Market Outlook this week
Equity benchmarks scaled to a new 52 week highs amid hopes of the GST bill getting passed in the ongoing session of Parliament. Nifty started the week on a positive note as it closed firmly above the 8600 levels, index then consolidated in the remaining four trading session with positive bias and finally closed the week with healthy gains of more than 1%. The broader markets were in a different league as the BSE midcap and small cap indices outperformed the benchmarks by rallying 3.1% and 1.7% respectively
The 30 share S&P BSE Sensex closed up by 248 points or 0.9% at 28051, while the NSE Nifty settled at 8638 up by 97 points or 1.1%
Among the Nifty constituents Asian Paints, Ambuja Cement, HCL Technology, Indusind Bank, Maruti, PowerGrid, Sun Pharma, TCS Ultratech Cement, Zee Entertainment, and Yes Bank were top gainers while Dr Reddy, GAIL, Hindalco and Idea Cellular stocks were top draggers for the week
HDFC Ltd. reported its Q1FY17 results that were in line with our expectations
Bharti Airtel results were also in line with our estimates. However, Asian Paints reported its numbers that were above our expectations
On the other hand, Dr. Reddy's Laboratories' result was below our expectations on all counts. Maruti's numbers came in below our estimates on the topline and margins front
Baja Auto reported lower-than-expected numbers on the topline and earnings front while it performed marginally above our expectation on the operational front
Crude prices closed at about US$ 42.6/barrel, down 6.8%, during the week. Gold prices were up by 1% during the week ending at 1335.3 $/ounce. Bond yields dipped by 7 bps to 7.18%
Week Ahead
The price action formed a sizable bullish candle which carries a higher high higher low compared to the previous week, indicating continuation of the positive bias. However the index is currently placed near the upper band of the short term rising channel which encompasses the entire up move since May 2016. Follow up strength and close above the previous week high (8674) will see continuation of upward momentum. Failure to do so, may lead to choppy consolidation amid stock specific action in the coming week
The Nifty has already retraced 80% of the entire decline from 2015 life high of 9119 to February 2016 bottom of 6825 placed around 8650 region
The 80% retracement of a major move is a significant level, which often acts as a key catalyst triggering market reversals
The triumph above the 80% retracement of the 2015-16 fall highlights the underlying strength in the current up move and augurs well for continuance of bullish momentum towards an extended target of 8850 over the short term. The measuring implication of the short term "bullish Flag'' continuation pattern projects upsides towards 8850. This also coincides with the April 2015 monthly swing high placed at 8844
The entire up move since March 2016 has been backed by strong market participation as the midcap and small cap indices have consistently outperformed the benchmark
The NSE midcap index has surged into uncharted territory by overhauling its previous 2015 life high well ahead of the benchmark while the small cap index is also at the cusp of venturing into new life highs. The strong outperformance of the broader market universe, which represents the larger section of market, indicates broad based participation in the current up move and highlights inherent strength in the trend
We have now revised the immediate support threshold for the index upwards to the 8450 region as it is the bullish gap area formed on July 12, 2016 and the lower band of the recent consolidation placed around 8475 region. Any cool-off from current levels should be used as an incremental buying opportunity
Important results next week: No major results expected next week.Important data releases in India next week- Eight Infrastructure Industries, Nikkei Composite PMI
Important data releases in US next week: Construction Spending MoM, ISM Manufacturing, Personal Income, Personal Spending, MBA Mortgage Applications, ADP Employment Change, Initial Jobless Claims, Continuing Claims, Factory Orders, Durable Goods Orders, Trade Balance, Change in Nonfarm Payrolls, Unemployment Rate
Important data releases in Eurozone next week- Markit Composite PMI, PPI, Retail Sales
Important data releases from Asia next week- Japan: Nikkei Manufacturing PMI, Vehicle Sales YoY, Monetary Base YoY, Labor Cash Earnings YoY, Leading Index CI; China: Manufacturing PMI, Non-manufacturing PMI
The Nifty has already retraced 80% of the entire decline from 2015 life high of 9119 to February 2016 bottom of 6825 placed around 8650 region
The 80% retracement of a major move is a significant level, which often acts as a key catalyst triggering market reversals
The triumph above the 80% retracement of the 2015-16 fall highlights the underlying strength in the current up move and augurs well for continuance of bullish momentum towards an extended target of 8850 over the short term. The measuring implication of the short term "bullish Flag'' continuation pattern projects upsides towards 8850. This also coincides with the April 2015 monthly swing high placed at 8844
The entire up move since March 2016 has been backed by strong market participation as the midcap and small cap indices have consistently outperformed the benchmark
The NSE midcap index has surged into uncharted territory by overhauling its previous 2015 life high well ahead of the benchmark while the small cap index is also at the cusp of venturing into new life highs. The strong outperformance of the broader market universe, which represents the larger section of market, indicates broad based participation in the current up move and highlights inherent strength in the trend
We have now revised the immediate support threshold for the index upwards to the 8450 region as it is the bullish gap area formed on July 12, 2016 and the lower band of the recent consolidation placed around 8475 region. Any cool-off from current levels should be used as an incremental buying opportunity
Important results next week: No major results expected next week.Important data releases in India next week- Eight Infrastructure Industries, Nikkei Composite PMI
Important data releases in US next week: Construction Spending MoM, ISM Manufacturing, Personal Income, Personal Spending, MBA Mortgage Applications, ADP Employment Change, Initial Jobless Claims, Continuing Claims, Factory Orders, Durable Goods Orders, Trade Balance, Change in Nonfarm Payrolls, Unemployment Rate
Important data releases in Eurozone next week- Markit Composite PMI, PPI, Retail Sales
Important data releases from Asia next week- Japan: Nikkei Manufacturing PMI, Vehicle Sales YoY, Monetary Base YoY, Labor Cash Earnings YoY, Leading Index CI; China: Manufacturing PMI, Non-manufacturing PMI
Happy investing
Source:Icicidirect.com
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