Taking Stock: Inflation spoils the party as profit booking hits D-St

The S&P BSE Sensex hit a record high of 41,185 on December 16, but pared gains towards the end of the session to close in the red, and below 41,000. The Nifty50 is still 105 points short from its record high of 12,158.

The NiftyBank which hit a record high of 32,186 also failed to hold on to the gains as the index closed with losses of 0.13 percent at 31,974.

Let’s look at the final tally on D-Street – the S&P BSE Sensex fell 70 points to 40,938 while the Nifty50 closed with losses of 32 points to 12053.

Sectorally, the action was seen in IT, Realty, and Power stocks while the profit-taking was seen in the metal, telecom, FMCG, and energy space.

On the macro front, Wholesale prices based inflation rose to 0.58 percent in November, as against 0.16 percent in October due to increase in prices of food articles.

The consumer price index-based retail inflation, as per data released last week, spiked to over a 3-year high of 5.54 percent in November. Experts feel that with a rise in inflation, the central bank might skip the February meeting to hike rates.

“Further spike in the inflation for primary food articles to a 71 month high 11.1%, drove up the WPI inflation in November 2019, arresting the downtrend seen in the previous two months,” Aditi Nayar, Principal Economist, ICRA Ltd told Moneycontrol.

“We continue to expect a pause in the next monetary policy review, based on the expectation that the CPI inflation will harden further in December 2019,” she said.

Experts are of the view that WPI inflation data gave reasons to investors to book profits at higher levels. Going forward, the GST Council meeting is something that will be in focus which could give direction to markets in the next term.

“Inflationary pressure and static manufacturing activity impacted the sentiment while trade deal optimism buoyed the global market. Global factors are likely to be more supportive in the near term and market anticipates a better economic growth in the coming years which is giving support in every consolidation,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

“Investors are also keenly waiting for the upcoming GST council meet to get any cues on overcoming revenue shortfall,” he said.

Stocks & Sectors:

Sectorally, the S&P BSE IT index was up 1.1 percent, followed by the S&P BSE Realty index which gained 0.46 percent, and the S&P BSE Healthcare index rose 0.03 percent.

Profit-taking was seen in the S&P BSE Telecom index which fell 1.59 percent, followed by the S&P BSE Metal Index which dropped 1.4 percent, and the S&P BSE FMCG index was down 1.2 percent.

Volume spike of 100-300% was seen in the stock like ITC, HUL, Amara Raja Batteries, Siemens, and Tech Mahindra.

Long Buildup – Tech Mahindra, IGL, and NMDC

Short Buildup – MindTree, HUL, Amara Raja Batteries

Stocks in news:

Aster DM Healthcare: Aster DM Healthcare share price gained 3 percent on December 16 after the company decided to close all its loss-making operations in the Philippines.

Ashiana Housing: Shares of Ashiana Housing ended 6 percent higher on December 16 after the developer told the exchanges that phase 1 of its project in Jamshedpur in Jharkhand was booked 97 percent.

Eris Lifesciences: Shares of Eris Lifesciences jumped 3 percent on December 16 after getting tax exemption on share buyback.

Ramco System: Ramco System share price gained 2 percent on December 16 after the company received an order from China Aircraft Services for end-to-end base and line maintenance operations.

Astron Paper: Astron Paper & Board Mill share price gained 2 percent on December 16 after the company entered into a strategic partnership with China’s Shandong Zhonghui Supply Chain Management Co Ltd (ABC Paper).

Technical View:

Nifty formed a Bearish Belt Hold kind of pattern or a Dark Cloud Cover kind of formation on charts

Nifty held on to crucial support near 12050 which is a positive sign for markets

If Nifty trades below 12046 levels then it shall attract follow through selling

A close below 11856 will confirm the bearish formation but the threat will get negated if the index closes above 12158 levels, said a Reuters report.

Short term traders are advised to remain neutral on the long side and wait for some signs of strength.

Three levels – 12046, 12158, 12200LIVE NOW… Video series on How to Double Your Monthly Income… where Rahul Shah, Ex-Swiss Investment Banker and one of India’s leading experts on wealth building, reveals his secret strategies for the first time ever. Register here to watch it for FREE.