Equity benchmark Sensex declined nearly 800 points after disappointing quarterly results announced by IT majors Infosys and TCS along with weakness in the global markets. There was uncertainty in both global and domestic markets and FIIs selling had a negative impact in the market. Moreover, traders were booking profits ahead of important quarterlies in major banks (ICICI, HDFC Bank, Axis Bank), refinery (Reliance), auto sectors. FIIs were net sellers over Rs 4000 crore in just four trading sessions.
Among the global markets, US, Europe and Asian markets declined this week after hawkish commentary by the US Fed officials that signaling another rate hike, softening US job market have raised fears of a possible recession. There was a mixed bag on US corporate rate results this week. Lower than expected Eurozone manufacturing PMI data, surged in UK Inflation data during the month of March (10.1% while expectation was 9.8%) and news flow on geopolitics sapped risk appetite in US and China have negative impact across the global markets. US 10-Year and 2-year bond yields surged to 1-month high on expectation of a few more hike interest rates by the US Federal Reserve.
IT stocks were major losers this week. Nifty IT Index slipped over 5% while declined 10% in the last few sessions. Paints stocks witnessed fresh buying due to the benefit of the fall in oil price. Oil price declined nearly 10% to 1-month low at $80/bbl. Hotel stocks gained on account of strong domestic demand and the benefit of rising ARR (Average Room Rent). Rice Exports companies witnessed fresh buying due to decade high international rice price as concern of supply shortage.
Next week will be important not only in the domestic market but also in the global market. Investors await a flood of earnings headlined along with global economy data to be released next week which is a key direction for the market. IT, Banking, Auto, mid-cap, small cap and FMCG sectors quarterly results to be announced next week.. RBI approval on HDFC and HDFC Bank merger, impressive quarterly results announced by heavyweight Reliance will be positive for the market. Moreover, RBI says that the economy is moving into a low inflation regime which indicates domestic inflation is near to peak and RBI may cut interest rate in the next policy meeting. FIIs were net sellers Rs 4112 crore while DIIs were net buyers Rs 2758 crore this week.
Among the global markets, expect the US market to be in wait and watch mode next week ahead of the tech earnings to be announced next week and upcoming Federal Reserve policy decision. Apart from results, investors this week would also keep an eye on key global events viz. Bank of Japan interest rate decision and GDP data for several important economies including the US, Euro zone, Germany, France and Italy would announce their Q1 GDP data during the week and would provide an indication on global economic health. Moreover, US Retail sales, Consumer Confidence and New Home sales data to be important from an economic point of view before the US Fed interest rate decision.
∙ Global markets ended in a mixed bag this week. The US Market fell by half percent while European markets gained 1% each. US Fed officials hawkish commentary and mixed bag o. quarterly results pulled down the US market.. Several Fed officials warned inflation was still too high and measures were needed to contain it, including more hikes. US 10-Year and 2-year Yield surged to 1-month high while US Volatility Index fell to 1-year low on expectation of US Interest rate near to peak level.
Stocks to watch
Trent: Buy
CMP: Rs 1383 | Target: Rs 1450 | SL: Rs 1370 | Duration : 2-3 Days
Trent has formed a base near its key moving averages and it has given a breakout of the falling supply trend line. It has formed a bullish candle on the daily scale which indicates buying interest. The momentum indicators are placed in the positive zone which will support the move to higher zones.
Navin Fluorine: Buy
CMP: Rs 4732 | Target: Rs 49750 | SL: Rs 4630 | Duration: 2-3 Days
Navin Fluorine has given a breakout of the resistance trend line and it has formed a bullish candle with follow up buying. The momentum indicators are placed in the bullish zone which will take the stock higher.
(Rahul Shah, Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution at Motilal Oswal Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)