Indian markets logged their best weekly gains in nearly six months as earnings season began on a strong note. The Sensex hit an all-time peak. Investors shrugged off trade tensions after China did not retaliate immediately to the latest U.S. tariff on Chinese goods. A weakness in crude oil prices rejuvenated buying interest in equities.
The Nifty rose 2.29 percent to close at 11,019 while mid-cap and small-cap indexes rose marginally, continuing their underperformance. FIIs were net sellers in the cash market to the tune of 18 billion rupees.
Beijing seemed to have toned down its rhetoric and the markets took it positively. Investors were reassured after U.S. Treasury Secretary Steven Mnuchin said that the United States could reopen trade talks with China if the latter was serious about structural reforms in its business practices.
Crude oil prices slipped at the end of the week on expectations that Russia and OPEC will manage to meet global demands. Also, Libya’s National Oil Corp announced that four export terminals were being reopened, allowing 800,000 barrels a day of oil into the market, ending a standoff that had affected markets.
The two-day NATO summit started off on a sticky wicket, with Trump targeting Germany over its support for the Nord Stream 2 gas pipeline from Russia.
The rupee turned stronger despite a rise in the dollar index to settle below 68.50. The reason for the rupee’s strength could be the sharp decline in Brent crude prices and some stability in global stock markets.
On the stock-specific front, Reliance Industries hogged the limelight throughout the week after it reclaimed $100 billion market capitalization, making Mukesh Ambani the richest man in Asia.
The Group of Ministers (GoM) may recommend reduction in GST on ethanol to 12 percent from 18 percent for blending in petroleum products to boost its consumption, according to reports. Reduction in GST on ethanol will help promote use of ethanol by oil marketing companies. The group is not in favour of imposing a cess on sugar as the industry’s financial situation has improved.
Multiplex stocks were in focus after the Maharashtra government decided multiplexes in the state won’t be allowed to charge more than the maximum retail price from August 1 and there will be no ban on food products from outside. The decision could hurt multiplexes such as PVR and Inox as about 25 percent revenue is from the F&B segment with gross margins as high as 75 percent.
Fortis Healthcare was in focus after the new board accepted Malaysian healthcare major IHH Healthcare BHD’s binding offer for a 40 billion rupee equity infusion.
TCS and Infosys along with IndusInd Bank kick-started quarterly earnings season.
TCS gained after it reported better-than-expected numbers. Infosys numbers were mixed, but what came as a surprise was the 1:1 bonus issue to mark 25 years since listing. IndusInd Bank saw pressure on the net interest margin (NIM), which was on the expected lines.
On the macro data front, retail inflation grew 5 percent in June to a five-month high. As per RBI’s June monetary policy, the CPI forecast for the first half was at 4.7-5.1 percent, which indicates we are close to the upper limit. India’s IIP dropped to 3.2 percent in May, the slowest in seven months on weak manufacturing sector output.
We have some frontline companies declaring numbers in the coming week, including HUL, Zee Entertainment, Ashok Leyland, Ultratech Cement, Bajaj Finance, Kotak Bank, Wipro, Bajaj Auto and HDFC Standard Life.
WPI inflation for June will be announced on Monday, along with U.S. retail sales data for June and China GDP. The U.S.-Russia summit on Monday will be keenly watched, with Trump and Putin set to discuss a number of topics from conflicts in Syria and Ukraine to sanctions imposed by the two nations against each other.
Although the frontline indices are touching new highs, we are not seeing any celebrations on the street as most individual portfolios, especially those with higher weightage to mid-caps and small-caps have underperformed. Liquidity continues to flow into mutual funds and it’s only a matter of time when fresh funds are raised for mid-caps and small-caps. It is still an opportunity to buy quality stocks in this segment before institutional interest revives.
Ambareesh Baliga has about 25 years of experience in the stock market and has worked with Karvy and Kotak groups in the past. He is a regular market commentator on various business channels. He is a commerce graduate from Calcutta University and a qualified cost accountant.
The views expressed in this article are not those of Reuters News.