At the end of 2018, I must say the Indian stock market has performed very well, lot many events which turned the tide in both the sides. The 50-share Nifty made new life high of 11760 and corrected to 10000, finally settling with ~4% gain on a yearly basis. Last week, Nifty ended with a gain of 0.93% at 10860. The mid and small cap indices ended with a gain of 0.50% and 0.33% respectively.
All the sectoral indices ended with gains between 1-2% except Metals (-1.58%) and Auto (-1.22%). The Bank Nifty gained 0.90% with gains in PSU by 1.50% and private banks by 1%.
Key global events in this week include ADP non-farm employment change data on Thursday, unemployment change and Fed chairman Jerome Powell's speech on Friday. Domestically, India's November month infrastructure output data will be declared today followed by Nikkei Manufacturing PMI on Wednesday and Nikkei Services PMI will be released on Friday. World markets except India will be closed tomorrow on account of New Year.
Last week, the broader Nifty remained in the range of 10535-10895 (within the projected range of 10560-10960). Technically it formed a Hammer pattern which indicates buying interest still persist. For the week, Nifty support levels at 10730-10650-10560 while resistance level at 10940-10980-11170. The probable trading range for Nifty could be between 10650 and 11170.
For the global financial markets, year 2018 was a tumultuous year, India stood amongst the best performers with correction in crude price and stronger rupee both played a vital role in favour of the Indian economy. With a lot of ups and downs, Indian benchmark indices managed to touch new life high of 11170 mark in January, corrected till 9952 in March on account of LTCG implementation and again touched fresh highs of 11760 in August and witnessed sell off towards 10333 on account of IL&FS default raising liquidity concern over NBFCs.
Throughout the year, markets were influenced with lot many events like PNB Bank fraud, Budget, reclassification of mutual fund portfolios, Fed rate hikes, tariff war, spike in crude price and stronger dollar against World currencies, rupee hitting new low of 74.69, financial meltdown in Turkey, Brexit, IL&FS issue leading to liquidity concern for NBFCs, sudden resignation of RBI governor, state elections etc. and many other corporate and political events.
The top performers in Nifty50 were Bajaj Finance(+50%), Tech Mahindra(42%), TCS(40%), HUL(33%) and Infosys(26%) while worst performers were Tata Motors(-60%), Yes Bank(-42%), Bharti Airtel, Vedanta and HPCL(-40%).
For the year 2018, the foreign institutional investors (FII) pulled out Rs 52,000 crore from equities while the domestic institutional investors (DII) bought shares worth Rs 1,10,000 crores (highest ever inflows so far).
Outlook 2019: Fundamentals appear to be at the start of new up-trend with the stronger rupee and lower crude, inflation and interest rates. Valuations are fair and market sentiments are depressed thus, equity markets appear to offer more upside than downside. Growth is likely to move higher, credit growth seems to be at the beginning of the new cycle, rates are likely to take a pause, corporate earnings show recovery in profit margins, valuations are at the historical mean range and could go either way depending on the factors.
Key Events in 2019 to watch out for are Brexit in March, Lok Sabha election outcome in April-May.
The concern would be ongoing US-China trade war, any spike in crude, strengthening of the dollar, any adverse outcome of LS election will keep Indian markets on the edge.
IN THE PLAY
For the week, Nifty support levels at 10730-10650-10560 while resistance level at 10940-10980-11170
For the year 2018, the FIIs pulled out Rs 52,000 crore from equities while the DIIs bought shares worth Rs 1,10,000 crores (highest ever inflows so far).
The writer is VP-retail research, Motilal Oswal Financial Services