Markets were focusing on RBI actions, Fed comments on the macro front, while company's results and inflation numbers were eyed closely on the street. Sensex and Nifty ended this week up by 1.0% 0.3% respectively, while CNX Midcap was down by 0.7%.
Monday - Sensex up by 0.4%, Nifty up by 0.4%, Midcap up by 1.2%
Indian markets continued its upward movement for third consecutive day as inflation numbers released on Friday came within the markets’ expectation and comfort zone of RBI. WPI gain for June was 4.86%, slightly higher than May figure of 4.7%. CPI climbed to 9.87% in June from 9.31% in May.
This upward movement in inflation numbers has increased the problems for RBI, which is facing a dilemma of whether announcing a rate cut to stimulate investments, which may lead to more inflation, or go for a rate hike to help falling rupee, which will lower import cost and hence inflation. We will get to see what RBI does on July 30. My bet is small changes in the underlying rates, or there might be a cut in CRR.
Asian markets were up largely owing to release of Chinese GDP data that matched the forecast of 7.5%.
Tuesday - Sensex down by 0.9%, Nifty down by 1.3%, Midcap down by 1.3%
RBI went undercover (sort of) yesterday evening and increased the marginal borrowing rates for banks by 2% from 8.25% to 10.25% through Marginal Standing Facility (MSF). RBI, in its attempt to halt the declining rupee is trying every trick in trade available to it, led to sell off in the markets as borrowing became more expensive. RBI’s belief that excessive liquidity in the system is leading to rupee volatility also hurts the rate cut expectations.
Wednesday - Sensex up by 0.5%, Nifty up by 0.3%, Midcap down by 0.8%
Mixed day for markets as investors sentiment got a boost as govt gave a green signal to FDI in almost a dozen sector, including telecom and defence sector. Global sentiment was little cautious ahead of Fed meeting where all eyes were on Fed comments on timing of their plan of cutting down on bond purchases. Investors also focused on value picking the FMCG stocks while avoiding the banks and other interest rate sensitive space. Street was not very happy with HDFC Bank results, as its net profit grew by 30% y-o-y but gross NPA levels increased to 16% q-o-q indicating stress on their balance sheet. Stock went down 2.4%.
Thursday - Sensex up by 0.9%, Nifty up by 1.1%, Midcap up by 1.0%
Markets went up further after Fed comments on being flexible about the timing of cut in stimulus spending boosted the sentiments. Global markets went up largely as Fed suggests that it may not be too aggressive with tapering plans and will depend upon the performance of underlying economy.
Friday - Sensex up by 0.1%, Nifty down by 0.1%, Midcap down by 0.8%
The mood stayed positive for second consecutive day boosted by Fed comments. Bank stocks continued to face volatility as market is concerned about RBI current stance of monetary tightening. Street is worried that instead of rate cut may raise CRR. IT major TCS rallied by 5%, as it beat the street expectation of revenue growth while sustaining its margins, which reflect strong account management and execution capabilities.
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