Weekly Market Commentary - Dec 9 - Dec 13, 2013

As political events have turned very exciting in the country, it is the boring economics that made investors realize that it cannot remain sidelined for long. This week as investors’ sentiment over exit polls reached a climax in the state election results, markets touch their all time high on first trading session of the week. However, as the reality of the day set in, inflation blew out all the air out of the election bubble.

Sensex fell 1.3%; Nifty lost 1.5% while CNX Midcap was down by 2.1% this week.

Monday – Sensex up by 1.6%, Nifty up by 1.7%, Midcap up by 1.0%
Sensex touched a new high as market momentum built up by the exit polls continued. The main opposition and business friendly party BJP win a clear mandate in three out of four state elections strengthening its electoral prospects and chances of forming a government in the centre in May.

Tuesday - Sensex down by 0.3%, Nifty down by 0.5%, Midcap down by 0.5%
Markets saw some profit booking while new draft regulation from CERC led a major blow to NTPC earnings. NTPC went down by 11% as under new guidelines that are going to implement from April 2014, has kept RoE as the method of calculating incentives but has done some tightening on taxation and expenses front making it difficult for players like NTPC and PGCIL to maintain their current profitability.

Wednesday – Sensex down by 0.4%, Nifty down by 0.4%, Midcap down by 0.6%
Markets opened lower as weak global sentiment weighed heavily on domestic trading, but good news on CAD front led indices recoup some of their losses. India managed to lower its current account deficit as exports grew by 5.86% in November while imports dip to their two and a half year low following steep decline in gold imports. India’s CAD now stands at $9.22bn as against $17.2bn previous month.

Thursday – Sensex down by 1.2%, Nifty down by 1.1%, Midcap down by 0.6%
Markets were under selling pressure ahead of release of CPI and IIP numbers. Street estimates IIP numbers are going to signal contraction in the economy while CPI numbers will stick in 10% range prompting RBI governor to raise rates.

Friday – Sensex down by 1.0%, Nifty down by 1.1%, Midcap down by 1.4%
Worse than expected CPI numbers took its toll on the Indian markets when it recorded its biggest weekly fall. CPI for November came at 11.24% vs. street estimates of 10% range raising the fear of increase in interest rates. Street is now estimating a 25bps hike in interest rates on Dec 18. The market has pared all gains made on Monday after state elections results announcement.

Weekly Market Commentary - Jun 24 - Jun 28, 2013

There is a thing with democracies. They squabble over issues/decisions, slows down progress, are mostly unable to reap the benefits of good times and sometimes take action to soothe one interest group which works as detrimental to rest of the country, before realizing it is too late. More often than not, reforms happened with the gun pointing at their head. It was balance of payment crisis in 1991, this time rising deficits and sliding rupee did the trick. Govt finally got its act together and bite the bullet over gas pricing. The war is not yet over as markets are looking at rising external debt. 44% of total external debt is maturing in the next one year which, if not restructured, will eat into 59% of total foreign exchange reserve country has. Chart below, from Livemint, illustrates the situation better.

Sensex ended this week up 3.3%, while Nifty gained 3.1% and CNX Midcap was up by meagre 0.3%.

Monday - Sensex down by 1.2%, Nifty down by 1.4%, Midcap down by 2.6%
Market extended their losses from previous week as the global stocks continue to slid post Fed announcement of curtailing its bond buying program. Market seems to be ignoring the ifs and buts in the announcement and is running havoc with no plan in sight. Markets were also nervous when Chinese central bank made comments to the effect that liquidity in the system is reasonable, when China is facing liquidity squeeze. Central bank suggested fine tuning the system, which market assumed as reducing liquidity. Shanghai went down more than 5%.

Indian markets mirroring their global peers, are also under pressure due to rising CAD worries and fall in currency value. Brokers are of the view that FIIs have sold over $5 billion of debt and equities in June so far.

Tuesday - Sensex up by 0.5%, Nifty up by 0.3%, Midcap down by 0.6%
The Indian stocks went up in early trade as China tries to soothe investors’ nerves, short covering as F&O expiry nears. Markets also bought oil and gas stocks ahead of pending decision on gas price revision. Gas price were supposed to be revised previous week itself but the decision was deferred as Oil Minister was out for an official tour.

Wednesday - Sensex down by 0.4%, Nifty down by 0.4%, Midcap down by 0.0%
The Chinese central bank move to provide liquidity to some parts of its financial system to stabilize money market rates cheered the global market. Indian markets had a rangebound session as good news from China, short covering due to nearing F&O expiry was completely offset by rupee playing a spoilsport sliding below 60/$ level.

Thursday - Sensex up by 1.7%, Nifty up by 1.7%, Midcap up by 0.7%
Sensex and Nifty rallied as investors cheered the downward revision on US GDP data from 2.4% to 1.8%, which eased the concerns of reduced Fed spending. RBI also took advantage of this news and advanced its release of CAD data by one day. India's March quarter CAD came at $18.1 billion, 3.6% of GDP vs. consensus estimate of $21.7 billion or 4.4% of GDP. Corresponding figure for December quarter was 6.7%. The FY13 CAD stood at $88.2 billion and the Q4 Balance of Payments (BoP) stood at a surplus of $300 billion versus a $600 billion deficit year-on-year. Short coverings on the last expiry day of June series also buoyed the market.

Friday - Sensex up by 2.8%, Nifty up by 2.8%, Midcap up by 2.9%
Indian markets rallied as govt got its act together and approved doubling of gas prices from current $4.2/mmbtu to $8.4/mmbtu. The gas price decision was in limbo for several months now as various govt ministries, such as fertilizer, power and oil quarrel over the impact on their respective sectors. This decision was in tandem with the recent approval to power producers to pass on the imported coal cost to the consumers. The new gas pricing will get into force from April 1, 2014 and will work to attract investments in the sector as it makes several projects, big or small, across the country even more economical.

Rupee also rebounded to 59 levels after govt announced reforms to attract investments in the country and reduce country's dependence on imported gas (fuel). Govt has also initiated towards setting up of a coal regulator to settle disputed over quality and quantity of coal sold in the Indian markets. The poor quality of coal has led to squabbling between the country's premier energy producer NTPC and largest coal producer Coal India.