The Sensex and the Nifty rose 2.48% and 2.64% respectively with the Sensex closing at record high levels and the Nifty at a 3 year high in the last week. The RBI monetary policy was the highlight of the week that saw a hike of 25 basis points (bps) in the repo rate under the Liquidity Adjustment Facility (LAF) to 7.75% and a reduction of 25 bps under the Marginal Standing Facility (MSF) from 9% to 8.75% with an immediate effect. The hike in repo rate under LAF that was on the expected grounds is a measure that is implemented to curb inflationary pressures and the reduction in the MSF rate is a measure implemented to improve liquidity in the banking system to stimulate economic growth. The interest rate corridor has now been realigned to the normal monetary policy operations and further efforts would be more focussed on mobilisation of deposits for banks.
US benchmark indices posted positive marginal gains on account of encouraging economic data that was reported last week. The industrial production rose 0.6% in September 2013 compared to 0.4% growth in August 2013. The Purchasing Manager’s Index (PMI) was reported at 51.8 for the month of October 2013 compared to 52.8 for the month of September 2013. The jobless claims for the previous week were reported at 3,40,000, which is below the week before last numbers of 3,50,000. The Dow Jones Industrial Average rose marginally by 0.3% and NASDAQ declined 0.53% on a week on week basis.
The PMI for China was reported at an 18 month high of 51.4 in October 2013 compared to 51.1 in the month of September 2013. The data confirms to a rise in economic activity for the country with an optimistic expectation about a sustained growth in the immediate future. The benchmark indices Hang Seng and Shanghai Composite rose 2.43% and 0.8% respectively last week on positive expectations about manufacturing growth in China.
The major currencies depreciated against the USD. The Euro declined 2.32% against the USD to 1.348 USD per Euro and Japanese Yen declined 1.28% on a week on week basis. The US Dollar Index strengthened 1.91% to 80.72 on a week on week basis. The Euro declined on the back of weak economic numbers in the Eurozone that saw unemployment rate at record high levels and inflation trending down on lack of demand in the economy.
Crude oil prices declined 0.93% to USD 106 /bbl and gold prices declined 2.59% to USD 1316 /Oz on a week on week basis. Gold prices declined as positive economic data in the US economy gave way to speculation that the Fed might reduce the stimulus in monthly asset purchases earlier than expected.
The equity derivatives market saw rise in open interest in Nifty Index futures by 43.25% while implied volatility of Nifty index options decreased week on week. FIIs were net buyers to the tune of Rs.5395 crores in the equity market in the last week. Domestic Institutional Investors were net sellers to the tune of Rs.3267 crores in the equity market in the last week.
Industry and Stock Specific trends
The sectoral indices gained significantly last week with only the S&P BSE IT index closing flat with a 0.07% decline on a week on week basis. S&P BSE Auto, Bankex, PSU and Oil and Gas indices gained 3.69%, 6.67%, 4.41% and 2.27% respectively in the last week.
Stock of Maruti Suzuki Ltd. rose 8.56% to Rs.1636 with the net profit of the company for Q2FY14 increasing by 6% on a sequential quarter on quarter basis to Rs.670 crores due to INR depreciation, higher localization and cost reduction measures. The total income increased 2.25% to Rs.10,468 crores on a sequential quarter on quarter basis. The company sold a total of 1.05 lakh vehicles and exports increased 27% year on year to 9025 vehicles in October 2013.
Mahindra and Mahindra stock rose 6.6% to Rs.925 after it reported a robust increase in tractor sales on a year on year basis and a marginal decline in the automobile sales for the month of October 2013.
Sesa Sterlite stock rose 2.15% to Rs.207 as the company reported a 358.65% increase in the net profit to Rs.2394 crores with a total income of Rs.26,266 crores attributed to the restructuring of the businesses.
Dr. Reddy’s Laboratories stock rose 2.78% to Rs.2471 as the net profit of the company increased 76% to Rs.690 crores with a 17% increase in the total income to Rs.3358 crores in Q2FY14 on a year on year basis.
Table 1. Weekly Market Movement
Table 2. Weekly Gainers and Losers