Action shifts to mid-caps and small-caps in India’s markets
MARKETS rose for the sixth week in a row in India, posting their longest winning streak since January 28, as global sentiment improved after the US-Mexico trade deal.
The rally was led by IT heavyweights Infosys and Tech Mahindra after the rupee depreciated to a new low against the US dollar.
However, renewed US-China trade war concerns capped gains.
The Nifty rose one per cent during the week to end at 11,680 while the mid-cap and smallcap indexes rose around two per cent.
FIIs were net sellers to the tune of 5.79 billion rupees while DIIs were net buyers to the tune of 6.05 billion rupees.
The rupee fell below 71 per dollar for the first time and clocked its biggest monthly drop in three years as rising crude oil prices threaten to put a bigger strain on the nation’s finances.
The US and Mexico announced a trade deal after months of negotiations between the two countries over the future of the North American Free Trade Agreement (NAFTA).
The new deal, which President Donald Trump said would be called The US-Mexico Trade Agreement, is expected to last 16 years and will be reviewed every six years.
In stock-specific action, Yes Bank was the top Nifty loser during the week, falling over eight per cent after the RBI deferred approving another three-year term for chief executive officer (CEO) Rana Kapoor, while allowing him to continue in his position for now. His term was set to end on August 31.
Pharma companies remained in focus as they are expected to benefit from a weak rupee since most of the frontline ones have exposure to the US market.
Oil marketing companies and aviation stocks also saw movement because of the double whammy of rising oil prices and a falling rupee.
Troubled Jet Airways posted a loss of 13.23 billion rupees in the first quarter due to higher fuel expenses, and investors will closely watch the airline’s survival plan.
For the coming week, India’s markets are expected to react positively to the upbeat secondquarter gross domestic product (GDP) numbers, which returned to eight per cent growth for the first time in two years, supported by a positive base effect and improving economic conditions.
Focus will also be back on the US-China trade conflict, where the situation continues to be grim.
Volatility will prevail as the US will activate new tariffs on US$200 billion worth of Chinese goods.
Automobile companies will be watched as monthly sale numbers for August start coming in.
The floods in Kerala is expected to have an impact on sales, especially in the passenger vehicle and two-wheeler segments.
Among the numbers declared so far, Ashok Leyland sold 17,386 units in August, a rise of 27 per cent on a yearly basis.
Maruti Suzuki’s sales fell for the second straight month and declined the most in nearly two years. India’s biggest auto manufacturer sold 158,000 units, a decline of 3.4 per cent from a year earlier.
Auto sales in September, which is generally strong due to the onset of the festive season, could suffer due to the introduction of long-term thirdparty insurance policy for new vehicles.
Buyers of four-wheelers will have to take a three-year policy and two-wheeler buyers will have to take a five-year policy upfront, thus increasing the initial cost of ownership.
The Nikkei Manufacturing Purchasing Managers Index (PMI) for August will be announced today, while the Nikkei Services PMI for August will be released on Wednesday.
On the global front, the Caixin ChinaGeneralManufacturingPMI for August will be unveiled today while the US ISM manufacturing PMI for August will be out on tomorrow.
Stock market momentum continues to be supported by domestic liquidity as the action decisively shifts to mid-caps and small-caps.
This trend is expected to continue for the next few weeks during the festive season till state elections bring to the fore the fears and uncertainty related to India’s general election in 2019. — Reuters