Focus on earnings, global factors

Indian equity markets turned positive this week on account of positive global and domestic cues. Cabinet this week approved an increase in Dearness Allowances by 5%, taking it up from 12% earlier to 17%, thus benefitting over 1 crore government employees and pensioners, which may boost consumption.

Further, US President Donald Trump signaled towards positive development on day one of US-China trade talks, while there is a rising expectation of smooth exit of Britain from the EU, which lifted the market sentiments.

However, Brent crude surged 1.8% to $60/barrel, after reports of missile strikes on an Iranian tanker in Saudi Arabia sparked fresh supply concerns.

Nifty 50 closed at 11,305, while Sensex closed at 38,127, both up 1.2% for the week. However, selling pressure was seen across the broader market with both NSE Midcap/ Smallcap Index being down 0.1%/0.3% for the week.

On the sector front, it was a mixed trend with Metals (+1.7%), Financial Services (+1.4%), Infrastructure (+1.4%), Banks (+1.1%) and FMCG (+0.3%) closing in the green. Rest all sectors closed in red led by Pharma, which fell the most (-1.6%) while Auto, IT, Energy and Realty were down 0.1-0.3%.

Foreign institutional investors (FIIs) continued to be net sellers for the week and sold equities worth Rs 466 crores. Domestic institutional investors DIIs, on the other hand, continued to remain net buyers, having bought equities worth Rs 1,660 crores during the week.

Market sentiments turned positive after the US President Donald Trump signalled towards the possibility of a trade truce between the US and China. Trump hinted at completing part negotiation on day one. If US and China are able to reach even partial negotiation, it would potentially unlock the year-long dispute between the world’s two biggest economies, and thus allay some of the concerns with regards to the global slowdown and bring cheers to the market.

On the other hand, development over the missile strike in Saudi Arabia on Iranian tanker would influence the crude price next week. Even India-China summit in Chennai over this weekend and further development over Brexit issue would influence the investor sentiments.

On the earnings front, Infosys came out with good results post the market which was in line with market expectations. Management also revised its full-year guidance upwards which would lift the market sentiments on Monday.

Over the next few days, few heavyweights like D-Mart, HUL, ACC, Wipro, SBI Life, etc would be announcing their results which would keep the market volatile.

Technically, Nifty formed bullish candle on daily as well as weekly scale with the long upper and lower shadow which implies that dips are being bought but at the same time supply is intact at higher levels.

Now it needs to continue to hold above 11250 zones to witness a bounce towards 11,400 then 11,500 zones while on

(The writer is the Head of Retail Research at MOFSL)