The Sensex and the Nifty gained 2.69% and 2.75% to cross the 20,000 and 6,000 levels respectively on account of an eventful week that saw the Fed take no action on the withdrawal of stimulus and the RBI announcing a slew of measures to tackle inflation in the economy and ease liquidity in the monetary system. The RBI increased the repo rate by 25 basis points (bps) to 7.5% from 7.25%, lowered the Marginal Standing Facility (MSF) rate by 75 bps to 9.5% from 10.25% and rolled back the daily Cash Reserve Ratio (CRR) maintenance of banks from 99% to 95% of the daily requirement.
The Wholesale Price Index (WPI) inflation was reported at 6.1% in the month of August 2013 against 5.79% seen in the month of July 2013. The food inflation was reported at 18.2% in August 2013 against 11.9% in July 2013, fuel inflation remained flat at 11.3% in August 2013 and the manufactured products inflation came in at 1.9% in August 2013 compared to 2.8% in the month of July 2013. The June WPI inflation was revised upwards to 5.16% from the earlier 4.86%. The increase in repo rate signals that RBI is not comfortable with the inflation levels.
The Federal Reserve in its policy meeting on 18th September 2013 decided to continue with its USD 85 billion bond purchases every month indicating no early withdrawal of the stimulus for the US economy. The Fed revised its estimates for the 2013 GDP growth to 2.0% – 2.3% from the earlier 2.3% – 2.6%.The US economic data showed Jobless Claims at 3,09,000 in the week previous to last, compared to the revised estimates of 2,94,000 in the first week of September 2013. The Dow Jones Industrial Average and the NASDAQ rose 0.49% and 1.42% respectively on a week on week basis. The USD Index declined 1.25% to 80.43 from 81.45 and the Euro strengthened by 1.73% to USD 1.352 per Euro.
The emerging market economies witnessed an inflow of funds with FIIs buying heavily in the last week. FII buying of Indian equities took up the INR by 1.92% to Rs.62.27 per USD.
Crude oil and gold prices declined by 2.22% and 0.08% to USD 109.22 /bbl and USD 1325 /Oz respectively on a week on week basis due to ease in geopolitical tensions in Syria. The decision to carry on with the bond purchases by the Fed supported recovery in the price of gold. Gold prices are now expected to remain firm till the Fed decides to withdraw the stimulus for the US economy.
The equity derivatives market saw fall in open interest in Nifty Index futures by 13.82% while implied volatility of Nifty index options decreased week on week. FIIs were net buyers to the tune of Rs.4669 crores in the equity market in the last week. Domestic Institutional Investors were net sellers to the tune of Rs.4055 crores in the equity market in the last week.
Industry and Stock Specific Trends
The sectoral indices increased last week with only the S&P BSE IT index closing flat with a 0.1% gain on a week on week basis. S&P BSE Bankex, PSU, Auto and Oil and Gas indices increased 4.98%, 2.34%, 2.37% and 1.97% respectively in the last week.
S&P BSE Bankex recovered lost ground due to heavy buying by the FIIs post Fed policy but lost momentum after the announcement of the RBI policy. Other indices also recovered on similar lines but with less gains.
Maruti Suzuki Ltd. rose 11% to Rs.1466 in the last week. Yes Bank rose 26.71% to lead the recovery in bank stocks and GMR Infrastructure rose 21.29% on account of the changes in management last week.
Financial Technologies was once again on the losing side with the stock down 19.92% in the last week due to the National Spot Exchange Limited (NSEL) issue.
Table 1. Weekly Market Movement
Table 2. Weekly Gainers and Losers