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The weekly view as on 30th Setember 2017 by Vinod Nair, Head Of Research at Geojit Financial Services

Published in Investment Monday, 02 October 2017 14:15


Week that was…
The market corrected due to expectation of deferral in economic growth on account of slowdown in GST tax collection. Additionally, outflow of foreign funds and losing sheen on INR owing to FEDs stance to trim their balance sheet impacted the market sentiment. Heighted volatility was also due to the monthly F&O expiry week. Nifty made a low of 9688 after breaking its intermediate strong support level of 9800. While strong bullish stance of DIIs saved market from further downside.
Market continued in a consolidation mood as markets were concerned with decline in GDP growth; led by disruptive GST. Slow down in GST tax collection dented the sentiment and investors expect that the GST led disruption is likely to extent and will hurt the earnings for the next few quarters, this has led to massive outflow of FII money. Delay in recapitalization of PSU banks & continued NPA issues is hurting credit growth. Further, lack of investor confidence is supporting domestic private investments and recent rise in CPI inflation will limit RBI to take any rate cut in upcoming policy meet. FPIs are cautious on government stimulus programme as this will widen fiscal deficit. Hawkish stance of major global central banks and US FED decision on balance sheet reduction will curtail easy liquidity. Given downgrades in domestic GDP growth and more headwinds in form of INR depreciation, sharp surge in global commodities is adding to investor cautiousness. Among the sector indices PSU Banks & Pharma were the worst performance declined by 3.3 & 3.0%.
Week ahead…
The tail winds enjoyed by domestic economy due to benign commodity prices and falling inflation has currently started to reverse. On the backdrop of lackluster domestic macros, likelihood of extension of GST disruption and continued impact on corporate earnings, the current domestic premium valuation will not sustain and we expect consolidation to continue in near term. RBI policy meet is the key event to watch out for next week and the expectation is that RBI will maintain status quo. 
 

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