Markets recoup losses, begin 2012 on a positive note

We wish all our readers a happy and prosperous 2012.

The markets have managed to recoup last week’s losses, and seem to have flagged off the New Year on a positive note. Several pieces of good news and positive developments on the global as well as domestic fronts buoyed investor sentiment this week.

On the global front, the US stocks have looked good this week on the back of better-than-expected manufacturing growth seen across the industries and an improvement in the labour market. The world’s fastest growing economy, China too showed slow but steady signs of economic growth, as the data improved, signalling some good times ahead. All these positive global factors seemed to have outplayed the Euro zone concerns for a while. In fact, Europe too witnessed a great week, as the data showed a surprise drop in German unemployment rate and resilience in the manufacturing sector overall.

Back on Indian turf, a consistent improvement in the manufacturing PMI data over the past couple of months, with the latest data for Dec 2011 coming in at 54.2, cheered the markets at the start of the week. There was also a bounceback seen in the 8 core sector industries, which grew at 6.8% for the month of Nov 2011, indicating an improvement in the overall IIP data for Nov 2011 that would be released shortly.

In other developments, inflation fell into the negative zone for the first time in 5 years. Latest data suggests that food inflation for the week ended Dec 24, 2011 cooled off to negative 3.34% as against 0.42% in the previous week, on the back of further easing in the prices of essential commodities like vegetables, onions, potatoes and wheat. Primary Articles' inflation also eased off to 0.1% for Dec 24, 2011 as against 2.7% in the previous week. This latest set of inflation data that shows clear signs of easing out spells out some optimism about a cutback in rates by the RBI going forward.

Finally, there were also some positive moves seen by the govt., which looked at making some progress on the policy front. In a respite to firms suffering under the weight of foreign loans, the govt. eased an accounting rule on forex losses, allowing them to be taken on the books over the life of the forex loan. Also, towards late noon today, our sources told us that the govt. was strongly mulling the option of re-introducing the multi-brand retail FDI bill through some back-channel talks.

Global commodities also saw some action this week, as gold and silver futures bounced back from the previous week's lows, with investors flocking towards them as safe investment bets. Consequently, the rupee regained some ground as investors shunned the dollar and the markets rallied. FII net investments in equity markets at Rs 681 cr for this week have started off the year in the positive zone.

The only negative factor that could limit this positive rally world over is the recent spike seen in crude oil over the past few days. This was on the back of fresh concerns from the Middle East, with Iran at the center. Iran’s flamboyant nuclear power-house ambitions have sparked off some high-intensity geopolitical tensions against the western powers USA and EU, and the world economy could find itself back on the brink of witnessing yet another war-for-oil situation.

Moving on, the state run MMTC, Hindustan Copper and RCF were among the top gainers for the week on potential capital raising, as the market regulator SEBI relaxed norms for stake sale and the buyback of shares. Tata Motors was also among the top gainers, reporting excellent auto sales numbers for Dec 2011. Prominent losers included Hero MotoCorp and Bajaj Auto, as the 2-wheeler market suffered on the back of muted sales for the month.