Global cues to keep Street volatile, but Nifty to recover

After facing bloodbath and breaching 10k mark, in the last truncated week Nifty gained 1.16% and ended at 10113 backed by bargain buy in the index heavyweight stocks, easing of the global trade war and reduced geopolitical tension with North Korea. Bank Nifty outperformed and gained 2.5% while mid and small cap indices performed at par and gained 1.50% each. Among the gainers, PSU banks led by gaining 6%. All the sectors ended in the green except IT and Energy which fell very marginally. Foreign institutional investors (FII) sold equities worth Rs 868 crore while domestic institutional investors (DII) bought worth Rs 6,151 crore in the last week.

The US Q4 GDP grew 2.9%, a bit drag due to jump in imports and bond yield also moderated to 2.76%. Last week started with a positive note and remained subdued due to FnO expiry on last Wednesday. The government announced borrowing program for the first half of 2018-19 and will borrow Rs 2.88 lakh crores a 48% of the total 6.05 lakh crores as against the normal ratio of 60%. The GST collection for the March month stood at Rs 85,000 crore, a tad below the expectation of Rs 89,000 crore. India’s deficit continues to run above estimates, April-February fiscal deficit stood at 120% of the revised estimate at Rs 7.15 lakh crores.

The Nifty returns were ~10% for the FY17-18 post retracing 10% from the all-time highs of 11171 on announcement of LTCG implementation, PSU bank fraud cases, the global trade war between the US and China and rising bond yields with series of Fed rate hikes in 2018.

However, FY2018-19 will be a very busy election calendar year with state elections in Karnataka, Rajasthan and Madhya Pradesh and will be followed by union elections in 2019, panning of corporate earnings growth revival, progress in GST collection and of course monsoon will be a key important factor for India’s rural economy revival. While on the global front, the impact of the US Fed hike and trade war tension are the hangover which is priced in partially. Thus, FY2018-19 will not be a smooth ride for investors with lot many events lined up but there are always opportunities in the state of greed and fear.

The European markets are closed today on the observance of the Easter. Key global data to watch are the US manufacturing PMI (today), the US February month trade balance on Thursday and the US non-farm employment data will be released on Friday. India’s Nikkei manufacturing PMI will be announced today followed by Nikkei services PMI on Wednesday and the Reserve Bank of India's (RBI) policy is scheduled on Thursday.

For the week, markets will face bouts of the volatility taking cues from the global markets and the beginning of the new financial year may attract buying interest from the investors ahead of moderation in price and in turn valuation as well. RBI may keep rates unchanged in the upcoming Thursday’s policy as inflation is lower and the other macro data are improving.

Technically on weekly charts, Nifty made “Harami” pattern which indicates a sign of recovery, it has also taken support at 50-day EMA. For the week, Nifty trading range could be between 10050-10330.

SOLID SUPPORT

• Beginning of new financial year may attract buying interest from the investors ahead of moderation in price and, in turn, valuation as well
   
• Nifty made ‘Harami’ pattern which indicates a sign of recovery

The writer is VP, Retail Research, Motilal Oswal Securities Limited