Q1FY18 Results Give Direction To The Market

Blue chip index stocks are fuelling the market rally, whereas companies with lacklustre, flat and disappointing earnings are being dumped by investors. Despite the rally, the market is reevaluating a large number of stocks that were earlier peaking on the back of mere sentiments. 

It was time to cut the celebration cake at the BSE as the Sensex soared past the 37,000 mark, gaining positive momentum from good quarterly earnings. The fortnight had it all, all-time highs, record closings, and the usual swings with Sensex and Nifty testing new highs. The PSU banks as well as private banks fuelled the market’s upward trajectory as they reported better asset quality for the quarter. The markets also took support from macro developments, including easing of trade war between the US and the European Union. Also, the fact that the US economy posted a GDP growth of 4.1% in Q2 eased some fears of recession. 

The global markets were upbeat during the fortnight with only Nasdaq down by 1.13% on the back of disappointing earnings by tech gaints Facebook and Twitter. In the last two weeks, Dow Jones gained by 1.71%, while S&P 500 was up by 0.63%. In Europe, UK’s FTSE 100 gained 0.51%, whereas the German index DAX posted a surge of 2.55% and the French CAC40 registered a growth of 1.52%. During the fortnight, the Asian markets Hang Seng, Nikkei and Shanghai exchange, gained by 0.98%, 0.51% and 1.50%, respectively.

Far ahead of its global peers, the Indian benchmark indices registered impressive gains of above 2% during the fortnight studded by new all-time highs. As the bulls took over the Indian equity markets, Sensex and Nifty scaled new highs gaining 2.29% and 2.35%, respectively. Sensex breached the 37,500 mark, while Nifty was trading above the 11,300 mark. Even the broader markets participated in the rally, with the BSE Mid-cap and Small-cap indices registering 3.12% and 1.57% gains, respectively, during the fortnight. Among the sectoral indices, the FMCG and Banks outshined the market, while Auto was the only sector that dipped as Q1 results of auto majors Maruti, Hero Motocorp and Bajaj Auto disappointed on the margin front. In the two-week period, the BSE Bankex gained 3.20%, FMCG was up by 3.55%, while Auto dipped by 1.21%. Power index grew by 2.11%, followed by IT which was up 0.91%, Realty up by 0.35% and Metal up 0.35%. 

In a reversal of the trend, albeit marginally, the FIIs have turned net buyers during the fortnight. The FIIs have bought equities to the tune of Rs 45.52 crore; whereas the domestic institutional investors (DIIs) have bought equities of Rs 598.38 crore, during the fortnight. 

As concerns over the trade war between the US and the EU eased, gold turned bearish. A dip in demand from local jewellers, coupled with weakness in the global markets, put pressure on domestic gold prices. The crude oil prices still lingered around the US$75 per barrel mark, even as the Trump administration continued to threaten Iran with sanctions. 

With the earnings season turning out be a success, investors are indulging in cherry-picking to update and rebalance their portfolios. The Reserve Bank of India at its August policy meet maintained the GDP growth forecast for FY19 at 7.4% and increased the repo rate by 25 bps to 6.5 per cent. Going ahead, banking and auto stocks are expected to give direction to the markets.


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