Market May Remain In Positive

Indian equities remained strong in the preceding week and managed to break previous all time high levels after encouraging data from the US allayed fears of a global growth slowdown, while the government’s move to ease foreign direct investment (FDI) norms in construction sector boosted sentiments. Both Sensex and Nifty gained 3.5% this week ending at their all-time closing levels of 27,866 and 8,322 respectively.

Both indices, the BSE Midcap and Smallcap underperformed their larger counterparts gaining 1.67% and 2.52%, respectively. Foreign institutional investors (FIIs) continued to remain net buyers in Indian equities after they bought equities worth Rs 1,755 crore, as per provisional stock exchange data. This month, mutual funds have been consistent buyers, investing about Rs 5,000 crore in stocks.

Petrol price was cut by Rs 2.41 a litre, the sixth reduction since August, and diesel by Rs 2.25 per litre on back of falling international oil rates. The reduction in rates of petrol and diesel, which was deregulated for the first time in more than a decade, will be effective from Saturday, Indian Oil Corp, the nation’s largest fuel retailer, announced. Oil PSUs on Saturday also cut aviation turbine fuel by 7.3%, bringing the overall reduction in ATF by almost 10% in last three months. However, airline companies are unlikely to pass on the benefits to the consumers as the industry continues to bleed on higher operational costs. Any reduction in fares will come only after the ongoing peak travel season gets over mid-January.

Festival season failed to bring cheer to car and motorbike makers, as major players including Maruti Suzuki India (1%), Hyundai, Mahindra (-15.39%) and Hero MotoCorp (-8.5%) failed to register significant sales growth during the month, which otherwise has been one of the best periods for vehicle sales in the country. An even Tata Motors sale was down 17% in October. However, TVS Motor Company has posted a growth of 21.8% growth in sales during October, 2014.

On the global front, The Dow Jones Industrial Average rose 1% to close at a record 17,390.52. The S&P 500 also closed at an all-time high to reach 2,018.05, up 1% after a surprise stimulus plan from the Bank of Japan was announced. On weekly basis, the Dow Jones Industrial Average jumped 3.5%; the Standard & Poor’s 500 Index added 2.7%, while the Nasdaq Composite Index climbed 3.3%.

Even, European stock markets rose broadly following the Bank of Japan's announcement on hopes that the ECB could be tempted to follow Japan's lead in stepping up stimulus measures. The European Central Bank (ECB) and Bank of England (BoE) will make interest-rate decisions on Thursday, 6 November 2014. FTSE 100 rose 1.3%, France's CAC 40 jumped 2.2% and Germany's DAX climbed 2.3%.

Asia’s biggest stock Japan market is closed today for a holiday. Hang Seng is down 0.06% while Shanghai Composite is trading on positive note with gains of 0.44%. The final HSBC/Markit Manufacturing Purchasing Managers' Index (PMI) edged up to 50.4 in October, up from the September's reading of 50.2, but unchanged from a preliminary reading. The official Purchasing Managers' Index (PMI) eased to 50.8 in October from September's 51.1, the National Bureau of Statistics said on Saturday. The official non-manufacturing Purchasing Managers' Index (PMI) fell to 53.8 in October from September's 54.0, the National Bureau of Statistics said.

Second quarter earnings and movement in crude oil prices will dictate the trend in the shortened week ahead with markets closed on November 4 for Muharram and on November 6 for on Guru Nank Jayanti. Further, HSBC will release its India's Manufacturing PMI and Services PMI for October on November 3 and November 5, respectively. SGX Nifty is showing positive trends with gains of 0.45%. We are of the opinion that Indian equities are likely to open on a positive note however auto stock may remain in pressure due to poor monthly sales figures.