Bulls make comeback on Dalal Street; reclaims 56K mark

It turned out to be a favorable week of trade for Indian equity benchmarks with frontline gauges garnering over four percentage points. There appeared not even an iota of profit booking during the week with benchmarks fervently gaining from strength to strength throughout the week to settle above their crucial 56,000 (Sensex) and 16,700 (Nifty) levels, as investors continued hunt for fundamentally strong stocks. Markets made an optimistic start as traders got encouragement with SBI Research in its latest report stated that the income of farmers has grown in the range of 1.3-1.7 times in FY22 from the FY18 levels on average while grain exports soared to over $50 billion. Some support also came after private report stated that India’s real gross domestic product (GDP) growth for the financial year 2022-23 is expected to be above 7 percent despite global headwinds. Markets extended northward journey with traders taking support with Minister of State for Finance Bhagwat Karad’s statement that concrete steps taken by the government and RBI helped banks recover bad loans worth over Rs 8.6 lakh crore in the last eight financial years. Market participants remained optimistic with Finance ministry’s statement that the economy is on course to achieve projected 8-8.5 per cent growth based on high-frequency indicators for the first quarter of the current fiscal. Sentiments remained jubilant taking support from the commerce and industry ministry stating that foreign direct investment (FDI) inflows in the research and development sector have increased to $343.64 million in 2021 against $55.77 million in 2020. Some support also came from Chief Economic Advisor (CEA) V Anantha Nageswaran’s statement the depreciation of the rupee against the US dollar has been lower than other major global currencies such as the Euro, the British pound and the Japanese yen. He attributed depreciation in rupee and other currencies against the US dollar to the aggressive monetary tightening by the US Federal Reserve. Buying on final day of the trade helped local bourses to extend weekly gains and end above their respective crucial levels as traders took support with Reserve Bank of India (RBI) Governor Shaktikanta Das’ statement that the Indian economy is relatively better placed amid a turbulent global economic scenario, drawing strength from its strong macroeconomic fundamentals. Besides, RBI’s Governor Shaktikanta Das has said that the rupee is holding up relatively well when compared to the currencies of emerging market peers and advanced economies.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 2311.45 points or 4.30% to 56,072.23 during the week ended July 22, 2022. The BSE Midcap index gained 805.75 points or 3.53% to 23,660.37 and Smallcap index surged 993.85 points or 3.86% to 26,773.41. On the sectoral front, S&P BSE Information Technology was up by 1,606.59 points or 5.92% to 28,729.49, S&P BSE BANKEX was up by 2,331.29 points or 5.82% to 42,405.30, S&P BSE Metal was up by 894.68 points or 5.62% to 16,819.31, S&P BSE TECK was up by 655.50 points or 5.27% to 13,085.31 and S&P BSE Capital Goods was up by 1,374.53 points or 4.97% to 29,009.37 were the top gainers on the BSE sectoral front, while there were no losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 670.25 or 4.18% to 16,719.45. On the National Stock Exchange (NSE), Bank Nifty was up by 2056.30 points or 5.93% to 36,738.95, Nifty IT was up by 1683.45 points or 6.36% to 28,168.15, Nifty Mid Cap 100 was up by 1030.60 points or 3.68% to 29,047.85 and Nifty Next 50 was up by 1220.65 points or 3.13% to 40,165.00.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 47,695.80 crore and gross sales of Rs 39,164.06 crore, leading to a net inflow of Rs 8,531.74 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 3,486.19 crore against gross sales of Rs 1,815.05 crore, resulting in a net inflow of Rs 1,671.14 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 4.10 crore and gross sales of Rs 47.96 crore, leading to a net outflow of Rs 43.86 crore.

Industry and Economy

Amid ongoing geopolitical uncertainties, industry body -- the Federation of Indian Chambers of Commerce & Industry (FICCI) in its Economic Outlook Survey (July 2022) has said that India’s economy is estimated to grow 7 per cent in the current fiscal, lower than the earlier projection of 7.4 per cent. It also said the policy rate of the Reserve Bank of India is expected to reach 5.65 per cent by the end of this fiscal. Currently, the policy rate (repo) is 4.9 per cent. The present round of survey was conducted in June that covered leading economists representing industry, banking and financial services sector. The survey has projected an annual median GDP growth for 2022-23 at 7 per cent, with a minimum and maximum growth estimate of 6.5 per cent and 7.3 per cent, respectively.

Outlook for the coming week

In the passing week, Indian equity markets, registered weekly gains of above 4% each as sense of comfort was drawn by the investor’s on the back of strong earnings expectations, sustained FII buying, better than excepted monsoon so far, and declining WTI oil prices after Russia's Nord Stream 1 pipelines resumed gas deliveries.

On economic front, investors will be eyeing the data of core sector growth, schedule to be release on 29 July. On the same, Government Budget Value and Foreign Exchange Reserves are also schedule to be released. The Indian foreign exchange reserves plunged to a 15-month low of $580.3 billion as of July 8th, falling for the second straight week as the country’s central bank ramped up efforts to slow the fast-depreciation of the rupee.

Further, in the ongoing earning season, investors would first react to results of ICICI Bank, Kotak Mahindra Bank, Yes Bank, Infosys, Axis Bank, Canara Bank, Central Bank Of India, Chennai Petroleum Corporation, IEX, Macrotech Developers, Tata Steel, Tech Mahindra, Asian Paints, Larsen & Toubro, Tata Power, Bajaj Finance, Maruti Suzuki India, Tata Motors, Bajaj Finserv, Dr.Reddy's Laboratories, Nestle India, Vedanta, TVS Motor, Cipla, HDFC, IOC, Bank Of Baroda, Sunpharma among others.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting with Dallas Fed Manufacturing Index on July 25, followed by Redbook on July 26, Goods Trade Balance Adv on July 27, Initial Jobless Claims, GDP Growth Rate on July 28 and finally Chicago PMI and Baker Hughes Total Rig Count on July 29.

Top Gainers

  • Indusind Bank up by 14.81% was the top gainer on Nifty for the week - The Bank gained traction on reporting 60.53% rise in its consolidated net profit at Rs 1,631.14 crore for first quarter ended June 30, 2022 as compared to Rs 1,016.11 crore for the same quarter in the previous year. Total income of the bank increased by 8.77% at Rs 10,113.29 crore for Q1FY23 as compared Rs 9,298.07 crore for the corresponding quarter previous year. On standalone basis, the bank has reported a rise of 64.45% in its net profit at Rs 1,603.29 crore for Q1FY23 as compared to Rs 974.95 crore for Q1FY22.
  • Ultratech Cement up by 12.62% was another top gainer on Nifty for the week - Ultratech Cement traded higher as its Q1FY23 bottom-line managed to beat street expectations, though it is lower year-on-year basis. The company reported net profit of Rs 1,582.02 crore for the quarter ended June 2022, 6.94 per cent lower than Rs 1,700.03 crore in the same quarter of last year. Total income of the company increased by 26.91 per cent at Rs 15,272.70 crore for the quarter under review as compared Rs 12,034.71 crore for the corresponding quarter previous year.

Top Losers

  • Dr. Reddy's Laboratories down by 4.41% was the top loser of the week on Nifty - Dr. Reddy's Laboratories came under pressure ahead of its result first quarter of FY23 to be out on July 28, 2022. Also, most of the pharma stocks remained in focus amid ICRA’s report that growth in revenues of leading Indian pharmaceutical companies like Sun Pharma, Lupin, Aurobindo and Dr Reddy's Lab in the US - the most lucrative market for Indian companies - will witness a muted 1-3% growth in FY2023.
  • Power Grid Corp down by 2.26% was another top loser of the week on Nifty - The Central Transmission Utility of India, an arm of Power Grid Corporation of India, has raised the issue of non-payment of dues by Tangedco towards transmission charges. Tangedco has outstanding dues of Rs 1,203.74 crore, out of which Rs 928.03 crore has already crossed 45 days. Meanwhile, the Central Bureau of Investigation arrested BS Jha, the Executive Director of Power Grid and five senior Tata Projects officials on bribery charges.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 16,752.25 on July 22 and lowest level of 16,142.20 on July 18. On the last trading day, the Nifty closed at 16,719.45 with weekly gain of 670.25 points or 4.18 percent. For the coming week, 16,323.68 followed by 15,927.92 are likely to be good support levels for the Nifty, while the index may face resistance at 16,933.73 and further at 17,148.02 levels.

US Market

The U.S. markets ended higher during the passing week as traders bet on strong corporate earnings reports and wagered that markets have found a bottom. Investors were betting that stocks have reached a bottom after their steep declines this year, and as the latest round of earnings reports showed businesses are working through economic pressures better than feared in the second quarter. Tesla (TSLA) reported second quarter earnings that beat expectations. Netflix reported better than expected second quarter earnings and a smaller than expected subscriber loss. Toymaker Hasbro (HAS) and oil services giant Halliburton (HAL) reported better than expected quarterly earnings. Further, a pullback in the dollar aided the rally. This was particularly the case for shares of tech companies with large portions of foreign sales that are taking earnings hits from the impact of the strong greenback this year.

On the economic data front, suggesting U.S. economic growth is likely to slow further in the near-term, the Conference Board released a report showing its index of leading economic indicators decreased for the fourth straight month in June. The Conference Board said its leading economic index slumped by 0.8 percent in June after falling by a revised 0.6 percent in May. Street had expected the leading economic index to decline by 0.5 percent compared to the 0.4 percent drop originally reported for the previous month. A report released by the Federal Reserve Bank of Philadelphia showed regional manufacturing activity unexpectedly contracted at a faster rate in the month of July.

The Labor Department released a report unexpectedly showing another modest increase in first-time claims for U.S. unemployment benefits in the week ended July 16th. The report showed initial jobless claims crept up to 251,000, an increase of 7,000 from the previous week's unrevised level of 244,000. The uptick surprised participants, who had expected jobless claims to edge down to 240,000. Meanwhile, a report released by the National Association of Realtors (NAR) showed existing home sales in the U.S. tumbled by much more than expected in the month of June. NAR said existing home sales plunged by 5.4 percent to an annual rate of 5.12 million in June after slumping by 3.4 percent to an annual rate of 5.41 million in May. Street had expected existing home sales to decrease by 0.6 percent to a rate of 5.38 million. Existing home sales declined for the fifth consecutive month, falling to their lowest level since June of 2020.

European Market

European markets ended passing week with notable gains. Markets made a positive start of the week, as Eurozone construction output grew for the first time in three months in May on the back of strong expansion in the civil engineering sector. The data from Eurostat showed that construction output rose 0.4 percent month-over-month in May, reversing a 1.0 percent decrease in April, which was revised from a 1.1 percent fall seen in the previous estimate. Civil engineering output logged a growth of 2.3 percent, while production in the building sector contracted 0.3 percent. Besides, Eurozone lenders tightened their credit conditions for households and firms in the second quarter amid high uncertainty and rising prices. The bank lending survey from the European Central Bank showed that regarding loans to households for house purchases, banks reported a strong net tightening of credit standards, while credit standards for consumer credit and other lending to households were tightened moderately.

Markets extended their gains towards end of the week, after the eurozone current account deficit remained unchanged in May. The European Central Bank said that the current account deficit held steady at EUR 4.0 billion in May. In the same period last year, there was a surplus of EUR 27 billion. In May, the surplus on services was offset by deficits in the secondary income and goods trade. The trade in goods showed a shortfall of EUR 1.0 billion compared to a balanced situation in the previous month. Meanwhile, the surplus on trade in services rose to EUR 13 billion from EUR 11 billion. Further, UK house prices grew at the fastest pace in nearly a year in May. The Office for National Statistics said that house prices grew 12.8 percent on a yearly basis in May after rising 11.9 percent in April. This was highest rate since June 2021.

On the inflation front, Eurozone inflation accelerated to a new record high in June, as estimated, driven by energy prices, and reinforced hopes for aggressive interest rate hikes. The harmonized index of consumer prices increased 8.6 percent on a yearly basis in June, faster than the 8.1 percent rise in May. The rate came in line with the flash estimate published on July 1. Meanwhile, core inflation that excludes energy, food, alcohol and tobacco, unexpectedly eased slightly to 3.7 percent, as estimated, from 3.8 percent. Besides, UK consumer prices grew at the sharpest pace in four decades in June and factory gate inflation hit the highest since 1977, raising prospects of a 50 basis point rate hike by the Bank of England at its August meeting. Consumer price inflation accelerated more-than-expected to 9.4 percent in June on rising motor fuel and food prices. Inflation was forecast to rise to 9.3 percent from 9.1 percent in May.

Asian market

Asian equity benchmarks ended in green during the passing week on receding concerns over the Federal Reserve's aggressive interest-rate hikes. Investors breathed a sigh of relief as natural gas started flowing through a major pipeline from Russia to Europe after a 10-day shutdown for maintenance. Traders also digested the latest batch of economic data from the U.S., and the European Central Bank's decision to hike interest rates by 50 basis points, the first rate hike in over a decade.

Japanese Nikkei edged higher by over three and half percent with hopes for solid corporate earnings. Some support also came after the latest survey from Jibun Bank said the manufacturing sector in Japan continued to expand in July, albeit at a slower pace, with a manufacturing PMI score of 52.2. That's down from 52.7 in June, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. Traders overlooked separate reports showed Japan's core consumer inflation remained above the central bank's 2 percent target for a third straight month in June, while a measure of manufacturing slowed to a 10-month low in July.

Chinese Shanghai rose by over a percent after the governor of the country's central bank vowed to increase implementation of prudent monetary policy to support the real economy. Some support also came followed by Chinese Premier Li Keqiang’s affirmation about government’s focus on jobs, flexibility on the economic growth, and a shift toward making its COVID-19 control measures more targeted. Meanwhile, China kept its benchmark lending rates for corporate and household loans unchanged, as policymakers adopted a cautious approach amid signs of economic recovery, growing domestic inflationary pressure and aggressive global rate rises.