The comments of the incoming Fed Governor Janet Yellen on the need to continue with stimulus to the US economy will help drive markets higher going forward. Global equities rallied with US indices touching record highs on the back of Yellen’s comments. RBI too calmed markets by stating that current account deficit will be lower by 30% in this fiscal compared to the last fiscal. The central bank played down rising inflation in the economy by suggesting that vegetable prices should come down in the coming months. Sensex, Nifty and the Indian Rupee will benefit from the Fed and RBI comments.
The Sensex and the Nifty declined 1.29% and 1.38% respectively in the last week on account of domestic and global factors. Positive economic data from the US led to concerns over taper of stimulus by the Federal Reserve and mixed economic data on the domestic front marginally dragged the indices lower after reaching record highs in the week previous to last. The trade deficit narrowed and inflation rose significantly for the Indian economy in the month of October 2013.
The trade deficit narrowed to USD 10.55 billion in the month of October 2013 compared to a deficit of USD 20.21 billion in October 2012. Exports reported a growth of 13.47% to USD 27.27 billion and Imports declined 14.5% to USD 37.82 billion on a year on year basis in October 2013.
The Consumer Price Index (CPI) and the Wholesale Price Index (WPI) increased to 10.09% and 7% respectively in the month of October 2013. The CPI and WPI inflation was at 9.84% and 6.99% (revised from 6.1%) respectively for the month of September 2013. Food inflation rose 12.56% in case of CPI and 18.19% in case of WPI on a year on year basis for the month of October 2013.
Economic data surprised as the US economy reported 2,04,000 job additions in October 2013 compared to a revised 1,63,000 additions in September 2013. The positive job additions data led to speculation about reduction in the stimulus by the Fed for the US economy. Statements by the Fed officials later indicated that the stimulus would be continued till growth is seen to be consistent and strong in the US economy. The Jobless Claims were reported at 3,39,000 for the previous week compared to a revised 3,41,000 for the week previous to last. The Dow Jones Industrial Average rose 1.27% and NASDAQ rose 1.81% on a week on week basis.
Crude oil prices rose 3.25% to USD 108.54 /bbl and gold prices remained flat at USD 1288 /Oz on a week on week basis.
The equity derivatives market saw fall in open interest in Nifty Index futures by 11.53% while implied volatility of Nifty index options decreased week on week. FIIs were net buyers to the tune of Rs.1042 crores in the equity market in the last week. Domestic Institutional Investors were net sellers to the tune of Rs.2317 crores in the equity market in the last week.
Industry and Stock Specific trends
The Index of Industrial Production (IIP) rose 2% in the month of September 2013 compared to a growth of 0.4% in the month of August 2013. The main contribution came from Electricity generation that increased 12.9% in September 2013. The industrial production growth for August 2013 was revised downwards to 0.4% from the earlier 0.6%.
The sectoral indices declined last week with only the S&P BSE Auto index closing positive with a marginal 0.41% increase on a week on week basis. S&P BSE IT, Bankex, PSU and Oil and Gas indices declined 1.16%, 1.06%, 2.43% and 2.48% respectively in the last week.
ONGC stock declined 2.56% to Rs.270 in the last week as the company’s net profit rose 2.83% to Rs.6064 crores with a 9.69% growth in revenues to Rs.23897 crores on a year on year basis for Q2FY14.
Coal India stock declined 5.89% to Rs.274 in the last week as the company’s net profit declined 0.83% to Rs.3052 crores with a 5.57% growth in revenues to Rs.17594 crores on a year on year basis for Q2FY14.
Tata Steel stock rose 5.54% to Rs.375 as the company reported a net profit of Rs.917 crores in Q2FY14 against a loss of Rs.364 crores in Q2FY13.
Cipla stock declined 4.47% to Rs.403 as the company reported a decline of 26.6% net profit to Rs.358 crores with a 14% growth in revenues to Rs.2463 crores on a year on year basis in Q2FY14.
M&M stock rose 5.27% to Rs.925 as the company reported a 4.63% increase in net profit to Rs.836 crores with a 4% rise in revenues to Rs.18675 crores on a year on year basis for Q2FY14.
Table 1. Weekly Market Movement
Table 2. Weekly Gainers and Losers