IIP Growth at 0.5%, base effect takes a bite NOVEMBER IIP HIT BY UNFAVORABLE BASE EFFECT. FESTIVE SEASON INVENTORY RESTOCKING LAST YEAR LED TO LARGE UPTICK IN MANUFACTURING INDEX
Industrial activity slowed down drastically in the month of November rekindling the risks to economic growth momentum. The IIP growth for November was recorded at a meagre half percent as compared to 8.4% in the previous month and 8.5% in November 2017. IIP which hit a 12-month high in just the preceding month dropping to 17-month low has further highlighted the volatility of this high frequency indicator. The slowdown in IIP was on the back of significant deceleration in manufacturing activity. The Manufacturing sector contracted by 0.4% in November as the strong unfavourable base effect set in. Just to highlight the base impact, it would be essential to state that November last year witnessed an 840bps rise in manufacturing index in one month. November last year had seen significant pick up in manufacturers activity to restock inventory for the festival demand especially when the inventory stocks were utilised just before the GST implementation. Manufacturing accounts for 78% in the IIP index and thus remains a significant mover for the index.
Within the manufacturing sector, it was the chemicals, metals products, pharmaceuticals, rubber products, electrical equipment, motor vehicles, etc which weighted down heavily on the IIP movement. Mining sector also saw deceleration in growth to 2.7% from 7.2% in previous month while electricity grew by 5.1% in November as compared to 11% in previous month. Amongst the highest contributors to IIP were electricity, diesel, sunflower oil, mining and cement while the drags were metal items, such as copper, steel, iron items etc.
As per the Use Based classification, both capital goods and intermediate goods saw a deceleration in November with a de-growth of -3.4% and 4.5% respectively. Consumer durables which have had a good run since the start of the FY19 dipped by 0.9% in November.
View
The IIP growth for the period of April to November stands at 5%. The sub-optimal growth of 0.7% in Apr-Nov period in Intermediate goods has been a major drag. Considering the pick up in the base in the previous year, IIP momentum is expected to slow down a little at least statistically. The same momentum is expected from the GDP growth in the second half. As the growth is expected to take a little breather and inflation to remain in the comfort zone, it gives a bigger reason for the central bank to stay on the path of neutral stance with a bias towards easing. Which would make a case for long duration investing, however the recent bearishness on account of fiscal pressures and oil price rebound may continue to impact the yields in the short term. It would be prudent to have a staggered approach of investing. Investors with higher risk appetite can take advantage of the high yields in the credit risk space through funds having a diversified and well spread out portfolio. Investors may also selectively look at NCDs, Bonds, Tax-free bonds, etc to complement their debt portfolio.
Disclaimer: This document is STRICTLY for authorised recipients only and is prepared for information purposes only. The information provided herein, we believe, is from reliable sources. IndiaNivesh is not liable for the accuracy of the source data as well as the results of the calculations based on the same. We do not claim that the data provided herein is accurate and complete in all respects. This is not an offer or solicitation of any offer to buy or sell securities. No action is intended to be taken by the recipients based on this document. The recipients may take their decisions based on their own judgement and independent advice that they may receive before making any investment or disinvestment decisions. The recipients are advised not to take any decision only on the basis of this document. No portion of this document should be printed, reprinted, redistributed, reproduced, duplicated or sold.
Posted by Mehul Kothari | Published on 11-FEB-2019
NIFTY
MARKET RECAP AND OUTLOOK
It was a high volatile action packed week wherein the index Nifty spot surpassed the much awaited zone of 11000 but eventually failed to close above the same. During the week, Nifty registered high of 11118 but ended flat near 10950 mark. Despite the decent rally there was too much pressure on the broader markets which indicates strong index management. On the other hand, even NIFTY BANK index remained quiet even after a surprise rate cut in RBI’s monetary policy. The above kind of behaviour indicates that markets are facing headwinds at higher levels due to lower participation.
Technically, we have been constantly warning about the strong hurdle between 11100 – 11200 zone. Now, Nifty has formed a ‘Doji’ candlestick pattern right at the 61.8% Fibonacci retracement level of the previous move as displayed above. If we club Friday’s black candle then together both can be construed as an “Evening Star” pattern which is a reversal one. Thus, going ahead a fresh upside could be expected only above 11118 mark. On the downside, breach of 10925 level would trigger fresh selling in the market which could drag the index towards 10800 mark. We continue to maintain ‘Stay Light’ stance on the market since the heavy weights are yet to correct.Disclaimer)
Posted by Mehul Kothari | Published on 13-FEB-2019
MARKET RECAP
KEY MARKET DATA POINTSThe markets maintained its corrective journey for the fourth consecutive session where the benchmark indices started the session on a flat note but closed near day’s low. The index Nifty managed to clear 10900 mark during the first half but sharp selloff in the final hour of session forced it to close with considerable loss near day’s low. On the other hand, Nifty Bank index corrected almost 300 points from day’s high to close an inch above 27000 mark.
Although the day was choppy but individual stocks underwent some buying interest and as a result market breadth remained positive. On the sectoral front, NIFTY MEDIA (+1.33%) and NIFTY METAL (+1.57%) stocks were the biggest gainers whereas NIFTY PSU BANK (-1.61%), NIFTY REALTY (-1.40%) and NIFTY IT (-1.00%) counters ended in loss. From the F&O space, DISHTV (+14.67%), CANFINHOME (+10.04%) and JINDALSTEL (+9.79%) were the top performers.
MARKET OUTLOOK
In our latest weekly edition we discussed that due to the ‘Evening Star’ pattern; breach of 10925 level would trigger fresh selling in the market which could drag the index towards 10800 mark. In line with that, NIFTY has almost arrived near 10800 level. Now at this juncture, Nifty is hovering just above the placement of 50 DEMA. A breach of the same would extend the selling towards 10750 in the upcoming session.
On the upside, bullish sentiment would resume only above 10930 mark. Traders can add aggressive long in index futures once Nifty starts trading above the mentioned resistance level. From the stock front, one should continue to stay hedge and avoid overleveraged positions since the heavy weights are yet to correct.
ESCORTS – Daily Chart
STOCK OUTLOOK
The stock has been trading in a strong down trend since August 2018
After the recent consolidation, ESCROTS confirmed another fresh breakdown during yesterday’s session
On a larger degree chart, the breakdown resembles a bearish FLAG pattern which indicates further downside
Thus, we advise traders to sell the stock in range of 630 - 650 with a stop of 700 for the target of 570 – 520
)
IIP Growth at 0.5%, base effect takes a bite
NOVEMBER IIP HIT BY UNFAVORABLE BASE EFFECT. FESTIVE SEASON INVENTORY RESTOCKING LAST YEAR LED TO LARGE UPTICK IN MANUFACTURING INDEX
Industrial activity slowed down drastically in the month of November rekindling the risks to economic growth momentum. The IIP growth for November was recorded at a meagre half percent as compared to 8.4% in the previous month and 8.5% in November 2017. IIP which hit a 12-month high in just the preceding month dropping to 17-month low has further highlighted the volatility of this high frequency indicator. The slowdown in IIP was on the back of significant deceleration in manufacturing activity. The Manufacturing sector contracted by 0.4% in November as the strong unfavourable base effect set in. Just to highlight the base impact, it would be essential to state that November last year witnessed an 840bps rise in manufacturing index in one month. November last year had seen significant pick up in manufacturers activity to restock inventory for the festival demand especially when the inventory stocks were utilised just before the GST implementation. Manufacturing accounts for 78% in the IIP index and thus remains a significant mover for the index.
Within the manufacturing sector, it was the chemicals, metals products, pharmaceuticals, rubber products, electrical equipment, motor vehicles, etc which weighted down heavily on the IIP movement. Mining sector also saw deceleration in growth to 2.7% from 7.2% in previous month while electricity grew by 5.1% in November as compared to 11% in previous month. Amongst the highest contributors to IIP were electricity, diesel, sunflower oil, mining and cement while the drags were metal items, such as copper, steel, iron items etc.
As per the Use Based classification, both capital goods and intermediate goods saw a deceleration in November with a de-growth of -3.4% and 4.5% respectively. Consumer durables which have had a good run since the start of the FY19 dipped by 0.9% in November.
View
The IIP growth for the period of April to November stands at 5%. The sub-optimal growth of 0.7% in Apr-Nov period in Intermediate goods has been a major drag. Considering the pick up in the base in the previous year, IIP momentum is expected to slow down a little at least statistically. The same momentum is expected from the GDP growth in the second half. As the growth is expected to take a little breather and inflation to remain in the comfort zone, it gives a bigger reason for the central bank to stay on the path of neutral stance with a bias towards easing. Which would make a case for long duration investing, however the recent bearishness on account of fiscal pressures and oil price rebound may continue to impact the yields in the short term. It would be prudent to have a staggered approach of investing. Investors with higher risk appetite can take advantage of the high yields in the credit risk space through funds having a diversified and well spread out portfolio. Investors may also selectively look at NCDs, Bonds, Tax-free bonds, etc to complement their debt portfolio.
Disclaimer: This document is STRICTLY for authorised recipients only and is prepared for information purposes only. The information provided herein, we believe, is from reliable sources. IndiaNivesh is not liable for the accuracy of the source data as well as the results of the calculations based on the same. We do not claim that the data provided herein is accurate and complete in all respects. This is not an offer or solicitation of any offer to buy or sell securities. No action is intended to be taken by the recipients based on this document. The recipients may take their decisions based on their own judgement and independent advice that they may receive before making any investment or disinvestment decisions. The recipients are advised not to take any decision only on the basis of this document. No portion of this document should be printed, reprinted, redistributed, reproduced, duplicated or sold.
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Weekly BSE & NSE Gainers & Losers - 4th Feb to 8th Feb 2019.
NIFTY MARKET RECAP AND OUTLOOK It was a high volatile action packed week wherein the index Nifty spot surpassed the much awaited zone of 11000 but eventually failed to close above the same. During the week, Nifty registered high of 11118 but ended flat near 10950 mark. Despite the decent rally there was too much pressure on the broader markets which indicates strong index management. On the other hand, even NIFTY BANK index remained quiet even after a surprise rate cut in RBI’s monetary policy. The above kind of behaviour indicates that markets are facing headwinds at higher levels due to lower participation. Technically, we have been constantly warning about the strong hurdle between 11100 – 11200 zone. Now, Nifty has formed a ‘Doji’ candlestick pattern right at the 61.8% Fibonacci retracement level of the previous move as displayed above. If we club Friday’s black candle then together both can be construed as an “Evening Star” pattern which is a reversal one. Thus, going ahead a fresh upside could be expected only above 11118 mark. On the downside, breach of 10925 level would trigger fresh selling in the market which could drag the index towards 10800 mark. We continue to maintain ‘Stay Light’ stance on the market since the heavy weights are yet to correct.Disclaimer)
Next Story
MARKET RECAP KEY MARKET DATA POINTSThe markets maintained its corrective journey for the fourth consecutive session where the benchmark indices started the session on a flat note but closed near day’s low. The index Nifty managed to clear 10900 mark during the first half but sharp selloff in the final hour of session forced it to close with considerable loss near day’s low. On the other hand, Nifty Bank index corrected almost 300 points from day’s high to close an inch above 27000 mark. Although the day was choppy but individual stocks underwent some buying interest and as a result market breadth remained positive. On the sectoral front, NIFTY MEDIA (+1.33%) and NIFTY METAL (+1.57%) stocks were the biggest gainers whereas NIFTY PSU BANK (-1.61%), NIFTY REALTY (-1.40%) and NIFTY IT (-1.00%) counters ended in loss. From the F&O space, DISHTV (+14.67%), CANFINHOME (+10.04%) and JINDALSTEL (+9.79%) were the top performers. MARKET OUTLOOK In our latest weekly edition we discussed that due to the ‘Evening Star’ pattern; breach of 10925 level would trigger fresh selling in the market which could drag the index towards 10800 mark. In line with that, NIFTY has almost arrived near 10800 level. Now at this juncture, Nifty is hovering just above the placement of 50 DEMA. A breach of the same would extend the selling towards 10750 in the upcoming session. On the upside, bullish sentiment would resume only above 10930 mark. Traders can add aggressive long in index futures once Nifty starts trading above the mentioned resistance level. From the stock front, one should continue to stay hedge and avoid overleveraged positions since the heavy weights are yet to correct. ESCORTS – Daily Chart STOCK OUTLOOK The stock has been trading in a strong down trend since August 2018 After the recent consolidation, ESCROTS confirmed another fresh breakdown during yesterday’s session On a larger degree chart, the breakdown resembles a bearish FLAG pattern which indicates further downside Thus, we advise traders to sell the stock in range of 630 - 650 with a stop of 700 for the target of 570 – 520 )