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Dull End to the Week; Software & Pharma Stocks Drag
Fri, 16 Jun Closing

Indian share markets continued to trade flat in the afternoon session amid mixed international markets. At the closing bell, the BSE Sensex stood lower by 19 points, while the NSE Nifty finished up by 10 points. Meanwhile, the S&P BSE Mid Cap the S&P BSE Small Cap finished up by 0.2% and 0.1% respectively. Gains were largely seen in FMCG stocks, and consumer durable stocks. Pharma stocks, capital goods stocks and software stocks witnessed selling pressure.

Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.56% and the Hang Seng rose 0.24%. The Shanghai Composite lost 0.30%. European markets are higher today with shares in France leading the region. The CAC 40 is up 0.89% while London's FTSE 100 is up 0.71% and Germany's DAX is up 0.43%.

The rupee was trading at Rs 64.59 against the US$ in the afternoon session. Oil prices were trading at US$ 44.88 at the time of writing.

In news from economic sector, India's trade deficit was higher and stood at US$29.7 billion. This was brought about by a larger increase in merchandise imports relative to exports led to surge in current account deficit (CAD) which soared to US$3.4 billion, or 0.6% of gross domestic product (GDP), in the fourth quarter of fiscal 2017, from US$0.3 billion a year ago.

However, as per Reserve Bank of India's data, despite a higher merchandise import bill and almost flat growth in services income as both software services income as well as remittances by the overseas Indians were at the same level as previous year, India's external sector balance sheet remained in the comfort zone of less than 2% of GDP during the quarter ended March'17. On a sequential basis, the gap between forex earnings and expenses, narrowed from US$8 billion in the third quarter of FY17.

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In the fourth quarter, net foreign direct investment moderated to US$5 billion. Net portfolio investment recorded substantial inflow of US$10.8 billion in both equity and debt segment, as against net outflow of US$1.5 billion in the same quarter of FY16. Capital account surplus more than doubled to US$10.3 billion from US$3.9 billion in the same period a year ago on strong portfolio flows during the quarter.

In FY17, gross FDI inflows stood at US$60.2 billion, higher than US$55.6 billion in 2015-16, while net FDI inflows in 2016-17 was at US$35.6 billion as against US$36 billion in 2015-16. Portfolio investment recorded a net inflow of US$7.6 billion in 2016-17 as against an outflow of US$4.5 billion a year ago. In fiscal 2017, there was an accretion of US$21.6 billion to the foreign exchange reserves as compared with US$17.9 billion in 2015-16.

India Runs a High Government Deficit Among G-20 Countries

India's government deficit to GDP ratio is higher than most G-20 countries. Therefore, any attempts of relaxing fiscal consolidation to spur demand must be weighed carefully.

Moving on to news from pharma sector. IPCA Laboratories share price plunged 8.5% in today's trade after the as the US drug regulator barred entry of the company's products in the US market because of non-compliance with manufacturing norms at its three facilities.

The company received communication from the US Food and Drug Administration (USFDA) that all drugs manufactured at facilities in Ratlam, Indore SEZ and Silvassa will be refused admission in the US until the company can demonstrate that products from these sites are in compliance with prescribed norms. IPCA's share price hit a 52-week low

Pharma stocks finished weak with Sun Pharma share price, Cipla share price and Torrent Pharma share price also falling more than 2%

In news from automobile sector, Hero MotoCorp is reportedly planning to invest around Rs 25 billion for the next two financial years up to 2018-19. The proposed investment includes products development, digitisation, phase-wise capacity installation.

Moreover, the company is planning to expand its existing facility at Gujarat and portion of the capex will be on upcoming plants in Andhra Pradesh and Bangladesh. This capex also includes investments towards up-gradation and modernisation of company's existing plant machinery. Meanwhile, the company has crossed 70 million in sales and is racing towards 100 million.

Hero Motocorp share price finished the day down by 0.5% on the BSE.

In another development, HDFC will issue secured redeemable non-convertible debentures (NCDs) worth Rs 20 billion on a private placement basis for a tenor of three years and three months, to meet its long-term capital requirements.

The proceeds of the present issue would be utilized for financing/refinancing the housing finance business requirements of the corporation. The issue will open and close for subscription on June 16, 2017.

Also, Axis Bank has received its board's approval to raise Rs 50 billion by issuing bonds on a private placement basis. The company's board gave approval for the same at its meeting.

The bonds are rated 'AAA' by Crisil, 'AAA hyb' by ICRA and 'AAA' by India Ratings (Ind-Ra). Bonds with AAA rating reflect an exceptional degree of credit-worthiness on the basis that the issuer can easily meet its financial commitments.

HDFC share price and Axis Bank share price finished the day up 0.3% respectively.

And here's a note from Profit Hunter:

The Nifty 50 Index ended the week on a negative note. On Monday, it opened gap down and continued to trade in a downtrend throughout out the week. The selling was due to a weak trend overseas. Finally, on Friday, the index recovered a bit but ended the weekly session down 0.83%.

As we mentioned in an earlier note, the Nifty formed a bearish engulfing candlestick pattern on the daily chart. This is a short-term reversal pattern that signaled a minor correction. The RSI indicator formed a negative divergence, which also indicated a correction. The index did correct - 80 points from last Friday's closing.

We mentioned that the correction might drag the index towards its 20-day exponential moving average (EMA), which is acting as good support at every minor correction since January 2017. The RSI indicator is also near its previous low, which might act as a support.

If the 20 EMA is able to provide support once again, the index might resume its uptrend. On the flip side, we might see short-term weakness if the index slips below the moving average.

Will the Index Resume Its Upmove?
Will the Index Resume Its Upmove? 

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Mar 2, 2021 02:02 PM