India Enters Elite Club- Consolidation To Continue

Indian equity markets achieved a new land mark yesterday as it entered the elite club of world’s 10 largest stock markets with a market cap of USD 1.6 trillion. India has been the best performing equity markets of 2014 and now ranks 9th on the league table of market cap. Consistent improvement on macro-economic front along with consistent positive news from global markets helped the Indian equities achieve the rate accolade.

In the last few trading session the Indian equities have consolidated, however continuously managed to close on a positive zone. Yesterday also amid high volatility the benchmark indices closed on a positive note. While the Sensex closed 27910 (Up 35 points) the Nifty closed at another all time high of 8362.65 (Up 18.450 points). As we suggested mid-cap and small cap both indices managed to outperform the benchmark indices. While BSE Midcap appreciated by 72 points to Close at 10085.65 (up 0.72%), Small cap index closed at 11162 (Up 0.24%).

Today is an important day for the Indian markets as CPI Inflation and IIP data would be announced. However the announcement would be at 5.30 pm (after markets hours). Hence the full impact would be seen only tomorrow. As for the expectations CPI for October 2014 is likely to be less than 6 %. It is estimated at 5.7 % primarily on account of higher base effect, falling vegetable prices and some impact of crude prices would be seen. The CPI inflation stood at 6.46% in September 2014. IIP growth for the month of September is estimated at 0.5% as against the 0.4 % consistently in the preceding two months. We feel, contracting inflation and slower IIP growth may provide some head room for RBI to cut key interest rates. However the actual rate cut would occur only in Q4FY15.

While the Indian equities are moving northwards even other global markets are moving consistently upwards. US markets continued the upward momentum and touched another all time high yesterday. The S&P 500 Index appreciated 0.1 % to 2,039.75 managing a fifth straight gain, the longest rally since June 2014. The Dow Jones Industrial Average climbed 2.06 points, to a record high of 17,615.80. It has gained six sessions in a row. Experts suggested that, the view basically is determined by the outlook for the economy, growing at 3 percent and S&P earnings increasing at high single-digit.

Taking the cues from US markets the Asian Indices are also trading in green. The market favors Japanese equities in terms of the additional stimulus announced by the Bank of Japan recently along with talks of an early election and possible push back of the sales-tax increase. As a result Nikkei is trading with gains of 150 points (up 0.89%). This is a seven year high for japans markets. Shanghai and Hang Seng are also trading with marginal gains. SGX Nifty is trading with gains of 12 points (Up 0.14%).

With positive global cues we expect the Indian equities to open on a positive note. However the important announcements like IIP data and CPI inflation data (expected after market hours) would keep the investors cautious. Hence we expect another day of consolidation for the Indian equities.