NIFTY and Sector Outlook 2019

After having relished a near-uninterrupted bull run through the year 2017, the bulls had a hard time staying on course for a large part of the year 2018. The calendar year 2018 was loaded with twists and turns, as some of the major events on the domestic front played party poopers and pushed the ball into the bears' court during the year. To start with, the introduction of long term capital gains tax (LTCG) in the budget, categorisation of mutual fund schemes, Additional Surveillance Measure (ASM), IL&FS debt disaster, and lastly, the results of assembly elections in five states, which were seen as a semi-final of the general elections in 2019, threw up a negative surprises. On the global front, the trade war between the world’s two biggest economies, the US and China spooked the markets and the tapering off of the balance sheets by major central bankers led to the choking of liquidity.

Despite all of the above mentioned challenges for the bulls, if one analyses the performance of the Indian stock markets, it has not just outperformed its global peers, but it has ended the year in the positive terrain, whereas a majority of the global stock markets witnessed depressing end.



Now, the crucial question that arises is: Will the Indian stock markets have a joyful ride in the calendar year 2019 or it would be a repeat of 2018 full of twists and turns. The NSE benchmark has been in an uptrend forming higher high since the last month of calendar year 2011 with the index rallying from the lower level of 4531 to a high of 11,760 in the month of August 2018. The complete price action has been captured in a well-defined eight-year long upward rising channel. Furthermore, it may be observed that since May 2009, the index has stayed above the 52-month exponential moving average (EMA), while there were minor intra-month breaks, the price never sustained below the 52-month EMA since May 2009. Repeated tests of the average and a bounce off the same on each test indicates that the average is acting as a strong floor price, which bodes well for the overall structure of the uptrend. In the coming year, we believe holding above the identical low of the two candles on the monthly time frame which stands around 10,334-10,342 would eventually result in challenging the 61.8 per cent retracement level (11,090) of the downmove from the all-time high registered in August to the low registered in October. On the other hand, sustaining above the 61.8 per cent retracement level would certainly set the tone for the next leg of the rally and, as a result, Nifty may set to touch the upper range of the rising channel which is placed around 12,300-12,450. However, a breach of 10,334-10,342 level would result in further correction, where the October low of 10,004 is likely to act as a support. However, failure to hold could lead to a sell-off, where the level of 9200-9500 may act as a strong support as it is the confluence of the long term 52-month EMA, 50 per cent retracement level of the upmove from February 2016 low to August 2018 high and the lower end of the upward rising channel.




Nifty Infrastructure:



NIFTY Infrastructure Index consists of companies belonging to telecom, power, port, air, roads, railways, shipping and other utility service providers. The key segments within this sector are construction, energy, telecom, services and industrial manufacturing. Among the constituents, Larson & Toubro Ltd and NTPC Ltd has the highest weightage of 37.59 and 9.35 per cent, respectively, in the index. The Nifty Infrastructure index disappointed investors in 2018 with a negative return of 12.64 per cent as against the stellar return of 34.11 per cent in the calendar year 2017. The index is consistently trading in the lower top, lower bottom sequence since January 2018. Recently, after forming a strong base around the level 2800, the index formed a significant bullish candle on the weekly scale as on weekend of November 2, 2018. Thereafter, it witnessed a sharp pullback. The index, on the way up, has managed to clear the downward slopping trendline hurdle on the weekly time frame. Recently, the 14-period weekly RSI has also managed to clear major hurdle around the 53 mark. According to MACD analysis, there is a centerline bullish crossover, which is a positive signal. Considering all the above factors, we feel Nifty infrastructure will be the turnaround sector in calendar year 2019.

Nifty PSE:



The NIFTY PSE index consists of companies in which 51 per cent of outstanding share capital is held by the Central government and/or state governments, directly or indirectly. The key segments within this sector are energy, metals, financial services, services and industrial manufacturing. Among the constituents, NTPC Ltd and Power Grid Corporation of India Ltd have the highest weightage of 12.54 and 11.83 per cent, respectively. The calendar year 2018 was the worst year for Nifty PSE index since 2012 as it has plunged over 21 per cent. The index since early 2018 had formed a sequence of lower top and lower bottom. Recently, the index took support around the long term upward sloping trendline support and also the weekly RSI, after witnessing a positive divergence, has been Thereafter, it witnessed a sharp pullback. The index, on the way up, has managed to clear the downward slopping trendline hurdle on the weekly time frame. Recently, the 14-period weekly RSI has also managed to clear major hurdle around the 53 mark. According to MACD analysis, there is a center line bullish crossover, which is a positive signal. Considering all the above factors, we feel Nifty infrastructure will be the turnaround sector in calendar year 2019. inching upward, signalling a trend reversal. The MACD and stochastic have recently given positive crossover, which suggests an upside momentum in the index. Considering all above technical factors, we believe Nifty PSE has the potential to deliver stellar performance in calendar year 2019.