Weekly Market Commentary - Mar 24, 2014 - Mar 28, 2014

Indian markets continued to zoom ahead as its peers in BRIC group faltered. Global investors – in search of better yields, seems to have gone full throttle on India in 2014 due to lack of other potential investment candidates.

Indian rupee has turned around dramatically in past eight months from being the worst performer among emerging market currencies to be the best performer. Strong fund inflows, positive economic data, shrinking current account deficit as well as easing inflation has helped the rupee and equities to move up with vengeance.

 

Problem with Russian equities is quite well known as investors continue to avoid them as global powers call for economic sanctions on the country in aftermath of Crimea annexation.

Brazil is facing somewhat similar political situation as India where current government has disappointed investors with their reforms pace and structure and market is preparing for a potential transition in October elections.

China, on the other hand, is facing prospects of recording its weakest growth since global financial crisis as manufacturing continues to disappoint. China released preliminary March factory survey data on Monday, which showed that manufacturing shrank for the third straight month. This release followed weaker-than-expected industrial output figures for January and February and a shocking fall in exports. Chinese Premier has asked investors to prepare for a wave of bankruptcies in the country.

Sensex ended this week up 2.7% while Nifty was up by 3.1% and Midcap up by 4.4%

Monday - Sensex up by 1.4%, Nifty up by 1.4%, Midcap up by 0.7%
Benchmark indices opened the week in positive territory with banking sector leading the pack. Hope rally continued in the last week of March as investors bet on 3Rs: Reforms, Recovery and RBI.

Tuesday - Sensex and Nifty flat, Midcap up by 0.8%
Markets broadly continued their upward momentum as benchmark indices touch all time highs during the day. Oil and gas stocks corrected a bit as Election Commission took cognizance of issue of gas price hike and asked Centre to defer it.

Wednesday - Sensex up by 0.2%, Nifty up by 0.2%, Midcap up by 0.6%
BSE Sensex continued its record-breaking steak and closed the day at all time high on the back of strong FIIs inflow. Rupee declined a bit as US recovery strengthens and PSU buy USD on behalf of RBI to prop up the reserve levels. However, sustained FII inflow restricted the decline in rupee value. Rupee is trading at its seven month ahead against the dollar.

Thursday - Sensex up by 0.5%, Nifty up by 0.6%, Midcap up by 0.3%
BSE Sensex rose to another record high as banking stocks gain ahead of expected favorable RBI rate policy review on April 1 and expected decision on Base III norm. Street expects RBI to keep the interest rates unchanged in this meeting as inflation and deficit data is in RBI’s comfortable range.

Friday - Sensex up by 0.6%, Nifty up by 0.8%, Midcap up by 1.9%
Key benchmark indices finished the week at record high – fifth consecutive day of record close. Markets continued moving upwards as RBI extended the deadline by another year for banks to implement Basel III capital-raising rules. RBI extended the deadline to Mar 31, 2019 as banks raised concerns on potential stress to asset quality.

Weekly Market Commentary - Mar 17, 2014 - Mar 21, 2014

Indian markets continued to have volatile sessions ahead of Indian elections due to lack of any other strong catalysts. US Federal Reserve attempts to increase short-term interest rates sooner than expected led to markets around the globe moving nervously. Any decline in interest spread between US and emerging markets may lead to decline in potential opportunities for yield-searching investments.

Sensex ended this week down 0.3%, Nifty was down by 0.2% while CNX Midcap was up by 1.3%.

Monday – Markets closed on occasion of Holi

Tuesday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 1.3%
Benchmark indices rose to their records highs but retreated later to settle almost flat. FIIs continue to put money in Indian blue chips ahead of Indian general elections. A small improvement in the industrial output and further lowering of inflation has also added to the positive mood on the street.

Wednesday - Sensex flat, Nifty up by 0.1%, Midcap up by 0.2%
Investor sentiment was subdued ahead of US Fed meeting later in the day. IT major TCS joined Infosys in flagging concerns about revenue growth in near term and indicated that growth could be weaker than previous quarters, which led to some profit booking in IT stocks.

Thursday - Sensex down by 0.4%, Nifty down by 0.6%, Midcap down by 0.8%
Stocks ended lower as Fed chairperson Janet Yellen hinted at raising interest rates sooner than expected and will affect the yield seeking investments. Indian capital goods, financial, auto and all other interest rate sensitive stocks ended the day lower.

Friday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 0.6%
Benchmark indices continued their positive momentum but ended the week only a tad higher on last day of the week.

The biggest risk in life...is not taking one

Hat Tip: Alpha Ideas

So, where are we, again?

Hat tip: The Reformed Broker

So where are we?

Interesting observation from Business Standard on past five year investment cycle in India.

"In the five years since the 2008 Lehman crisis, capital flow in equities and returns have followed a cycle. Immediately after the crisis, investors switched their focus to the domestic demand story, leading to a sharp rally in consumer goods and automobile companies. That story began to wane by early 2012 as the rupee began to depreciate, on account of a rising current account deficit and economic slowdown in India. Export or dollar revenue-driven companies in pharmaceuticals, information technology and some auto makers became the new darlings for equity investors.

The market has completed a full circle. In the past month, money has begun to flow to investment demand-driven stocks in capital goods, construction & infrastructure, real estate and banking, away from export-oriented sectors. The trigger has been an improvement in the current account deficit, rupee appreciation and expectation of a 'market-friendly' government after elections."

Read the full article here: Business Standard

Weekly Market Commentary - Mar 10, 2014 - Mar 14, 2014

Indian markets reported a weekly loss after ending three consecutive weeks in green. As expected, markets continued to stay volatile ahead of the elections, with somewhat positive momentum. It has been almost six months the key benchmark index, sensex trading above 20k level.

RBI review meeting on Apr 1 will be next key catalyst investors are focusing on. If RBI managed to cut rates, we may expect some more rally in cyclical especially banks and capital goods.

Sensex ended this week down 0.5%, Nifty was down by 0.3% while CNX Midcap was down by 0.9%.

Monday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 0.5%
Markets continued their positive momentum and sensex traded above 22,000 level for a while and closing at its new record high. Investors continued to show interest in cyclicals while defensives act as source of funds. Market is expected to stay volatile in days ahead of the election with a focus on economic data release on trade deficit, IIP, CPI and WPI in the near term.

Tuesday - Sensex down by 0.5%, Nifty down by 0.4%, Midcap down by 0.3%
Profit booking across the sector led to benchmark indices losing some ground. The fall in trade deficit failed to bring cheer to the market as the data showed decline in exports. The trade deficit lowered to $8.13bn in Feb, which is lowest in past five months.

Wednesday - Sensex up by 0.1%, Nifty up by 0.1%, Midcap down by 0.4%
Markets closed at almost flat as investors keenly await inflation data release. Inflation and industrial output data are key determinants of RBI interest rate policy that will be up for discussion on April 1.

Thursday - Sensex down by 0.4%, Nifty down by 0.4%, Midcap down by 0.7%
Benchmark indices climbed to their highs as govt releases inflation stats. Feb WPI inflation declined to 4.68% vs. 5.05% in Jan due to fall in vegetable and fuel prices. However, markets quickly gave up their gains as IT stocks declined after Infosys painted beak future of its business outlook. China’s missing of its industrial growth and retail sales target also add to the selling pressure in the markets.

Friday - Sensex up by 0.2%, Nifty up by 0.2%, Midcap flat
Indian markets traded weaker during most of the day like their asian and European counterparts on fears that China may be slowing down and standoff on Ukrain may continue or even escalate. But value buying in key sensex and nifty stocks during the end of the day led the benchmark indices closing in the green.

Dilbert on Fund raising

Weekly Market Commentary - Mar 3, 2014 - Mar 7, 2014

Both Sensex and Nifty ended this week at record all time highs. Investors, both domestic and foreign, are rushing in Indian markets to position themselves to benefit from an expected favorable election outcome. As I mentioned in my previous post, that favorable outcome is formation of stable NDA govt at the centre. With Congress losing its fight to retain prominence and AAP continues to use reality TV gimmicks to attract voters, NDA stock continues to rise.

As far as economics is concerned -- With India outperforming most of its emerging market peers in Feb, inflation declining, deficit numbers at four-year low and GDP growth bottoming out, India is definitely at a sweet spot.

Markets are expected to remain volatile in near term, as some people will book profits as markets rise while others will position themselves to benefit in a pre-election rally.

Sensex ended this week up 3.8%, Nifty was up by 4.0% while CNX Midcap was up by 4.1%.

Monday - Sensex down by 0.8%, Nifty down by 0.9%, Midcap down by 0.4%
War mongering in Ukraine sent investors’ mood around the world rolling down. World leaders unite in censuring the Russia’s move to send the forces in Crimea. Gold went up as fear and uncertainty rose. Indian markets ignored the improvement in HSBC PMI index – 52.5 in Feb vs. 51.4 in Jan, which indicated strongest manufacturing growth in last 12 months.

Tuesday - Sensex up by 1.3%, Nifty up by 1.2%, Midcap up by 1.3%
Benchmark indices bounced to their five-week highs as Russian President called back its troops back to their bases. Almost all sectoral indices ended up in green with cyclical leading the rally.

Wednesday - Sensex up by 0.3%, Nifty up by 0.5%, Midcap up by 1.4%
Markets continued their upward momentum. The benchmark Sensex closed just around 100 points away from its previous all time high. Investors have turned bullish ahead of general elections and have largely ignored the weakness in European markets.

Thursday - Sensex up by 1.1%, Nifty up by 1.1%, Midcap up by 1.4%
Benchmark indices soared past their earlier peak and set new record highs on the back of strong bullish investor sentiment as current account deficit numbers came at four-year low. With December CAD at 0.9% of GDP, exports picking up and gold imports subdued market is hopeful that the rupee will get a boost and FII inflows will increase.

Friday - Sensex up by 1.9%, Nifty up by 2.0%, Midcap up by 0.4%
Markets extended their winning streak and ended the week with all time record highs on the back of lower CAD numbers and increased fund flows from both domestic and foreign investors. Almost all indices ended the week in green barring IT and healthcare as investors churn their portfolios from export driven to domestic cyclical stories.

Bubble Trouble

The best way to spot a bubble is when everyone and his uncle start trading investment tips and predicting the next sensex or nifty level. We faced such times during late 2007-early 2008 duration. It seems everyone was on the bandwagon and was busy discussing Reliance Power IPO.

I present a chart below which shows that Indian markets are still far away from attracting volumes and interests they generated during 2007 bubble phase.

When indices makes new highs on the back of lower volumes, it is generally due to more institutional investment in high value stocks. Maybe that's why CNX Midcap is still far away from its record highs.

Time will only tell whether this rally has more legs.

Weekly Market Commentary - Feb 24, 2014 - Feb 28, 2014

If one goes by the direction of the market, it seems that nation (investor populace mostly) has already made up its mind regarding the outcome of Lok Sabha elections. Continuous upward momentum indicates the increasing expectations of a stable NDA government in the centre. NDA govt is widely expected to undo the decade of policy paralysis and junking of pro-growth model of development and replace it with one with more pro-market flavor.

Sensex ended this week up 2.0%, Nifty was up by 1.4% while CNX Midcap was up by 1.8%.

Monday - Sensex up by 0.5%, Nifty up by 0.9%, Midcap up by 0.4%
Markets continued to move up as buying interest emerged in capital goods and banking sector stocks on the back of favorable policy measures and reduced deficit numbers announcements by outgoing UPA govt.

Tuesday - Sensex up by 0.2%, Nifty up by 0.4%, Midcap up by 0.1%
Benchmark indices were able to hold ground after a volatile session as F&O contracts near their expiry on coming Wednesday. The optimism about US recovery led to higher closing of IT stocks.

Wednesday - Sensex up by 0.6%, Nifty down by 1.0%, Midcap up by 0.2%
Sensex regained 21,000 mark as foreign funds continued to flow in Indian equities. Stocks also gained as traders due to short covering on F&O expiry day.

Thursday – Exchanges closed on Maha Shivratri

Friday - Sensex up by 0.6%, Nifty up by 1.1%, Midcap up by 1.2%
Markets closed higher ahead of GDP data release for quarter ending December. A Bloomberg poll showed the growth expectations to be 4.7% as against 4.8% in September quarter. Mood was also positive as Fed Chairperson Janet Yellen indicated that Fed would continue its tapering program in a measured way.