Weekly Market Commentary - Oct 28 - Nov 1, 2013

Growing inflation, rising NPAs, deteriorating governance and still here we are at record high Sensex. As we all know, this rally is liquidity driven and this liquidity will not stop flowing until March next year. At least that is what street was expecting. I feel unless the rally spreads to midcaps and small caps (as the chart below suggests it hasn’t) it can’t be relied upon and can fizzle out anytime in next two quarters. It is advisable that investors book profits in the names, which have rallied beyond what their fundamentals would suggest.

Sensex gained 2.5%, Nifty gained 2.6% and CNX Midcap was up by 3.5% this week.

Monday – Sensex down by 0.5%, Nifty down by 0.7%, Midcap down by 0.8%
Markets were little jittery ahead of RBI monetary policy review meeting on Tuesday. A 25 bps repo rate hike is widely expected on the street. Fed is also scheduled to meet on Tuesday to discuss their tapering plans.

Tuesday - Sensex up by 1.7%, Nifty up by 2.0%, Midcap up by 1.5%
Markets went up as RBI actions were in line with what street was expecting. RBI raised the repo rate by 25 bps while cutting down the MSF rate by the same amount, thereby bringing the difference between them back to normal 100 bps. Mood was also bullish due to Fed’s decision of keeping their liquidity taps open and short coverings ahead of derivative expiry on Thursday.

Wednesday – Sensex up by 0.5%, Nifty up by 0.5%, Midcap up by 0.1%
Markets continued their momentum from previous day but were largely volatile ahead of F&O expiry next day.

Thursday – Sensex up by 0.6%, Nifty up by 0.8%, Midcap up by 1.5%
Sensex rose to its all time high amidst the sustained buying from institutional investors who ignored the latest Fed pronouncement of stopping the QE sooner than expected. As of now, market is factoring tapering to begin in March next year.

Friday – Sensex up by 0.2%, Nifty up by 0.1%, Midcap up by 1.2%
Strong support from FIIs and Fed’s decision to continue its QE program for now continued to take Sensex to a new high.

A very Happy Diwali to all

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.

Keynes vs Hayek

Econstories surely knows how to make the drab subject of economics into an interesting one. Actually, the one you can rap to. This are the best videos on difference between the economic philosophy of John Maynard Keynes and Friedrich Hayek.

Watch and learn.

Round I

Round II