Bulls To Rule This Week

Indian equities remained strong in the preceding week and managed to break previous all time high levels. It was yet another week which saw key benchmark indices broke previous records and scale new all-time high levels. Benchmark indices managed to churn out over 1% gains amid consolidation and saw Nifty cross the crucial 7900 mark for first time ever. The proposed banking reforms and a dip in global crude oil prices boosted investor sentiment along with inspiring speech by Prime Minister Narendra Modi on Independence Day.

In addition the Finance Ministry approved a draft cabinet note, which proposes to create a holding company structure for public sector banks. This holding company will raise money in order to re-capitalize public sector banks. Market experts from all quarters have consistently suggested investors to exercise caution while diving in the choppy waters of broader markets. But yet again this week's performance of stocks from the space suggests that market participant’s sometime play for the love of the game, when in a bull market.

CNX mid-cap and BSE small-cap indices jumped 3.6 % and 4.8 % respectively this week. From the space, BASF, Hercules, Manappuram, Nectar Life, Igarashi Motor hoisted up between 33-47%. Bhushan Steel and UB Holdings tanked between 20-22%. Bhushan Steel tanked after the company's Vice President was caught in a bribe-for-loan scandal. Bankers have tightened the noose on Bhushan Steel. The consortium of banks led by PNB says auditors will monitor the company’s cash flow on a daily basis and a forensic audit will be conducted.

Globally, Wall Street and other stock markets paused on Friday, halting the week's strong gains, as worsening Ukraine tensions dogged trading, while the dollar rose after Federal Reserve Chair Janet Yellen said policymakers eyeing interest rate hikes need to move cautiously. Ukraine on Friday said Russia had launched a "direct invasion" of its territory after Moscow sent a convoy of aid trucks across the border into eastern Ukraine, where pro-Russian rebels are fighting government forces. Moscow, which has thousands of troops close to the Russian side of the border, warned against any attempt to "disrupt" the convoy but did not say what action it might take if Kiev's military intervened.

The Dow Jones industrial average fell 38.27 points, or 0.22 %, to 17001.22, the S&P 500 lost 3.97 points, or 0.2%, to 1988.40, and the Nasdaq Composite added 6.45 points, or 0.14%, to 4538.55. The US dollar index, which values the greenback against a basket of a half dozen major currencies, was up 0.2% at 82.310 after setting a 2014 high of 82.456. In a speech to a gathering of central bankers, closely watched for hints on shifts in monetary policy, Yellen said the US labor market is still bruised from the Great Recession and that the Fed should move cautiously in determining when interest rates should rise. The US jobless rate has fallen more quickly than expected, but Yellen said the economic disruption of the last five years has left millions of workers sidelined, discouraged or stuck in part-time jobs, which is not captured in the unemployment rate alone. In such an environment "there is no simple recipe for appropriate policy," Yellen said, arguing for a "pragmatic" approach that allows officials room to evaluate data as it arrives without committing to a preset policy path. At the same time, she said, the labor market may in fact be tighter than it seems and the Fed may have to raise rates sooner and more quickly than expected. Higher interest rates tend to boost the allure of the dollar.

European shares dipped 0.27% after the Russian convoy of aid trucks entered eastern Ukraine without Kiev's permission. The MSCI world equity index, which tracks shares in 45 nations, was down 0.29%.

Asian equity indices declined as investors weighed comments from central bank leaders for clues to monetary policy ahead of conflict negotiations between Russia and Ukraine. Nikkei is trading in positive with gains of 20 points. Shanghai Composite is however trading in red with loss of 7 points. SGX Nifty is also trading in red with decline of 16 points. We expect a flat opening for Indian Equities. However we expect bulls to help indices continue the up-ward momentum.