Markets marked red in March; Sensex & Nifty register plus 1% fall

Indian market have been volatile and witnessed erratic moves in the month of March. After two consecutive months of gains, the Sensex fell 1.96% and the Nifty");'> Nifty dropped 1.66% in March.

Major Headlines:

India's Jan exports surge 10%
India's manufacturing growth slows in Feb
RBI cuts CRR by 75 bps
January 2012 IIP at 6.8% v/s 1.8% in December 2011
Feb inflation at 6.95% v/s 6.55% in Jan
New Income Tax Slabs
February car sales up 13%
RBI limits gold loan by NBFC's to 60%
February infra output up 6.8% yoy
No tax liability on P-notes holders: FM
RBI plan to buy bonds of Rs10,000 crore today



Indian Indices
The month of March was a tough one for Indian markets. Markets were highly volatile throughout the month based on news action from all across the globe. This month's rangebound price action came after two months of healthy gains. The March series too was quite bad for the market as compared to previous two strong series on heavy inflow of foreign money. The Nifty");'> Nifty tanked over 5% in March series while gained 16-18% in January and February series.
What weighed on the markets?
Confusion over the General Anti-Avoidance Rules ( GAAR), less optimistic Union Budget FY13, rollback of rail fares, weak political situation and less hopes of rate cut in April forced the market to shed gains.
The three key domestic events in March - outcome of UP elections, RBI mid-quarter review and the Union Budget disappointed investors, capping the upside for the Indian markets.
During this month, India's Q3 GDP came in at 6.1% v/s 6.9%, which was lower than expectation.
Certain aspects like January 2012 IIP at 6.8%, February inflation at 6.95%, no change in RBI policy, Railway Budget and Union Budget also kept the markets highly volatile.
Post a highly debatable Union Budget 2012-13 & Railway Budget, political worries also added to the negative mood after Prime Minister Manmohan Singh accepted Railway Minister Dinesh Trivedi's resignation. Although, relief came in post the roll back of rail fare hike for the local trains. Mamata Banerjee's new nominee in Railway Ministry Mukul Roy on Thursday (March 22, 2012) withdrew the hike in passenger fares for all classes including suburban trains except AC 2 tier and First class.
Indian rupee too suffered its worst fall in four months, shedding 3.68% in the month of March hammered by investor jitters over the impact of high global oil prices. On the other hand media reports about a controller and Auditor General's ( CAG ) draft report estimating loss of up to $210 billion in revenue due to selling coalfields too cheaply and tax uncertainty among foreign investors on account of General Anti-Avoidance Rules ( GAAR) has also hurt investors' sentiment.
News that gave a pinch of relief to the investors was when Finance Minister Pranab Mukherjee said holders of participatory notes, or P-notes, will have no tax liability in India. A fall in crude oil prices also boosted the sentiments, easing worries of inflation and rising interest rates.
On the Global Front, the manufacturing data of China disappointed the markets. The HSBC Flash China Manufacturing Purchasing Managers' Index declined from final reading of 49.6 for February to 48.1 in March, which was the lowest level in four
months.
The Sensex closed the month down by 1.96% or 1739 points at 17404 and the Nifty");'> Nifty ended the month lower by 1.66% or 575 points at 5296.
Global indices:
On the last trading month of the new financial year majority of the global indices closed in negative zone. The biggest loser was - Shanghai Comp which fell by 6.82% and Hang Seng declined 5.19%.
On the other hand, US stock market had its best first quarter in 14 years. For the first three months of the year, the Dow was up 8% and Nasdaq composite index, made up of technology stocks, has had an even more remarkable run-up of 19%.
Sectoral and stock screening:
Among the 13 sectors, only three sectors managed to close in positive. BSE FMCG was up by 7.83%, BSE HC up by 4.57% and BSE Auto up by 1.40%. The topmost losers were - BSE Realty fell by 9.13%, BSE Power fell by 8.31% and BSE Oil & Gas fell by 7.17%.
Among 'A' group stocks, top three gainers were - Tech Mahindra up by 20.64%, Pidilite Industries up by 17.74% and Jubilant Foodworks up by 15.84%. Top three losers - Manappuram Finance down by 27.19%, Opto Circuits India down by 24.59% and HDIL down by 22.11%.
FII/MF activity:
The foreign institutional investors (FIIs) purchased Indian stocks worth a net of Rs7,535 crore and the domestic investors sold Indian stocks worth a net of Rs1,549 crore in March.
Market Outlook:
Looking at Indian markets going forward, we expect markets to stay rangebound in the month of April also. Volatility could spike up in the result season. The stock specific volatility could increase in the Q4 result season based on the quarterly performance. The bond yield have hardened prior to the RBI policy review on April 16 and any move to ease bond yield through CRR reduction or policy rate cuts could enthuse the markets. But the probability of any dovish move from RBI is limited due to firm crude prices and strong inflationary pressures.