Last Updated: Saturday, October 31, 2015

India Infoline Weekly Wrap - October 30, 2015

Market Outlook
Selling pressure continued without respite through the week with the Nifty ending below 8,100, down ~3%. For the October series, the Nifty gained over 3% even as the November series began on a nervous note. Investors are grappling with developments in the global economy, the action of central banks and of course the earnings season which is underway.

Worries that the NDA government may not do well in the Bihar elections also weighed on sentiment. After enjoying a fantastic upswing for almost a month, the Indian equity market has taken a breather as opinions seem to be changing in the market with the Fed making direct references to a rate hike possibility in December.

Investors will of course pay immediate attention to the host of data that comes from monthly car sales besides keeping track of PMI and services PMI. Corporate earnings will also continue with Cipla, Tech M and GAIL among the major companies to announcetheir earnings. We expect Cipla to report 9% qoq decline as most of the gNexium boost has been captured in Q1 FY16 and company had indicated that Q1 supplies have been lower (leading to lower PAT in Q2) which along with higher R&D spends would impact margin by ~400bps qoq to 23%. Cipla's reported PAT is likely to decline ~25% qoq. So far, Q2 Pharma results have been a mixed bag with notable disappointment from Lupin offset by strong showing from Dr Reddys' and Cadila.

Technical View
Inability to cross the hurdle of falling trendline from the peak of 9,119 and the formation of bearish engulfing pattern on the weekly chart has led to sharp decline in this week’s trade. In the process, it broke below earlier breakout line of 8,090 which has confirmed the breakdown of indecisive trading range, thus projecting target of 7,780. Hence forth any pull back is likely to remain short lived and any recovery could be capped towards 8,200 levels.
F&O View
In spite of increased lot size in most of the F&O scrips, market-wide rollover was surprisingly higher at 84.2%. The expiry week went quietly dragging the benchmark indices Nifty and Bank Nifty lower by almost 3% each. Nifty Futures managed to hold the important level of 8030 below which it can crack by another 100-150 points. Options data shows November series starting with 8500 Call and 8000 Put holding maximum OI. All the sectors showed negative price movement with auto, realty and capital goods contributing most to the fall.

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