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Weekly Nifty Trading View for the Week May 29, 2017–June04, 2017

Events to watch this week

• US Q1 GDP revised up to 1.2% from 0.7%
• China downgraded by Moody’s
• UK on highest alert after Manchester attack
• US stocks set fresh records
• EU says UK must honor commitments

The Week ahead:

• G7 leaders meet in Sicily on Saturday, 27 May
• Markets in the US and UK are closed for Memorial Day and the spring bank holiday on Monday, 29 May
• ECB president Mario Draghi testifies before the European Parliament on Monday, 29 May
• China reports purchasing managers’ indices on Wednesday, 31 May
• Eurozone unemployment data are reported on Wednesday, 31 May
• Manufacturing PMIs are released globally on Thursday, 1 June
• The May US employment report is released on Friday, 2 June

For the week,Global equities continued to rally this week, led by the United States, where record highs were recorded. The yield on the 10-year US Treasury note remained essentially unchanged at 2.24% while oil prices dipped. West Texas Intermediate crude fell to $48.95 a barrel from $50.30 a week ago as OPEC extended its output cap for another nine months. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), slipped to 10.30 from 10.80 last Friday.

NIFTY- 9,595.10
CRUDE OIL-Rs 3,216barrel
GOLD-Rs 28,884 gram
Rs/$-Rs 64.45

MARKET ROUND UP

Domestic stocks logged strong gains in the week ended Friday, 26 May 2017 led by steady buying in index heavyweights ITC, ICICI Bank and Infosys. The barometer index, the S&P BSE Sensex, scaled record high above the psychological 31,000 mark. The Sensex and the Nifty, both, hit record closing high. However, the BSE Mid-Cap and the S&P BSE Small-Cap indices underperformed the Sensex during the week.

In the week ended Friday, 26 May 2017, the Sensex jumped 563.29 points or 1.85% to settle at 31,028.21, a record closing high. The index hit record high of 31,074.07 in intraday trade on Friday, 26 May 2017.

The Nifty 50 index surged 167.20 points or 1.77% to settle at 9,595.10, a record closing high. The index rose 95.15 points, or 1% at the day's high of 9,604.90 in intraday trade on Friday, 26 May 2017.

The S&P BSE Mid-Cap index fell 124.10 points or 0.85% to settle at 14,519.90. The S&P BSE Small-Cap index fell 140.81 points or 0.92% to settle at 15,086.26. Both these indices underperformed the Sensex.

Macro Economic Front:

On the Economic Front,Economic data on Tuesday, 23 May 2017 showed that the eurozone kept up a strong growth rate. The May flash composite PMI stood at 56.8, matching the six-year high registered in the previous month. In particular, the French private sector rose to a six-year high in May supported by the election of President Emmanuel Macron.

The Office for National Statistics said on Thursday, 25 May 2017 its latest data suggest the economy expanded at a quarterly rate of 0.2% in the first quarter, a weaker pace of growth than the 0.3% preliminary estimate published last month and much weaker than the 0.7% pace notched up in the final three months of 2016. On an annualized basis, the economy grew 0.7%, compared to an earlier estimate of 1.2%.

Major Action &Announcement:

GAIL (India) rose 0.06%. The company's net profit dropped 68.74% to Rs 260.16 crore on 15.86% rise in total income to Rs 13674.09 crore in Q4 March 2017 over Q4 March 2016. The fall in bottomline was due to accounting of impairment of investments in Ratnagiri Gas and Power (RGPPL) of Rs 783 crore in Q4 March 2017. The net profit without the impact of impairment rose 25% to Rs 1043 crore in Q4 March 2017 over in Q4 March 2016. The result was announced after market hours on Monday, 22 May 2017.

Maruti Suzuki India advanced 4.21% toRs 7,073.35 on reports a foreign brokerage has maintained buy rating on the stock for a target price of Rs 8,100. The global brokerage house reportedly said that the company's retail passenger vehicle (PV) demand trends are showing a big improvement. The brokerage sees FY 2018 to be the first double digit growth year for the Indian PV industry since FY 2011. If demand improvement sustains, waiting lists for Maruti's models will grow, the brokerage added.

Mahindra & Mahindra (M&M) rose 0.58%. M&M announced on Sunday, 21 May 2017, that it has plans to invest directly and/or through its subsidiaries in high-end electric powertrain technology as part of its plan for the future of mobility; and electrification of some of its existing and future products. The investments will also be utilised towards increasing the capacity for electric powertrains and electric vehicles. The high end electric powertrains will be used for the Group's future line up of electric vehicles.

Tata Motors gained 8.53%.after the company reported better than expected Q4 results. Tata Motors' consolidated net profit fell 16.79% to Rs 4336 crore on 2.86% fall in revenues to Rs 77272 crore in Q4 March 2017 over Q4 March 2016. Consolidated profit and revenue in Q4 was lower due to translation impact from Pound to Indian Rupee. Consolidated profit before tax shed 12.26% to Rs 5166 crore in Q4 March 2017 over Q4 March 2016. This broadly reflects strong retail sales in Jaguar Land Rover business on continued strong demand for the product and also higher wholesale volumes partially offset by overall higher marketing expenses and higher depreciation and amortization, company said. The result was declared after market hours on Tuesday, 23 May 2017.

Pharma major Lupin lost 15.44% after consolidated net profit fell 49.16% to Rs 380.21 crore on 1.33% growth in total revenue from operations to Rs 4253.30 crore in Q4 March 2017 over Q4 March 2016. The result was announced during market hours on Wednesday, 24 May 2017. During Q4 March 2017, the company made a provision for liability towards its Australian subsidiary amounting to Rs 155.90 crore in respect of compensation for patent litigation towards its Isabelle generic launch in Australia.

Global Front:

In Overseas Markets,Japanese exports rose 7.5% in April, buoyed by strong demand in Asia for semiconductors, semiconductor-making equipment and steel. It was the fifth consecutive month of increase for exports, data from Japan's Ministry of Finance showed on Monday, 22 May 2017.

Moody's Investors Service on Wednesday, 24 May 2017 downgraded China's credit rating to A1 from Aa3, changing its outlook to stable from negative, citing concerns efforts to support growth will spur debt growth across the economy.

Global Economic News:

US growth revised up
The second look at first-quarter growth in the United States was somewhat brighter than the first. Gross domestic product expanded at an annual rate of 1.2%, according to the Bureau of Economic Analysis, up from an initial 0.7% reading. After revisions, consumer spending was a bit stronger than the initial report, though capital expenditures were less robust.

China’s credit rating cut
For the first time in nearly three decades, Moody’s has downgraded China’s sovereign credit rating. The rating now stands at A1, with a stable outlook. Moody’s cited rising liabilities and weakening financial strength as reasons for the cut. China’s finance ministry dismissed the move as “groundless.”

UK terror threat level raised
Following an attack outside an arena in Manchester that killed 22 and injured scores more Monday, British prime minister Theresa May put the country on its highest alert level, warning of the potential for an imminent follow-on attack. The general election campaign was suspended, but was expected to resume on 26 May. In the wake of the attack the prime minister will cut short her participation in the G7 summit in Sicily this weekend.

US equities set fresh records
Upbeat corporate earnings and positive economic data helped underpin a continued rally in US equities, with both the S&P 500 Index and the Nasdaq Composite Index hitting fresh all-time highs on Thursday.

War of words heats up ahead of Brexit talks
Officials from the European Union and the United Kingdom are scheduled on 19 June to commence negotiations on the UK's exit from the European Union. Both sides are setting out fairly extreme positions in advance of the talks. The EU continues to float exit bill figures as large as €100 billion while the UK has said it may owe nothing.

GLOBAL CORPORATE NEWS

Fed outlines proposed plan to shrink balance sheet
In the minutes of the May Federal Open Market Committee meeting, the US Federal Reserve began to lay out the methodology it could use to shrink the central bank’s $4.5-trillion balance sheet. Under the proposed approach, the Fed would set a gradually increasing cap on the dollar amounts of Treasury and agency securities it would allow to run off each month. The caps would be set at low levels and then raised every three months, to their fully phased-in levels. The final values of the caps would then be maintained until the size of the balance sheet was normalized.

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 (29May)

US Market Closed

Tuesday (30 May)

Consumer Confidence

Wednesday (31May)

MBA Mortgage Applications&Pending  Home Sales Index

Thursday (01 June)

Natural Gas Report& Jobless Claims

Friday (02 June)

Employment Situation

Fundamental Pick of the week:

Accumulate HSIL Ltd For Target Rs.410.00

Technical Outlook

*  HSIL has been maintaining long term uptrend since 2001 and garnered exponential returns for the investors in last 15 years.

*  It has had corrective phases also in between but the recovery was equally swift and even stronger in some cases, indicating strengthen. For instance, it made a new record high of 474.40 in April, 2015 from roughly 70 in last up surge and that too in less than two years.

*  It has been consolidating in a broader range for last two years and currently hovering around the upper band of the same. The indications from the price chart and indicators are in the favor of breakout in near future. Traders shouldn’t miss this opportunity and accumulate in the range of 340-344 with close below stop loss of 315 for the target of 410.

Recommendation

Accumulate HSIL Ltd @ 340-344 Stoploss 315 Target 410

Domestic Market Overview

Market witnessed strong upside momentum last week reaching new all time highs as bulls took Sensex above 31000 and Nifty to record high above 9600 on the closing session of the week. A strong hammer candle formation seen on the weekly charts hinting more buying will likely to remain intact for the coming week as well. On the daily charts also latest two candles build up is showing very strong formation with a fresh upside breakout above 9532 Nifty Spot. Upper levels are very well supported by 20DMA along with the momentum indicators e.g. RSI and a fresh crossover in MACD.

GST rates led the indices to began the week on positive note. But, street sentiments turned shower following the geo political tension on the borders, pushing the indices to trade in red level. However, Benchmark indices again showcase tremendous buying after US fed Janet yellen in may policy meeting signalled to wait for some more data for further interest rate hike. This sent a strong signal on the street, pushing humongous buying in the large caps as well as mid caps. Apart from that, big corporates Q4 quarterly results also stood better than expected barring few pharma companies. Most importantly, may month expiry remained full of positivity and again pushed the sensex and Nifty to close at the record high. Overall, week ended on the jubilant mood following huge buying in mutual funds.  

Though, next week could remain traded on the sideways since market is already at high and further movement only could come on the back of early arrival of pre-monsoon shower along with better GDP number for Q4. Next week quarterly GDP data is pending, which is likely to throw some colour on the Indian economy. Also, manufacturing PMI data is Schedule, which will also show manufacturing growth post demonetisation. Apart from that, corporate results for Q4 will be also keenly watched. Still, we will be cautious for any news related to geo political news, which could bring heavy selling on the street. Overall, market looks positive from here on. We advise investors to look to enter in fertilizer, agriculture and rural focus sector like auto and fmcg.

TECHNICAL VIEW:

As expected Nifty saw a sharp recovery from the value zone near 9360 as the 'Resistance becoming Support' theory remained valid yet another time. The sharp rebound near the value zone resulted into a fresh impulse move which could see an extension towards 9740 on an immediate basis. With no signs of a negative divergence on RSI and its placement below its overbought zone compliments the ongoing bullish setup. Momentum traders could retain their longs with a stop below 9360 from here on as the range gets elevated to 9740-9400 for the month of June. Aggressive bets /leverage longs near the extremes of the range should be avoided during the week.

Bank Nifty:Low made today was 22570 and as soon as 2274o was broken the big move started with leap and bounds and did the both target 22900/23110.From June Series perceptive bank nifty bulls need a close above 23300 for the next move towards 24100. Bearish below 22900 for a move towards 22500. Bank Nifty closed above 23300 suggesting bulls are having upper hand and can push bank nifty all the way till 23600/23800/24000. Bearish below 22900 only. 

Conclusion:

Nifty regained its momentum in the passing week and made a new record high at 9604.90, thanks to recovery in the global markets and supportive local cues. We expect the uptrend to continue ahead as well and any intermediate pause or decline should be seen as buying opportunity.

At the same time, maintain caution in stock selection as rebound in the midcap and small cap would be gradual as compared to the index majors. We suggest keeping a close eye on the last leg of the earning season and also on global events for further cues.

Happy Investing…..