Weekly Market Newsletter - Dec 23 2012

What the RBI did was more or less in line with market expectations. Although a section of the markets and India Inc. wanted a CRR cut, lack of announcement on the same wasn’t a surprise for sure. The RBI hinted at a shift in stance towards pro-growth measures Indian markets declined for the second week running, as investors digested news flow from India and its global peers, even as they wait for the Government to introduce important reforms. The market appears to be in a sort of uncertainty with some kind of year-end fatigue. Christmas is round the corner but no signs of a Santa Claus rally here. Nifty has been stuck in a trading band of 5,800-5,960 for last two weeks so a breakout either side is anxiously awaited to determine the near term direction. Global cues also were not supportive as fiscal cliff issues continue to overshadow any other economic news. In the coming curtailed week, volatility is likely to escalate due to F&O expiry.

Weekly Newsletter - Nov 25 2012

The indices may have notched up marginal gains for the week but the performance remained more or less subdued save for Wednesday when some gains were seen. The global cues were also hard to come by with a truncated week in US on account of Thanksgiving Thursday and Black Friday. The market didn’t seem to pay too much attention to the ruckus in Parliament as it managed to avoid any losses on Thursday even as the Lok Sabha and Rajya Sabha were adjourned. The Government is locked in a battle with the opposition over the validity of a debate over FDI reforms. The finance minister is in favour of rolling out GAAR from April 2014. Meanwhile, Moody's says the Indian economy is likely to grow at 5.5 % to 6 % this year and is hopeful that things will improve from then onwards. However, if India fails to rein in its ballooning deficit, India could face a downgrade in its ratings. The market could remain in a narrow range for some time as clear triggers are lacking. India’s Q3 GDP figures on 30th November will be keenly watched. Among the global cues to look out for are Greece debt situation and US fiscal cliff handling. On the political front, a meeting of all party leaders of Lok Sabha and Rajya Sabha has been conveyance by Parliamentary affairs minister Kamal Nath; the outcome here will be crucial for Parliament to function.

Weekly Newsletter - Nov 11 2012

The week began with attention solely focused on who would the Mr. President of the United States of America. Obama’s second coming brought the US indices lower and all other global markets appeared to have followed suit. Investors appeared to be worried about how Obama will deal with or avoid the ‘fiscal cliff.’ Interest rates were left unchanged by ECB and Mario Draghi sounded that economic activity in the eurozone would remain weak in the near term. Indian indices were resilient at the start of the week but turned in the red from mid-week as the global sentiment worsened. For the week the Sensex and Nifty index ended marginally lower by 0.18%. The IIP numbers will have its impact on few segments as the numbers are announced on Monday. The earnings season continues and investors will continue to pay closer attention to corporate numbers as they come. The Monthly WPI is expected on Wednesday. It may be recalled that the diesel price hike had led to WPI inflation hitting a 10-month high in September.

Weekly Newsletter - Sep 22 2012

Indian stocks ended near 52-week highs on the back of a ~2% surge on Friday. Indian stock indices were among the best-performing ones globally. This week’s ascent can be attributed entirely to the Government’s new-found enthusiasm on economic reforms. Last week’s announcements were followed up with formal notification of FDI norms for various sectors. The Government also slashed withholding tax on overseas borrowings to attract critical foreign capital flows, besides approving an equity market scheme for smaller investors. The rupee too benefited from the UPA’s reforms push. The issue of UPA Government’s stability was also settled after the Samajwadi Party said it will support the Congress-led regime from outside. With the troublemaker TMC out of the way, the Government seems all the more emboldened to go ahead with pending reforms. Markets could rise further if the bottlenecks to fresh domestic investments are removed. Global markets also need to be supportive. However, one must be careful as inflation remains sticky and the RBI may take a while before slashing rates. The external situation also remains fragile, especially in Europe and China.

Weekly Newsletter - Sep 14 2012

Indian markets had a splendid week, with the BSE Sensex and the NSE Nifty scaling seven-month peaks besides crossing important milestones. The much-awaited move on fuel price revision did come about, with the Government finally hiking diesel prices. LPG subsidy has been capped while excise duty on petrol has been slashed. The Government was also due to take a call on a whole host of reform measures to avert BRICS’ first debt downgrade to ‘junk’. All eyes are on the RBI, which reviews its policy on Monday. With inflation in August spiking, the RBI may not yet cut policy rates. Stocks could fly even higher if the RBI too springs a pleasant surprise. Globally too, things have improved considerably, with Europe, China and now the US unleashing fresh stimulus to boost growth. One bad news for India is the fresh uptick in commodity prices, especially that of crude oil and gold. We also need to see what follow-up policy action the Centre unveils in order to restore investor confidence.

Weekly Newsletter - Sep 8 2012

Indian stock indices gained 1.5% during the week, mainly due to a powerful rally on Friday, after the ECB President delivered on the promise made by him recently in its fight against the three-year-old debt turmoil. It may be recalled that Indian indices had snapped a four-week winning streak last Friday on worries that policy paralysis will continue to be a major headwind for the Indian economy and markets. In fact, India is at a risk of losing its investment grade debt rating if the Centre fails to announce any significant reform(s) in the coming days. That could partly offset the positive vibrations generated by the ECB monetary stimulus and the impending QE3 from the Federal Reserve. Next week will be an important one again, as markets will react to the latest IIP and WPI inflation numbers. Globally, the key event to keep on one’s radar will be the two-day FOMC policy meeting. ECB President Draghi has kept its promise on monetary stimulus. Will his US counterpart do an encore on QE? We will have to wait and watch.

Weekly Newsletter - Aug 5 2012

The indices did manage to eke out around 2% gains after being on a weekly loss for a couple of weeks. Dark clouds would actually bring joy as the focus of the nation is on the deficient monsoon. If the rain gods fail to shower their blessings adequately, India could see its growth in the current fiscal falling to 6% according to the Planning Commission. Any positive signals from the Euro zone can provide comfort and support to the markets which remain on tenterhooks. Corporate results will continue to flow in bringing in the necessary action in those particular stocks. As far as key data points are concerned the IIP numbers would be keen awaited on Friday. Globally too various data points will provide some cues on the current state of affairs. The month of August is not really known for much gains or pains. At best we could remain in a tight range for sometime. In short, the coming week will continue to swing more to the global cues than any domestic affair.

Weekly Newsletter - June 9 2012

It was a pretty good week for equities, as desperate investors snapped up beaten down shares on hope of emergency monetary action. While the Australian and Chinese central banks did cut rates, lack of commitment from the ECB and the Fed left investors dismayed. Another wave of dismal economic reports out of the eurozone coupled with yet another downgrade for Spain failed to influence the investors. However, things did cool down substantially on Friday in the wake of Fed chairman Ben Bernanke’s snub. The Chinese rate cut triggered speculation about Saturday’s data points. Tension also prevails over the precarious fiscal health of Spain and its fragile banks. Greek elections on June 17 will start playing on investors’ minds from next week. The following couple of weeks also has key events lined up, especially the FOMC meet and G-20 summit. For India, next week will be important, as the Government will release the latest IIP and inflation reports. The two data points could well have a bearing on the outcome of the RBI’s June 18 policy meeting.

Weekly Newsletter - May 26 2012

After a long time, the main Indian stock indices managed to register weekly gains. The steep petrol price hike probably did the trick as it sparked off expectations of few more bold policy actions from the usually lethargic UPA II. But, it didn’t take much time for that perception to change as reports of a partial rollback in petrol prices started doing the rounds. Also, an EGoM scheduled for Friday to consider revision in other petroleum products was deferred amid stiff political backlash and public outrage. Whether UPA II manages to improve its scorecard in the remaining two years of its term is anybody’s guess. Things have not exactly been rosy for the Congress-led regime, and the biggest victim of the policy paralysis has been the rupee. Although, the local currency has recovered slightly in the past two sessions, it remains to be seen if it can sustain the pullback in the absence of progress on the policy front. Next week’s release of GDP data will be of interest to market participants amid fear of a deeper downturn.

Weekly Newsletter - Apr 13 2012

The roller-coaster ride continues on Dalal Street, with the main indices falling ~2% each after rising modestly in the past couple of weeks. While the dismal IIP numbers and shocking revision lifted hope of a repo rate cut on April 17, worries about slowdown in China and fiscal woes in Europe dampened the mood on Friday. IT shares were hit hard after Infosys announced disappointing Q4 earnings and muted guidance.

Concerns persist over economic growth in key regions like the US, China and the eurozone. Back home too, the macro-economic conditions are not conducive. While the Government continues to dither on important policy reforms, some of the announcements like GAAR have spooked foreign investors. Data quality and reliability are also in doubt following the IIP fiasco. Therefore, there is an urgent need for the Centre to prevent the situation from spiraling out of control.

The RBI could help by cutting the repo rate by at least 25 bps. But, given the high fiscal deficit, elevated crude oil prices and sticky inflation it will be a tough call for Governor D. Subbarao.

Weekly Newsletter - March 25 2012

The win-loss score line for the Indian market now stands at 7 to 5. The strong momentum that one saw early in the year has clearly subsided now post the big events of March. It looks like market players are resigned to another grinding year ahead with no clear bias. At the same time, there is no dearth of headwinds at the moment. It will take a while for these uncertainties to abate.

As far as India is concerned the two big worries are sticky crude oil and persistent policy inertia at the Centre. Even the RBI is waiting for these two variables to sort of ease a wee bit before it starts slashing rates. Estimates of potential quantum of rate cuts by the RBI have been scaled back after the Budget.

All eyes are on the Government’s economic managers to see whether they are able to take the requisite decisions to pump-prime the domestic economy.

On the global front, market participants are increasingly worried about the situation in China even as concerns prevail over the sorry state of the eurozone.

Weekly Newsletter - Feb 25 2012

We warned about a meaningful correction on Feb. 22. Incidentally, the main indices witnessed second big fall of 2012 on the day. Not only that, the Indian market broke its seven-week winning streak this week. The frontline indices fell for three straight days and logged their first down week of 2012. Traders preferred to book profits in the run up to important domestic events next month.

The fall this week may not necessarily be a bad thing. A pause is always healthy after such a rise. For those who missed the rally, such corrections could be a blessing in disguise. The Indian market could consolidate in a sideways fashion in the near term as uncertainties over the European debt crisis and geopolitical tensions persist.

One should keep a close eye on FII flows, which have been quite robust so far. Q3 GDP data and LTRO-2 by the ECB will among the events to keep on one’s radar for next week. The Centre must not lose any time in accelerating reforms. That will in turn become fuel for our markets.

Weekly Newsletter - Feb 20 2012

With the liquidity flow continuing relentlessly, indices have no other way but to look up. The truncated week could see some wild swings though. The left out feeling is there in some quarters and a few are wary of the sudden rise and may prefer to sell into the strength. The week will give some opportunities to get in as the global macro factors could cause a temporary cooling anytime.

Among the global factors to watch out for there is Greece which is showing signs of pressure as the country faces a March 20 bond redemption totaling 14.5 billion euros ($19 billion). While the nation’s political leaders have signed up for fiscal retrenchment and detailed 325 million euros in new budget cuts for this year, euro-area governments have yet to approve a second bailout of 130 billion euros

Weekly Newsletter - Feb 12 2012

After a strong start to 2012, the equity markets are showing some signs of fatigue. Although the Nifty crossed 5400 this week, the frontline Indian stock indices seemed to struggle in their endeavour to move higher. World markets too lost some steam amid ongoing uncertainty over Greece.

Most central banks are in defensive mode right now as they try to contain the spill-over effect from the eurozone debt crisis. China is a bit of a conundrum at the moment.

Weekly Newsletter - Feb 6 2012

Five winning weeks in a row have clearly stunned most market players after last year’s disappointment. The Nifty has convincingly crossed its 200-DMA and has also closed above it for the past four sessions. The Sensex too has pierced the crucial technical barrier. The manner in which the market has rallied has raised expectations of more gains. However, one must not loose sight of the risks confronting the market – both domestic as well as external.

Things could get little trickier going forward as strong money flow is driving the current ascent. The US jobs data, outcome of Greece’s debt swap talks and the lower court’s verdict on P. Chidambaram’s alleged complicity in the 2G scam are among the events to keep on one’s radar in the immediate future.

One also has to see if the ongoing FII inflows persist or taper off. Although FY12 earnings have been discounted, any nasty surprise from results may also dampen the mood. One should tread carefully at this juncture, as the market could get pegged back again on any fresh bad news.

Weekly Newsletter - Dec 31 2011

To say that 2011 was challenging would be an understatement. There was no dearth of bad news be it the never-ending list of scams, or spiraling inflation, or hardening interest rates, or general economic slowdown, or a sliding rupee, or policy paralysis or the eurozone debt crisis. So, naturally investors shied away from Indian markets. In fact, India was among the top losers.

But after having experienced so much turmoil across the board, things can only look up sooner or later. The outcome of UP elections could have a significant bearing on the policy decisions of UPA II, including the Budget. It might also change political equations at the Centre. Once inflation moderates to acceptable levels and the state elections are over in March, we could see reversal in interest rates and few policy initiatives as well.

The December F&O expiry has seen traders rolling over short positions, leaving chance for a short squeeze. Corporate results, IIP, inflation, RBI policy action and global events will underpin the markets' direction next month.

Weekly Newsletter - Dec 11 2011

Next week is again very important for our markets. The IIP data for October will be out on Monday. The number is likely to be a pretty dismal one with one national daily actually reporting a 7% contraction.

Latest inflation report will be released on Dec. 14 and the RBI will take up its review on Dec. 16. A pause is what the RBI had predicted at its previous meeting. But, one has to see what stance the central bank takes as the rupee's depreciation has made things worse with cost of imports shooting up sharply.

Weekly Newsletter - Nov 27 2011

The undercurrent will remain weak as long as European leaders find a common ground as far as finding a lasting solution to the debt crisis is concerned. Right now they seem to be struggling in containing the financial malaise amid fears of it spreading to the core of the eurozone. At the same time, other developed economies like the US, Japan and the UK are also having their own set of problems.

Weekly Newsletter - Oct 30 2011

Indian markets did well to notch up gains on all three trading days in the holiday-shortened Diwali Week. Indications of a pause by the RBI offset the 13th rate hike in the past 18 months.

The main indices rallied in lockstep with other world markets amid expectations of a wide-ranging deal to control the eurozone debt crisis. The deal finally saw the light of day, lifting all risky assets in tandem. Encouraging data on the health of the US economy, including Q3 GDP report, also buoyed the sentiment.

Weekly Newsletter - Oct 23 2011

After a choppy week, Indian markets could witness some more volatility and uncertainty as participants brace for the outcome of the much-hyped eurozone summit besides the RBI’s policy meeting. Both these key events will have a definite bearing on the sentiment, as will the F&O expiry and corporate earnings.

Next week will be a truncated one due to Diwali holidays. Of course, there will be the special Mahurat session on Diwali.