Weekly Market Commentary - Jul 8 - Jul 12, 2013

The highlight of this week was Fed comments on sustaining its bond purchases, aka stimulus spending until the moment it sees sustainable development in US economy. Markets across Asia and Europe cheered the statements and rallied as reversals of outflows have made their economies even more vulnerable. Indian markets had another reason to cheer as Infosys posted bested the street expectations. Sensex and Nifty ended this week up 2.4% each, while CNX Midcap was up by 1.1%.

Monday - Sensex down by 0.9%, Nifty down by 1.0%, Midcap down by 0.3%
Markets went down as Indian President agreed to passing of controversial Food Bill Ordinance, which provides 2/3rd of Indian population with legal right to cheap food grains. The food bill is expected to dent a big hole in Indian govt budgetary calculations. Strong US dollar on the back of positive US job data also led to rupee breaching 61 mark and causing nervousness among investors.

Tuesday - Sensex up by 0.6%, Nifty up by 0.8%, Midcap up by 0.8%
Investors’ mood turned positive after rupee recovered sharply as RBI and SEBI announced steps to curb currency speculation. Eurozone markets also rallied as Portugal moves closer to political stability and Greece got another bailout approval.

Wednesday - Sensex down by 0.7%, Nifty down by 0.7%, Midcap down by 0.5%
Markets slipped as investors turned cautious ahead of Fed meeting, commencement of earning season and release of a bunch of Indian economic data. Refinery stocks came under pressure as RBI in a bid to curb currency speculation directed all state oil companies to use one single bank for their dollar transaction.

Thursday - Sensex up by 2.0%, Nifty up by 2.0%, Midcap up by 0.7%
Markets regained their bullishness as Fed comments of continuing stimulus bolstered the investor sentiment. The comments allayed the fear of flight of foreign flows from emerging markets in hurry and hopefully will put a brake on it. Bank of Japan also reiterated its stance of keeping its bond purchase program unchanged as per market expectation.

Friday - Sensex up by 1.4%, Nifty up by 1.2%, Midcap up by 0.3%
Markets continue its upward movement as Infosys the leading IT company, announced results that beat market expectation. The company left its FY14 dollar sales growth guidance unchanged at 6-10%, which boosted the investor sentiment. India's trade deficit in June narrowed to $12.24bn from a 7 month high, helped by slowdown in gold imports. Lowering of trade deficit will hopefully provide a cushion to current account balance and rupee also.

Weekly Market Commentary - Jul 1 - Jul 5, 2013

Indian markets have become more sensitive to global and domestic macros rather than stock fundamentals in recent times, which is in fact good news for stock pickers who follow bottom up strategy rather than top down. Sensex ended this week up 0.5%, while Nifty gained 0.4% and CNX Midcap was up by 0.5%.

Monday - Sensex up by 0.9%, Nifty up by 1.0%, Midcap up by 2.3%
Markets continued their bullish momentum from previous week as govt paced up the reforms. The recent gas price hike will attract more investments into country's oil and gas space. Investors are closely watching every govt move and expect more reforms before elections. News of above average monsoon expectations also kept the mood buoyant.

Tuesday - Sensex down by 0.6%, Nifty down by 0.7%, Midcap down by 0.6%
Investors booked profits after 3 days rallies in the stocks. Almost all sectors end up in red. Tata Motors went down 1% after company announced 16.4% fall in domestic sales of Commercial and Passenger vehicles to 48,712 units and 34.2% decline in exports in June 2013 over June 2012.

Wednesday - Sensex down by 1.5%, Nifty down by 1.5%, Midcap down by 2.1%
Markets slipped as rising crude prices and weak rupee brought back the focus on current account deficit. Ouster of Egyptian President Mohammad Morsi and subsequently army coming back to power has raised tension in one of the biggest Middle East countries, which led to increased volatility in crude prices. On the other hand, FIIs continued to offload their rupee assets further deteriorating the rupee exchange rate against the dollar.

Thursday - Sensex up by 1.2%, Nifty up by 1.1%, Midcap up by 0.7%
Investors turned to value buying, as sentiment has turned positive after recent reform announcement. Also, falling rupee has turned investors bullish on IT stocks. Meanwhile, the government on Wednesday finally cleared an ambitious Rs 1.25 lakh crore food security plan, promising subsidized food to two out of every three Indians. The move will help the Congress party gain significant political support in the run-up to the 2014 general election, although it may stretch the government's fiscal deficit. Food bill is expected to increase from 85,000 crores to 1.5 trillion rupees.

Friday - Sensex up by 0.4%, Nifty up by 0.5%, Midcap up by 0.3%
Markets went up globally as central bankers in Europe assured investors that there is no hurry to wind down stimulus. Overall, mood in Indian markets remained positive though FIIs has turned net sellers amid increasing rupee volatility.

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.

Ben Bernanke - Calling early victory?

Market reaction to Fed announcement of reducing easy liquidity it has splashed the markets with, has not come as a surprise to lot of investors. It is the timing, which caught few investors off-guard. US markets are not yet out of the rut, unemployment is still not back to pre-crisis range, business confidence has not improved significantly meaning none of the objectives of the QE has been achieved so far. Investors should keep in mind that Ben's term is getting over in January, and maybe the biggest reason of tapering down of QE is that he does not want to go down in history as the person who threw the world economy into deflation. He does not want to end up like his predecessor Alan Greenspan. Maybe that explains the call for early victory.