Market Outlook this week 5 Sep 2015

Market Outlook this week 5 Sep 2015

Previous Week

Equity benchmarks nosedived on lower-than-expected domestic GDP data and on fears of a slowing global economy after contraction in Chinese PMI weighed on sentiments.
	CNX Nifty closed in red in four out of the five sessions during previous week. Index opened negative and then continued to head south amid accelerated selling pressure.
	Mid week recovery attempt on Thursday’s session was short lived as the index witness steep decline on Friday’s trade to breach its previous week low (7667) and form a fresh 13 months low of 7627 levels.
	The broader markets also witnessed sharp decline as the BSE midcap and small cap index closed down by 3.7% and 3.5% respectively
	The 30 share S&P BSE Sensex closed at 25201.90, down by 1190 points or 4.5%, while the NSE Nifty settled at 7655.05, down by 347 points or 4.3% for the week.
	All major sectoral indices ended deep in the red. Losses were led by Banking, Oil & Gas, Power, Realty, Capital Goods, Metal and Auto indices.
	Q1FY16 GDP came in at 7%, lower than 7.5% in Q4FY15 but higher than 6.7% seen in Q1FY15. It was lower than expectation of 7.4%.
	The index of eight core industries saw a fall in its rate of growth, falling to 1.1% in July 2015 against growth 3% in the previous month.
	Crude prices closed at about US$ 49.1/barrel, up 1.7% during the week. Gold prices were down by 0.8% during the week ending at 1124.8 $/ounce. Bond yields closed at 7.74%, down 3 bps during the week.

 

Week Ahead

 

The weekly price action formed a strong bear candle which closed near the low of the week indicating a sharp sell-off after previous week’s late pull back. The high and lower low on week time interval chart indicate continuation of downward bias for fourth successive week
	While short term trend remains down and volatility is likely to stay elevated, the four week sharp decline (8654-7626) has led Nifty in to oversold territory. Index is seen approaching a key value area placed near 7500 mark and therefore we believe price wise damage is nearing its maturity
	The Nifty has major medium term support 7500 being the confluence of the following technical parameters:
	The current down move from July 2015 high of 8654 will achieve price equality with the March to June decline (9119 to 7940) at 7500 levels The 38.2% Fibonacci retracement of the larger up trend from 2013 low of 5118 to life-time high of 9119 is also placed around the 7500 region, which makes this a sound base for the market from medium term perspective The base formed post the 2014 General Elections is also placed around the 7500 region
	A pull back from the value area near 7500 is likely to take Nifty towards last Tuesday’s gap down area (7970) which remains key immediate technical resistance for prices
	Important data releases in India next week- BoP Current Account Balance Q1FY16, Exports YoY, Imports YoY, Trade Balance, Industrial Production YoY
	Important data releases in US next week- NFIB Small Business Optimism, Consumer Credit, MBA Mortgage Applications, Import Price Index MoM, Import Price Index YoY, Initial Jobless Claims, Continuing Claims, Wholesale Inventories MoM, PPI Final Demand MoM, PPI Final Demand YoY, Monthly Budget Statement
	Important data releases in Eurozone next week- GDP SA QoQ, GDP SA YoY, Household Consumption QoQ, Government Expenditure QoQ
	Important data releases from Asia next week- Japan: Leading Index CI, Coincident Index, BoP Current Account Balance, Trade Balance BoP Basis, GDP SA QoQ, GDP Annualized SA QoQ, GDP Deflator YoY, Money Stock M2/M3 YoY, Machine Orders YoY, PPI YoY, China: Foreign Reserves, Trade Balance, Exports YoY, Imports YoY, CPI YoY, PPI YoY, New Yuan Loans CNY, Money Supply M0/M1/M2 YoY

 

International Markets:

 

	US Markets: The markets largely remained in the negative territory as volatility, on the back of global economic woes, weighed on the market sentiments.
	Weak macroeconomic data emanating out of China caused ripples across markets while markets also took cues from a possible Fed rate hike in the near term.
	Though there was some recovery seen in the middle of week on the back of bargain hunting by traders and market taking cues from better private sector employment data.
	On the macroeconomic data front, the Federal Reserve released its Beige Book which showed that economic activity continued expanding across most regions and sectors during July to mid-August.
	Payroll processor ADP’s report on private sector employment showed an increase of 190000 jobs in August over an increase of 177000 jobs in July.
	Commerce Department stated that trade deficit had narrowed to $41.9 billion in July from $45.2 billion in June. ISM’s non-manufacturing index came in at 59 in August vs. expectation of 58.5. It was 60.3 in July.
	European Markets: The past week was a tale of two halves for the European markets as concerns and subsequent weak numbers from China dragged the markets in the beginning of the week.
	While bargain hunting and dovish stance by the ECB at its meeting in Germany lifted the market sentiments in the later part of the week.
	Markets reacted negatively as Caixin reported China’s Manufacturing PMI at 47.3 in August, a contraction for sixth successive month and the lowest reading since March 2009.
	The key highlight was that ECB left its interest rates unchanged at near-zero level of 0.05%. The markets cheered ECB’s hint that it may consider further stimulus measures for Euro area.
	On the macroeconomic data front, Eurozone inflation came in at 0.2% in August vs. expectation of 0.1%.
	Eurozone unemployment rate dropped to its lowest in three and a half years to 10.9% in July, coming in better than the expectation of 11.1%. Markit Manufacturing PMI for August was 52.3, a marginal decrease from 52.4 in July.

 

Happy Investing

Source:Icicidirect.com