Markets continue to focus on macros

Indian equity markets continued its upward journey with both the benchmark indices hitting record highs during the week.

Investor sentiment during the week was mainly driven by positive news about US-China trade talks progress and continuation of measures by the government to boost consumer demand and economic growth. However, profit-booking set in on the last day of the week given concerns emerging over US-China trade deal and cautiousness ahead of the Q2FY20 GDP data release which got announced post the market.

US President Donald Trump signed a bill backing Hong Kong protesters, raising concerns about the prospects for an interim trade deal between the world’s two largest economies.

Nifty 50 closed higher at 12,056 with gains of 1.2%, while Sensex closed at 40,795, with gains of 1.1% for the week.

On the other hand, Nifty Midcap 100/Nifty Smallcap 100 outperformed, closing positively with gains of 2.1%/2.0%. All the sectors closed in green except Media which lost 7.3% for the week. PSU Banks led the rally with gains of 4.3% followed by Metals (4.1%).

Private Banks and Real Estate gained 2-3% while Pharma, Auto, FMCG and Infra gained 0.5-1.5%.

Foreign Institutional Investors (FIIs) turned net buyers this week, buying equities worth Rs 4,800 crore. On the other hand, domestic institutional investors (DIIs) continued to be net sellers of around Rs 3,200 crore.

India’s Q2 GDP growth fell to a six-year low at 4.5%, lower than 5% reported in Q1 and 7.1% in Q2 last year. While this is largely in line with the market expectation (around 4.5%), the data highlights the concerns on the growth side and the efforts required to pull up the economy from its current slump.

This will also pull down the full year’s growth projections adding to the negative sentiments on the economic growth front.

Next week, auto stocks would be reacting to their November sales data. Also, some of the mid and smaller banks would be in focus as the IPO of Ujjivan Small Finance Bank would open to raising Rs 750 crore. While overall market sentiments continue to remain positive, there is some cautiousness as well as profit booking seen at higher levels.

The market would also be cautious ahead of purchase managers’ index (PMI) data and Reserve Bank of India (RBI) monetary policy scheduled next week. Further, weakness in the underlying economy, as well as slower earnings growth, leave limited room for upside. However, we believe that the current momentum can sustain in the near term on the back of strong liquidity flows and positive sentiments.

Technically, Nifty formed a Red body candle on daily chart. While the index concluded the week with a gain of 1.19% and formed a green body candle on the weekly chart. A positive momentum after the formation of three consecutive Doji candles on weekly chart is a positive sign for the market.

Thus, till the time, Nifty holds above 12000 zones, we maintain our positive stance on market for an up move towards 12250 levels.

(The author is the head of Retail Research, MOFSL)