a total consideration of 100 million pounds. The announcement was made during market hours on 2 May 2017.

Housing finance major HDFC rose 0.61%. The company's net profit fell 21.58% to Rs 2044.20 crore on 7.7% decline in total income to Rs 8514.51 crore in Q4 March 2017 over Q4 March 2016. The result was announced during market hours on 4 May 2017.

ONGC dropped 1.56%. ONGC Videsh, a 100% subsidiary of ONGC announced that it has encountered exciting result in its well Mariposa-1 which is under drilling in CPO-5 block of Colombia. ONGC Videsh is the operator of the block and holds 70% participating interest and Amerisur Resources holds the remaining 30%. The announcement was made after market hours on 4 May 2017.

TCS gained 2.11%. The company said it has been selected by one of Europe's largest utilities companies Vattenfall-to provide IT services across multiple European operations including Swedan, Germany and the Netherlands. The announcement was made after market hours on 2 May 2017. The managed services agreement is a multi-year partnership in which TCS will be responsible for the development and maintenance of a large number of applications.

Wipro rose 0.88%. The company announced that it has joined Enterprise Ethereum Alliance (EEA) as a founding member. EEA is a collaboration of enterprises to promote, develop and implement enterprise grade Ethereum based blockchain applications across industries for specific business use cases. The announcement was made after market hours on 4 May 2017.

ICICI Bank surged 7.2%. The stock was the biggest gainer from the Sensex pack. The bank's net profit jumped 188.5% to Rs 2024.64 crore on 10.8% decline in total income to Rs 16585.76 crore in Q4 March 2017 over Q4 March 2016. The result was announced after market hours on 3 May 2017.

Hero MotoCorp gained 1.38%. The company's total two-wheeler sales declined 3.5% to 5.91 lakh units in April 2017 over April 2016. The two-wheeler industry witnessed heavy retail off-take towards the end of March 2017 in view of the transition from BS III to BS IV vehicles. The announcement was made on 1 May 2017.

Maruti Suzuki India rose 1.88%. The company's total sales rose 19.5% to 1.51 lakh units in April 2017 over April 2016. Domestic sales grew by 23.4% to 1.44 lakh units in April 2017 over April 2016. Exports declined 29.4% to 6,723 units in April 2017 over April 2016. The announcement was made on Monday, 1 May 2017.

Global Front:

In Overseas Markets,the US Federal Reserve on 3 May 2017, left monetary policy unchanged, as expected, and indicated it remains on track to deliver two more rate increases by year-end. The Fed said that it would not change its interest rate target this month. However, the Fed also stated that a recent economic slowdown was transitory, fuelling hopes among investors for future rate rises.

China's service sector expanded at the slowest pace in nearly a year, a private gauge showed on 4 May 2017, pointing to possible softness in the sector. The Caixin China services purchasing managers' index slipped to 51.5 in April--the lowest since May 2016--from 52.2 in March, Caixin Media Co. and research firm Markit said.

China's nationwide factory activity expanded at a slower pace in April, with a private gauge falling to a seven-month low. The Caixin China manufacturing purchasing managers' index dropped to 50.3 in April from 51.2 in March, indicating a slower expansion of activity, Caixin Media Co. and research firm market said on 2 May 2017.

Global Economic News:

Nonfarm payrolls rebound
Friday’s US employment report was fairly upbeat, with 211,000 added to payrolls in April versus a downward revised 79,000 in March. The unemployment rate fell to a 4.4%, a 10-year low, though average hourly earnings were restrained, rising a less-than-expected 2.5%. The report paves the way for likely rate hikes from the US Federal Reserve at its June meeting. The Fed earlier this week held rates steady but said weakness in the US economy in the first quarter was likely transitory.

Macron holds formidable lead ahead of Sunday’s vote
Thirty-nine-year-old centrist Emmanuel Macron, seeking elective office for the first time, looks poised to win the French presidency on Sunday. He leads right-wing populist Marine Le Pen by an average of 20 points in opinion polls. The same polls proved quite accurate in the election’s first round, and showed that Macron bested Le Pen in Wednesday’s head-to-head debate. If Macron wins, as expected, two-round parliamentary elections in June will be critical for his fledgling En Marche! party, which will have to cobble together a working majority to allow Macron to govern effectively.

UK–EU divide widens ahead of negotiations
Explosive media reports this week documenting a meeting on 26 April between Prime Minister Theresa May and European Commission president Jean-Claude Juncker show just how far apart the two sides are before Brexit negotiations begin in earnest. While the United Kingdom hopes to negotiate the terms of its divorce from the European Union and its future trade relations in parallel, the EU has made clear that exit terms must be well on their way to being ironed out before it will entertain trade talks. Also in dispute is how large a bill the UK will have to foot to exit the EU. Numbers as high as €100 billion were floated in the media this week. Prime Minster May will lead her party into elections on 8 June, so the public spat with the EU this week comes at a fortuitous time for her, as it plays well to the anti-EU faction of the UK electorate.

European economy kicks into gear
Economic growth in the Eurozone grew at an annualized pace of 1.8% in the first quarter of 2017, outstripping US growth, which was an anemic 0.7% annualized rate over the same period. Purchasing managers' indices reported this week suggest that European growth might be accelerating further.

Health care reform bill emerges from US House
After months of Republican infighting, a bill to repeal and replace Obamacare emerged from the US House of Representatives this week. The bill will likely face a stiff challenge in the Senate, where lawmakers will attempt to fashion a bill under the so-called reconciliation rule that won’t require 60 votes for consideration. A Senate vote on the measure is expected to be some months away.

GLOBAL CORPORATE NEWS

Largest-ever US municipal bankruptcy for Puerto Rico
Puerto Rico filed for a form of bankruptcy this week. The territory is weighed down by approximately $75 billion in debt, making the filing the largest in US history. Detroit’s $9 billion filing held the previous record. A decade-long recession, a shrinking population and a dramatically underfunded pension system forced the territory to seek protection from creditors.

As of 3 May, 357 of the 500 constituents of the S&P 500 Index have reported earnings for the first quarter. Earnings are expected to increase 14.2% from a year ago. Stripping out energy, earnings growth is 10%. Revenues for the quarter are expected to increase 7.2%. Ex energy, they are seen up 5.3%. The next-twelve-months earnings estimate for the S&P 500 is 17.7x.

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 (08May)

Labor Market Conditions

Tuesday (09 may)

NFIB Small Bussiness

Wednesday (10May)

MBA Mortgage Applications

Thursday (11 May)

Jobless Claims& Fed Balance Sheet

Friday (12May)

Consumer Price Index

Fundamental Pick of the week:

Buy Hindustan Unilever Ltd For Target Rs.1,020.00

Derivative Ideas

* Hindustan Unilever Limited (HUL) is an Indian consumer goods company based in Mumbai, Maharashtra. It is owned by Anglo-Dutch company Unilever which owns a 67% controlling share in HUL as of March 2015 and is the holding company of HUL. HUL's products include foods, beverages, cleaning agents, personal care products and water purifiers.

* On the charts, it has marginally retraced from its 52-week high i.e. 954 and has formed a fresh buying pivot after consolidating in a narrow range.The chart looks upbeat from hereon and we believe that the prevailing momentum will continue ahead as well and expect of making a new record high soon.

TECHNICAL VIEW:

As expected Nifty consolidated and traded in a narrow range of 107 points throughout the week but hits new all time high by 10 points on the back of strong up-move in Banking stocks like ICICI Bank and PSU banks as the new ordinance to resolve the bad loans kept the sector in momentum. The result season was mixed with strong performance from ICICI Bank, HDFC, and Marico while muted results from Biocon, Bharat Finance, Dabur and JSW Energy.  Core sector output rose by 5% in March, recovering from the one-year low growth rate of 1% in February keeping the industrial segment in focus. Global markets also remained flat as FOMC kept the interest rates unchanged, hinting at hikes in the next meeting in June. Commodities continued to remain under pressure with dollar index trading at sub 100 levels.

 Nifty has ended flat down by 0.3% after hitting a new all time high at 9377 reversing the entire week gains on Friday to close at 9,285 levels.  There was sharp profit booking in high beta sectors and stocks during the week. Metals, Energy and Auto declined by 4.1%, 2.8% and 1.5% respectively, while IT and Bank Nifty gained by 1.4% and 1%, respectively for the week. CNX Midcaps and Small cap ended flat to negative after hitting an all time high. 

Conclusion:

We continue to believe markets would consolidate and also expect some correction to fill the gap level which was left near 9,225 levels. It could head for large correction if 9,000 gets broken on the downside as it is a very important level placed since the start of the up move from January 2017.  The option data also continues to suggest a strong support at 9000 with an OI of 50 lakhs shares in put options. On the upside 9400 has the highest OI of 55 lakhs shares in call options.