WEEKLY WISDOM

NIFTY ACHIEVES 8275 TARGET; CORPORATE EARNINGS, ECONOMIC DATA IN FOCUS NEXT WEEK

THE WEEK GONE BY

World equities starter calendar 2017 on a positive note. US indices gained between 1% to 2.6% and scaled fresh record highs. Main European markets rose 1% each. In Asia, Hang Seng climbed 2.3%, Nikkei rose 1.8% and Shanghai was up 1.6%.

The U.S. economy added 156,000 jobs in December, lower than the estimated 178,000 figure. The unemployment rate came in at 4.7%, in line with expectations. Average hourly wages rose 10 cents to $26, representing a 2.9% annualized gain.

In other economic data, November factory orders fell 2.4%, more than expected. The final read on December IHS Markit manufacturing PMI came in at 54.3, hitting a 21-month high. The ISM manufacturing index read for December came in at 54.7, above November's read of 53.2. Construction spending hit its highest level in more than 10 years in November. Mortgage applications tanked 12% week-on-week as rising interest rates weighed. U.S. auto sales for December came in much stronger than expected, with a pace of 18.4 million, versus an estimate of 17.7 million.

The minutes of the December Fed meeting showed the central bank is concerned about a strengthening dollar, and that more fiscal stimulus could raise demand above sustainable levels.

Data from Europe showed that the final reading of the Eurozone December manufacturing purchasing manager's index stood at 54.9, the fastest growing pace in more than five years. Inflation levels in Germany climbed to its highest level in over three and a half years at 1.7%. French consumer inflation came in at 0.8%, its highest level since May 2014. U.K. manufacturing PMI increased to 56.1 in December, the highest reading since June 2014. Retail sales in the euro zone dropped 0.4% month-on-month in November. The year-on-year figure increased 2.3% from a revised 3% rate in October. The economic confidence index jumped to 107.8 in December from a revised figure of 106.6 in November.

China's December Caixin manufacturing PMI came in at 51.9, up from 50.9 in previous month and marking the highest level since January 2013. Caixin services PMI for December hit its highest reading since July 2015 at 53.4 compared to 53.1 in November.

Dollar index fell 0.2% to 102.20, extending the losing streak to second consecutive week. Gold gained 1.8% to $1173 per ounce, extending the winning streak to second week.

WTI crude fell 0.4% to $53.70.

Indian indices extended the rally to second consecutive week with Sensex and Nifty gaining 0.5% and 0.7% respectively to close at the highest level since the week ended 11th November 2016. Nifty Realty and Metal indices soared 7.5% and 5.5% respectively, becoming top gainers among the sectoral indices while IT index lost 2.8%.

Real Estate stocks surged after PM Modi, in his national address on New Year's eve announced interest subsidy of up to 4% on loans taken in the new year under the Pradhan Mantri Awaas Yojana in a bid to boost rural and urban housing post demonetisation.

IT stocks tumbled after a bill backing key changes in the H1-B Visa programme, that allows skilled workers from countries like India to fill high-tech jobs in the US, has been re-introduced in the US Congress.

During the two-day GST Council meeting that concluded Wednesday, Centre and states failed to iron out differences on contentious issues of “dual control” and taxing rights of goods moved through high seas. The council will again meet on January 16. The delay has worsened prospects of an early GST rollout and the original deadline of April 1, 2017 looks missed for now.

The growth projection by the Central Statistics Office (CSO) released yesterday said that India’s economic growth is likely to decelerate to 7.1% in 2016-17 from 7.6% the previous year, mainly due to an industrial slowdown. CSO said that for the most part, data up to October had been used while in a few cases November data has also been incorporated.

Economic data was on the weaker side. India's core sector growth slowed to 4.9% in November from 6.6% in October. India's Nikkei/Markit Manufacturing Purchasing Managers' Index fell to 49.6 in December from November's 52.3, its first reading below the 50 mark that separates growth from contraction since December 2015. India's Nikkei/Markit Services PMI stood at 46.8 in December as against reading of 46.7 in November.

Maruti reported 1% y-o-y decline in total sales at 1,17,908 units in December. Eicher motor reported 42% jump in Royal Enfield sales at 57398 units. CV sales however were down 20%. Bajaj Auto reported 22% y-o-y fall in December sales at 2.25 lakh units. M & M's auto sales were down 4% at 36363 units but tractor sales were up 9% at 14047 units. SML Isuzu sold 1021 units, a growth of 16.4%. Escorts tractor sales were up 15.8% at 3187 units. Tata Motors total sales are up 2% at 40944 units.

FIIs net sold stocks worth Rs 1881 cr but net bought index futures and stock futures worth Rs 1862 cr and 1292 cr respectively. DIIs were net buyers to the tune of Rs 1522 cr.

Rupee depreciated 0.1% to 67.96/$.

OUTLOOK

Corporate earnings and economic data will be in focus next week. As usual Alcoa kick-starts the US earnings season on Monday. Big Banks JP Morgan, Bank of America and Wells Fargo are slated to report on Friday.

US Economic data to eye next week include crude oil inventories on Wednesday followed by /retail sales and University of Michigan consumer sentiment index on Friday.

The European Union will chair the last meeting of the body which oversees the Iranian nuclear deal before Donald Trump becomes president. Discussions will focus on steps to ensure Iran does not exceed the limits on its nuclear stockpile set by the July 2015 nuclear agreement. However, the main focus may be how to shore up an agreement once Mr. Trump enters office as during the presidential campaign, Mr. Trump threatened to scrap the accord.

In Europe, German industrial production data is due on Monday, followed by UK trade balance and industrial production Wednesday and eurozone industrial production on Thursday.

China reports its December CPI and PPI on Monday, followed by December trade data on Friday.

The biggest trigger for India starting next week would be October-December quarter earnings from India Inc. Indusind would be the first Nifty company to kick-start on Thursday, followed by TCS and Infosys on Friday.

Also on tap would be Industrial Production data for November and  CPI for December, both of which will be released on Thursday.

Taking cues from the charts, Nifty, while touched intra-week high of 8307, failed to close above the 8275 hurdle, which is the top made in December as well as the 200 DMA. A decisive crossover of this hurdle is required for the fresh upmove. If that happens, 8400-8450, the region where 34-week as well as 20-week moving averages are placed, would be the next major target as well as resistance zone to gun for. On the way down, 8200 is the immediate support on the hourly chart below which 34-DMA, placed around 8130, would be the next support to eye. Traders can trail the stop-loss in long positions to 8200.