Weekly Market Commentary - June 30, 2014 - July 04, 2014

Sensex ended this week up by 3.4% while Nifty was up by 3.2% and Midcap up by 5.2%

Monday - Sensex up by 1.3%, Nifty up by 1.4%, Midcap up by 2.2%
Markets closed the first quarter of fiscal year 2015 with a 13.5% gain, recording the best quarterly gain for Sensex since second quarter of FY2010. All recent gains made by the stock markets are attributed to Narendra Modi led BJP govt with its economic reform agenda coming into power.

Tuesday - Sensex up by 0.4%, Nifty up by 0.3%, Midcap up by 0.6%
Sensex and Nifty rose again as auto companies such as Maruti Suzuki India surged after reporting stronger monthly sales. HSBC also released its PMI index data that indicated slight gain to 51.5 in June from 51.4 in May.

Wednesday - Sensex up by 1.3%, Nifty up by 1.2%, Midcap up by 1.6%
Both Sensex and Nifty surged again after FM called for more fiscal prudence and warned against mindless populism. FM tried to reinstall the confidence in his govt with a reminder that inflation and high fiscal deficits are his main targets and challenges.

Thursday - Sensex down by 0.1%, Nifty down by 0.1%, Midcap up by 0.1%
Markets took a breather after four consecutive closing in green. Both Sensex and Nifty declined slightly with a technical snag on BSE halting the trading for three hours.

Friday - Sensex up by 0.5%, Nifty up by 0.5%, Midcap up by 0.5%
Markets ended this week in positive territory as investors brace for budget session on July 10. Lot of money – both domestic and foreign is riding on the expectations that PM and FM will deliver a credible and fiscally prudent budget and will have catalysts to revive the Indian economy.

Weekly Market Commentary - June 16, 2014 - June 20, 2014

According to the Ministry of Oil and Natural Gas, India imported about 13% of its crude oil requirements from Iraq last year and this year was planning to take that figure to 20%. Iraq is the second largest crude producer in the OPEC group. With only half of the supplies covered so far, India has to rush to other players to secure oil – likely at higher prices now. According to one govt. estimate, oil price can rise to $120 per barrel for several months and may hit the govt. budget by atleast $3.3bn.

Sensex ended this week down by 0.5% while Nifty was down by 0.4% and Midcap down by 0.7%

Monday - Sensex down by 0.1%, Nifty down by 0.1%, Midcap up by 0.4%
Sensex and Nifty continue to trade lower as Iraq crisis weigh on investor’s mind. Brent rose to $113 per barrel, a nine-month high as ISIS strengthens its position in Iraq. Rise in crude prices coupled with weak monsoon can spell trouble for India. WPI for May came in about 6% - five month high due to higher food and fuel costs.

Tuesday - Sensex up by 1.3%, Nifty up by 1.3%, Midcap up by 1.3%
While rising oil prices has put Indian finance ministry in a difficult position, such is not the case with oil and gas companies. Indian upstream sector gained as investors lapped up shares on expectations of margin expansion. Sentiment on the street remained positive with investors buying in every decline.

Wednesday - Sensex down by 1.1%, Nifty down by 1.0%, Midcap down by 0.9%
Rising crude prices seems to make everybody apart from upstream companies very nervous. Sensex and Nifty slumped again as rising crude prices raised concerns about higher inflation and govt.’s finances. Rising crude prices have also hushed the chatter about interest rate cuts.

Thursday - Sensex down by 0.2%, Nifty down by 0.2%, Midcap down by 0.7%
Oil and Gas stocks slumped on concerns that India may allow higher gas prices only for incremental output from existing fields. Brent crude also hit a further high of $115 per barrel as fighting intensifies in Iraq.

Friday - Sensex down by 0.4%, Nifty down by 0.4%, Midcap down by 0.7%
Sensex and Nifty continued to trade lower as investors continued to focus on Iraq issue in short term. Market is expecting major reforms in the first budget of Modi govt. but situation in Iraq has made things little difficult with rising crude prices feeding into higher inflation and deficits.

Weekly Market Commentary - May 19, 2014 - May 23, 2014

As dust settles on election results, investors now keenly wait for the formation of new government structure, which PM elect Narendra Modi has indicated would be small and compact. Investors are all excited and the sentiment on the street is quite bullish – midcap gained more than 10% this week, largely due to strong performance from domestics. Also, see this chart.

Modi will take the oath of PM office on Monday along with his cabinet (hopefully) and we may see return of Arun Shourie to mainstream politics. He was widely known for his portfolio of disinvestment minister – when he ushered in slashing govt stakes from key companies in a bid to make them less bureaucratic, less corrupt and more competitive and efficient.

There are huge expectations with new govt, which has won this election on the agenda of development and reforms. A Reuters report cited this week that finance ministry is working on a proposal to cut welfare spending and reining in fiscal deficit to 3.8-3.9% of GDP in its first budget – hopefully will be presented in July. In my view, it is a prudent step – not only it will make govt. more fiscally responsible, it will also have a long-term impact on inflation.

Sensex ended this week up by 2.4% while Nifty was up by 2.3% and Midcap up by 10.2%

Monday - Sensex up by 1.0%, Nifty up by 0.8%, Midcap up by 4.4%
Markets continued their journey upwards, with Sensex and Nifty on their record-breaking spree. The domestics remained the central attraction to investors and sustained their rally. Gains were capped with exporters such as IT majors and pharma falling as rupee strengthened against the dollar.

Tuesday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 1.0%
Strong performance by domestics and midcaps continued as cabinet formation days draws nearer.

Wednesday - Sensex down by 0.3%, Nifty down by 0.3%, Midcap up by 0.7%
Finally, benchmark indices took some breather as blue chips such as L&T retreated from recent strong gains a day after foreign investors turned net sellers for the first time in about a month.

Thursday - Sensex up by 0.3%, Nifty up by 0.3%, Midcap up by 1.7%
Expectations that Coal India might get split into smaller companies, led to a rally in the stock. The Nifty closed at a record high as investors resumed buying stocks of companies expected to benefit from an economic recovery. Titan surged after RBI allowed banks to provide gold loans to jewellery makers.

Friday - Sensex up by 1.3%, Nifty up by 1.2%, Midcap up by 2.0%
Markets rallied after SBI surged 10% after reporting decline in bad loans indicating worse may be over for banking sector in terms of asset quality. There was some rally in power stocks in expectations of reform measure from incoming government.

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.

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

Markets cheered the vote-on-account. Some investors appreciated the excise duty cuts meant to boost the auto, manufacturing and capital goods sectors, while others celebrated FM meeting his fiscal deficit target of 4.8%. In fact, he has done better and achieved fiscal deficit of 4.6%. Sensex ended the week 300 points up.

However, if we look closely to the vote-on-account statements, we will observe that a lot of accounting talent has been put to use to fudge the numbers to meet the above target. FM postponed the subsidies; recorded revenues in advance; coaxed public sector companies like Coal India and few PSU banks into paying special dividends - harming the interest of their minority shareholders; moved money from one public company to another as in the case of IOC, where ONGC and Oil India will buy stake from govt.

Govt accounting has made Enron look good. Incoming govt will have an uphill task in getting the fiscal house in order.

Sensex ended this week up 1.6%, Nifty was up by 1.8% while CNX Midcap was up by 2.1%.

Monday – Sensex up by 0.5%, Nifty up by 0.4%, Midcap up by 0.1%
Markets recovered their lost ground during the closing as some buying emerged as air around the interim budget cleared. Govt move to reduce excise duty from 12% to 8% for small cars, bikes; from 30% to 24% for SUVs and; from 24% to 20% for mid segment cars came as a huge relief to reeling auto sector. Govt also reduce the excise duty for capital goods and consumer durables by 200 bps to provide a fillip to ailing manufacturing sector. FM’s accounting jugglery to meet fiscal deficit target helped India to escape the danger of rating cut from premier rating agencies.

Tuesday - Sensex up by 0.8%, Nifty up by 0.9%, Midcap up by 0.9%
Markets went up as the optimism from govt move to avoid the populism and provide a boost to certain sectors in the form of excise duty cuts improved the investor confidence. Banking sector stocks led the rally as expectations of turnaround in economy led to rise in expectations of more lending.

Wednesday – Sensex up by 0.4%, Nifty up by 0.4%, Midcap up by 0.6%
Benchmark indices continued to be buoyed by positive sentiment generated by vote-on-account. The gains were mainly on the back of overnight gains in the US market and sustained capital inflows from foreign funds.

Thursday – Sensex down by 0.9%, Nifty down by 1.0%, Midcap down by 0.2%
Market had a pullback as China reported weak manufacturing data and US maintained its stand of tapering of quantitative easing.

Friday – Sensex up by 0.8%, Nifty up by 1.1%, Midcap up by 0.8%
Stocks went up as US factory activity accelerated at its fastest pace in four years in February leading to rise in firming up of all Asian markets.