Consolidation To Continue

Indian equities witnessed some amount of consolidation on the last trading session of preceding week. If we consider the last five trading sessions (preceding week had two public holidays), the benchmark indices moved northwards for the first two trading sessions. However the next three trading sessions were quite range bound. A lot of macro and micro data on domestic and global front was announced during the similar period, keeping the investors a bit cautious. As a result on Friday the Indian markets along with Asian peers witnessed some profit booking. On Friday the Sensex witnessed a decline of 47 points (Down 0.17%) to close at 27868. Nifty closed at 8337 showing a decline of just 1.30 points (Down 0.02%).

As we move ahead there are quite a lot of factors that are expected to drive the markets. First and the foremost would be announcement of CPI inflation numbers and IIP numbers on November 12. We are of the opinion that while the CPI inflation for October 2014 is likely to witness some amount of decline, there is expected to be improvement on the IIP front for the month of September 2014. With BJP Government getting into action, a lot of road blocks were cleared in power and metal industries. This would have helped the industrial production. However a significant improvement is unlikely and we expect marginal improvement is expected. In August 2014 thee IIP growth was only 0.4%. As regards the CPI, for September 2014 it declined to 6.46% from the levels of 7.73% in August and 9.84 % in September 2013. We feel with decline in Crude oil prices and vegetable price, CPI is expected to remain below the 7% mark. However both the factors are unlikely to guide the RBI to cut interest rates. Another factor driving the markets is, Government has extended its cabinet. This is an indication towards one factor that reforms process is likely to remain on fast track. Earnings season has been in line with expectations and there are unlikely to be any surprises.  

On the global front US markets closed on a flat note with Dow closing at 17573 (up 19 points) or 0.11%. S&P also closed with gains of 1 point (Up 0.03%). The Dow and the S&P 500 finished the past week at new highs, amid expectations that economic data will continue to support gains, interest rates would not move much higher, and earnings will continue to improve.

As for Asian markets, most of Asian stocks fell as the yen strengthened; dragging Japanese shares lower following a three-week rally, before a report on Chinese inflation. Nikkei is trading at 16773 (Down 107 points) or 0.63%.

On Chinese data front Bloomberg reported that, Chinese exports rose more in October than economists had estimated, sparking concern over fake invoicing as imports grew slower than expected. Policymakers have eschewed across-the-board stimulus and interest-rate cuts even as growth cooled to the weakest pace in more than five years last quarter. With this Hang Seng is trading with gains of 437 points or 1.71% and Shanghai is Trading with gains of 30 points or 1.27%. SGX Nifty is trading with gains of 12 points.

We expect Indian equities to open in green. However the leading indices may remain range bound. All in all we expect consolidation to continue keeping the indices under check.