Market In Consolidation Mode Despite Positive Q2 GDP | CORPORATE ETHOS

Market In Consolidation Mode Despite Positive Q2 GDP

By: | December 2, 2017
stock market

Week that was…

Market started this week on consolidation mode due to status quo in sovereign rating and F&O expiry, market traded in range between 10400-10100 levels. Despite positive uptick in Q2 GDP, the consolidation extended in the market due to concerns of widening of fiscal deficit, rise in bond yields and rising crude prices.

Economic growth of 6.3% in second quarter failed to lift the market, as anxiety over INR and premium valuation led to selling pressure in the market. The OPEC & Non OPEC countries have extended the production cuts till December 2018, leading to spike in crude prices which is negative for India. With raising crude prices and inflation, RBI is expected to maintain status quo in next monetary policy leading to disappointment among investors. The major indices declined by 2.6% for the week and the selling was broad based, the worst performer was PSU Banks which declined by 6% on account of profit booking after the recapitalization led rally. Sectors like Pharma, IT and Metals declined by 2-3% for the week. FII were net sellers in the market, while DII flows continued to be on positive side.

Week ahead… 

The Q2 GDP data suggest the worst impact of demonetization & GST is over and the economy is expected pick-up in near future. Q2 results were better for the corporate and market anticipates a better performance in H2FY18, leading to upgrades. However, in the near term, investors will be cautious due to the concerns on domestic fiscal deficit and rising crude prices. Having said that, downside in the market is protected due to strong reform measures in domestic market and favourable global cues. The outcome of upcoming state election (Gujarat & Himachal Pradesh) in favour of ruling party could be a catalyst for further uptrend. For the week ahead, RBI policy meet is the key event and market expects a status quo.

Mr Vinod V Nair is Head of Fundamental Research, Geojit Financial Services Ltd.