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 | | In This Issue: | | • Market View | • Sectoral Outlook | • Technical Outlook | | | Market View | - Indian market ended in the red during the week. Nifty and Sensex down this week by 0.98% and 1.02% respectively.
- In terms of sectors Telecom, Paints and FMCG were the winners of the week. Auto Ancillaries, Power and Petrochemicals were the notable losers this week.
- Government aims 50% digital literacy in 3 years: As the government plans to offer most of its services in digital form, it is aiming to achieve a digital literacy of 50 percent in three years. Telecom Minister Ravi Shankar Prasad said 100 percent digital literacy is required to make the country a truly digitalised society and the government aims to take digital literacy to 50 percent in three years from the current 15 percent. Digital literacy can be defined as the knowledge to handle digital devices like computers, tablet PCs and smartphones, and Internet usage.
- Government to infuse about Rs 5,000 cr in PSU banks this quarter: Government will infuse about Rs 5,000 crore capital in the public sector banks in the current fiscal to strengthen balancesheet. "As committed, banks will get fund infusion in the fourth quarter. Banks will get about Rs 5,000 crore," Financial Services Secretary Ajuly Chib Duggal said on the sidelines of an event here.
- Government may allot 15 blocks to PSUs for commercial coal mining: Moving ahead with its decision to open up the coal sector for commercial mining, government has identified 15 blocks to be alloted to central and state PSUs for undertaking production and sale of the dry fuel. With the allotment, the Centre's monopoly over mining and sale of coal will come to an end. "As many as fifteen blocks have been identified for allotment to state and central PSUs for commercial mining," a top official told PTI.
- RBI leaves repo rate, CRR, SLR unchanged: As expected by economists, the Reserve Bank of India (RBI) on Tuesday left the key repo rate unchanged at 6.75 percent, saying it would want to wait for more inflation data and the Union Budget before taking action, even as it said it would continue to remain "accommodative. In its monetary policy statement, the Reserve Bank said the Indian economy was prodding along well, but said it would take into consideration steps taken in the Budget that would boost growth while keeping inflation in check.
- Government approves 5 projects with grant of Rs 175 cr: Government on Tuesday approved five projects with a grant of Rs 175 crore related to the capital goods space for companies including HMT Machine Tools Ltd. "Government support in form of grant of about Rs 175 crore will be given from a scheme of the Department of Heavy Industry titled Enhancement of Global Competitiveness of Indian Capital Goods Sector," an official statement said.
- Government bans zero duty import of capital goods for power plants: The government on Monday banned duty-free import of capital goods for power generation and transmission projects under the EPCG Scheme. The decision is aimed at encouraging manufacturing of power equipment and giving a push to domestic capital goods sector, with an aim to boost the overall economy.
| | | Sectoral Outlook | Capital Goods
We are bullish on this sector in the medium- to long-term as we are near the bottom of the economic cycle and expect revival in capex in H1FY17.
| Pharmaceuticals
We continue to remain neutral on the pharma sector, though we continue to prefer players present in niche and specialized product portfolio with focus on regulated markets.
| | Infrastructure
We are bullish on this sector from a long-term perspective, as a stable and decisive Government at the Centre would bring investment cycle back on track. We are bullish on the Road and Transmission & Distribution sector.
| Cement
With greenshoots of revival in the demand from infrastructure, we are positive on the sector. Within the sector, we prefer south based cement companies given that the region accounts for maximum incremental demand triggers.
| | Consumption
We are neutral on this sector. Slow demand environment in most markets (except South India) has impacted sales. Faster project approvals could result in increased new launches in the southern market.
| Real Estate
We are neutral on this sector. Slow demand environment in most markets (except South India) has impacted sales. Faster project approvals could result in increased new launches in the southern market.
| | Information Technology
Demand dynamics of the IT industry changing drastically more towards discretionary spending backed by disruptive technology and digital innovation. Leadership in the industry will change towards a company having higher revenue from discretionary related services. Investment in the sector should be stock specific. INR USD movement will help the companies to report better operating margins in a period when topline growth is challenged by cross currency volatility.
| BFSI
We are positive on select Private Banks. Earnings trajectory is expected to pick up over the next two years as utilization of excess capacity and pent up demand will boost corporate capex, reviving credit demand in FY17 and reduction in interest rates will drive improvement in asset quality.
| | | Technical Outlook | - Nifty surge for three consecutive Friday's to end the weeks with positive sentiments. This Friday, Nifty ends at 7,489 gaining 85 points though for the week it managed to end in the red losing 74 points. The high volatility is being witness across the global indices. Gold is trading at 3 month high of $1155 on safe haven buying while Silver is inching towards $15 mark (high $14.90 for the week). Crudeoil packs continue to remain volatile in the range of $30-$34.
- On sectorwise this week, FMCG was the only sector who ended in positive territory gaining 1.7% while the underperformance was witnessed by Real Estate and PSU Bank sector which plunged 4% followed by Media which fell 3.4%.
- Nifty rallied by 1.15% on the last day of the week but manages to end the week in red at 7,489 losing 1%.
- The follow up of 'Morning star doji' bullish reversal pattern is visible on weekly chart.
- The candlestick reversal pattern had formed at the support line of falling channel.
- Bullish anti-butterfly is visible on daily chart suggesting bullish biased.
- Positive crossover is witnessed on stochastic.
- We expect index to rise towards 7,650-7,700 next week.
- The crucial support for the week are placed at 7,420-7,350 and resistance at 7,647-7,800.
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CA. Rajesh Desai
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February 05, 2016
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