The Indian benchmark indices the Sensex and the Nifty rose 6.45% and 7.32% on a month on month basis and 18.61% and 17.85% on a year on year basis respectively as improving economic conditions coupled with expectations of a BJP led government coming to power in the forthcoming elections cheered the markets. The markets rose to record high levels of 22363.97 and 6702.6 for the Sensex and Nifty respectively in the month of March 2014. The Foreign Institutional Investors (FIIs) were net buyers to the tune of USD 3.3 bn in the Indian equity markets in the month of March 2014.
The economic data that was reported in the month of March 2014 indicated marginal improvement in the economic conditions for the Indian economy. India’s current account deficit (CAD) narrowed sharply to USD 4.2 billion or 0.9% of GDP in Q3 December 2013 from USD 31.9 billion or 6.5% of GDP in Q3 December 2012. CAD in Q3 December 2013 was lower than USD 5.2 billion or 1.2% of GDP in Q2 September 2013. The lower CAD was primarily on account of a decline in the trade deficit as merchandise exports picked up and gold imports moderated. Trade deficit narrowed to USD 8.1 billion in February 2014 as against USD 9.9 billion in January 2014 on faster contraction in imports as compared to exports.
The index of industrial production (IIP) in January 2014 reported growth of 0.1% compared to the previous year. The Wholesale Price Index (WPI) and the Consumer Price Index (CPI) reduced to 4.68% and 8.1% respectively in the month of February 2014 from 5.05% and 8.8% respectively in the previous month. The CPI had reported 10.39% growth levels in the month of March 2013.
The Rupee strengthened by 3.37% against the USD to reach levels below 60 per USD in the month of March 2014 on the back of broad USD weakness and FII inflows in Indian equity markets amounting to USD 3.3 bn. The Rupee still remains 10.34% below from the levels that were seen in the month of March 2013.
China’s benchmark stock market index Shanghai Composite remained flat on a month on month basis but is down 12.59% from levels that were seen in the month of March 2013.
The economy recorded a trade deficit of USD 22.989 bn in the month of February 2014 the highest in the last two years for a country that has been reporting trade surpluses since 1995.
The GDP growth was reported at 1.8% for the fourth quarter ended December 2013 as compared to the previous quarter that had seen a growth of 2.2%. The Annual GDP growth rate was recorded at 7.7% for the year 2013 that was lowest since the year 1999.
People’s Bank of China decided in March 2014 to widen the trading band, allowing the Yuan to fluctuate by 2% from the parity daily, up from the previous 1% target. The decision aims to enable the market to play its roles and make the Yuan a freer currency.
The Indian markets have outperformed and the Chinese markets have underperformed in the pack of emerging market economies. Growth has slowed down for the Chinese economy and expectations of lower corporate profits have dragged stock market indices lower while economic parameters have marginally improved for India with higher expectations of better government policies and higher profit growth after election results has soared stock markets to all time record high levels.
The developed world market indices of the US, Dow Jones Industrial Average and S&P 500 remained flat on a month on month basis and rose 11.97% and 18.42% respectively on a year on year basis while the NASDAQ declined 3.17% in the month of March 2014 and rose 27.21% since March 2013. The Federal Reserve in its monetary policy review in March 2014 reported that it will trim its monthly bond purchases by USD 10 billion to USD 55 billion from the existing USD 65 billion. The Federal Reserve also indicated that it will end its bond-buying program before the end of the year with an interest-rate increase likely to follow after six months thereafter.
The German DAX and the UK FTSE indices for Germany and UK declined 0.78% and 2.69% respectively on a month on month basis due to the ongoing Ukraine crisis. The indices are however up by 22.99% and 3.2% respectively on a year on year basis.