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Macrodata, US Fed meet outcome, Brexit in focus

WT24 Desk

Investors are likely to remain cautious ahead of key macro economic data and the outcome of the US Federal Reserve meet. Meanwhile, worries that Britain, in a referendum on June 23, may vote not to be a part of the European Union would continue to weigh on sentiment, Business Standard reports.

In the week to June 10, benchmark share indices witnessed profit taking after they hit 7-month highs with large-caps taking a hit while outperformance in the broader market was seen on theme-based buying.  The S&P BSE ended down 0.8% at 26,636 and the Nifty50 ended down 0.6% at 8,170. In the broader market, the BSE Smallcap index ended up 2%.

witnessed a bit of consolidation tracking global cues and round of profit booking after sharp gains before the RBI policy session. Returns in the broader market were led by specific themes like logistics and NBFCs which could have further upside closer to the monsoon session. Going forward macro-data environment would be expected to drive the markets both locally (CPI, and WPI) and global (Brexit, meet outcome)” said Tirthankar Patnaik, Head of Strategy, Mizuho Bank.

The Reserve Bank of India at its bi-monthly policy review early this week kept key policy rates unchanged amid inflation concerns but maintained an ‘accomodative’ monetary policy stance going forward. The repo or the repurchase rate was unchanged at 6.50% on the back of higher food inflation and amid expectations of a rate action by the US Federal Reserve. The central bank has also kept the  Cash Reserve Ratio (CRR) unchanged at 4%.

Meanwhile, Index of Industrial Production (IIP) for April was weaker-than-expected after it contracted to -0.8% as compared to 0.1% in March 2016 with manufacturing sector contracting to -3.1% compared to -1.2% in the previous month.

The broader markets hogged the limelight during the week under review with logistics companies gaining the most on hopes of clearance of the goods and services tax (GST) Bill in the upper house of the Parliament. Gati, Snowman Logistics, Sical Logistics, Allcargo Logistics, Patel Integrated Logistics and VRL Logistics surged 6%-20% each.

Alphageo was the top gainer up 66% after the company announced that it has received letters of award for contracts from Oil And Natural Gas Corporation of India (ONGC) for an estimated value of Rs 1,482 crore.

Shreyas Shipping and Logistics gained 27% after the company said that it has entered into an agreement with state-owned Shipping Corporation of India (SCI) to strengthen costal shipping and expand its presence on East-West trade lane.

Select state-owned companies surged amid reports that the Centre has released a new set of guidelines on capital restructuring of state-owned companies. MMTC jumped 20% while STC gained 8%.  Sugar companies also surged during the week tracking surge in global prices. Further, rating agency ICRA said the profitability trend for domestic sugar mills is likely to be better during the crushing season 2015-16 on supply correction. Upper Ganges, Ugar Sugar, Uttam Sugar, Oudh Sugar and Dharani Sugars zoomed between 17%-26% each.

Companies engaged in the manufacture of defence equipment also gained during the week on hopes of order inflows after the US recognised India as a major defence partner. BHEL ended nearly 5% higher, Astra Microwave gained 12%, Walchandnagar Industries zoomed 10% and Nelco ended up 6.7%.

Phoenix Lamps jumped 20% after Motilal Oswal Asset Management Company (AMC) had bought 153,212 shares of the company at an average price of Rs 132.16. Among index stocks, energy shares firmed up tracking rally in global crude oil prices. ONGC and Reliance Industries ended up 1.9%-2.9% each.

emerged as the top Sensex loser down nearly 7% amid worries that compensation increase and higher visa fees could impact margins in the first quarter of the current fiscal. Further, concerns that growth could remain volatile in the near term also dampened sentiment.

Dr Reddy’s Labs ended down 3% on reports that the US Consumer Product Safety Commission (US CPSC) has asked the US Department of Justice to seek civil penalties from Dr Reddy’s Laboratories Limited in a five-year old case related to non-reporting of a possible hazard posed to children from non-child resistant packaging for five prescription drugs.
Outlook
Apart from the global events such as the US Fed meet, macro economic data such as the wholesale price index and consumer price index for May 2016 along with the progress of the monsoon will dictate market trend.

Investors will also be keenly awaiting the commentary from the US Fed at the conclusion of its two-day policy meet which ends on Wednesday, June 15. Further, announcements by the Indian Meteorological Department regarding the progress of monsson will also be in focus.

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