Weekly Market Commentary - Oct 21 - Oct 25, 2013

What might appear to be a dull week was actually quite interesting. Sensex tried to regain its old glory by rising within a handshake distance of all time high. In early 2008, when Sensex was at its peak, everybody (almost) believed India could do no wrong. Today investors are more cautious than ever.

Some bulls reason that current rally is sustainable due to good corporate results. This is not true. Markets are rallying as US Fed decided to defer its QE tapering decision and India benefits as it gets its share of global portfolio allocation.

Better than expectations result (was expectations low or results were actually better) helped the bulls find a fundamental story in the yarn they were already weaving.

Anyways, not all sectors have posted good results. Most of the cement stocks, the sector that should be the early riser in case of recovery, posted 50-80% decline in their quarterly profits.

We believe we want to believe.

Sensex lost 1.0%, Nifty lost 0.7% and CNX Midcap was up by 0.3% this week.

Monday – Sensex up by 0.1%, Nifty up by 0.3%, Midcap up by 1.0%
Markets are range bound, as investors get concerned about valuation levels. Easy liquidity flow continued to prop up the market levels.

Tuesday - Sensex down by 0.1%, Nifty flat, Midcap up by 0.4%
Investors continued to stay cautious as global markets wait for release of US jobs data later in the day. Jobs numbers are one of the critical figures, which US Fed looks out for to decide on its tapering plans.

Wednesday – Sensex down by 0.5%, Nifty down by 0.4%, Midcap down by 0.2%
Weak US jobs data firmly pushed expectations for the tapering of Federal Reserve stimulus into next year. Markets opened higher earlier in the day but lost all gains as interest rate sensitive stocks see selling pressure ahead of RBI meeting on Oct 29.

Thursday – Sensex down by 0.2%, Nifty down by 0.2%, Midcap flat
Sensex continues to see resistance as most of the stocks stayed in high valuation range while investor’s fear of another rate hike of 25 bps by RBI led to selling in rate sensitive stocks.

Friday – Sensex down by 0.2%, Nifty down by 0.3%, Midcap down by 1.0%
Sensex ended the day in negative after a brief rally during the day. India’s economic fundamentals do not support the current market levels. Investors continued to book profits in IT companies.