The Positive Week, Except Friday!

The Indian markets this week opened positive with more than 1 per cent gains on both, Monday and Tuesday. This was caused by an overall positive sentiment across the global over hopes of policy reforms and measures to boost economic growth. The appointment of P Chidambaram as the Finance Minister was also taken positively by the markets. On appointment, he announced of plans to reduce the fiscal deficit and to address the concerns of overseas investors. Moreover, the Prime Minister allowed government land transfer to state run agencies for infrastructure development without compulsory cabinet approval. Investors have been looking forward to some policy action since a very long time after being highly disappointed by the inaction by both Pranab Mukherjee and Manmohan Singh. This optimism turned negative on the markets on the announcement of the IIP data for June that was released on Thursday, 9 August 2012. This figure was lower than market expectations and came at -1.8 per cent. The market again turned flat on Friday, 10 August 2012 due to poor results by some big corporate like SBI, Bharti Airtel and Ranbaxy Labs.

*Closing till Thursday

Overall, in the week, all the markets closed positive due to relatively better global cues. The Sensex and Nifty, with the trend mentioned earlier, closed higher by 2.09 per cent and 2.01 per cent respectively. The week ended with the Sensex closing at 17557.74 and Nifty at 5320.4. Investors in the U.S. have been looking forward to another round of quantitative easing in the U.S. An overly strong currency has been hurting U.S. exports and this needs to be acted upon. The Commerce Department, on Thursday announced that the U.S. trade deficit narrowed by 10.7 per cent in June. The deficit shrank to USD 42.9 billion from USD 48.0 billion in May. This data is expected to boost the U.S. GDP in Q2 CY12. Another report released on the same day also reported for first-time jobless claims to have fallen by 6000 to 361000in the week ended August 4. This turned out to be contrary to the estimated data release by London based Markit Economics. The jobs market still remains negative in the U.S. indicative from the rise in the unemployment rate in July to 8.3 per cent. With this, the U.S. markets had been trading higher in the week. The Dow Jones, S&P and Nasdaq were all trading higher in the range of 2.22 per cent and 3.75 per cent. The futures in U.S. were affected after the release of Chinese data today.

The Chinese data also took a toll on the rally seen across Asia and Europe seen throughout the week. Chinese data initially supported the markets with strong earnings and with the inflation data leaving gaps for monetary easing. The trade data released on Friday managed to drag the markets down though. Chinese trade surplus dropped from USD 31.7 billion in June to USD 25.1 billion in July. This drop has shocked markets worldwide, moderating the gains seen over the week. The data has been far below street expectations and has been the lowest in terms of exports since November 2009. The Asian indices had been positive through the week though, closing higher. Hang Seng, Nikkei and Shanghai Composite closed higher by 2.39 per cent, 3.93 per cent and 1.70 per cent respectively. Also, Singapore announced that its economy shrank by 0.7 per cent (annualised) in the previous quarter, adding to Asian worries.

The positive global cues seen through the week helped boost oil prices by more than 4 per cent. The Brent and Nymex were seen trading higher by 4.58 per cent and 4.44 per cent respectively as compared to the beginning of the week. On the currency front, the rupee gained and came out of the 56 zone. It closed at Rs.55.344/dollar on Friday. This has eased pressures of the 56 and 57 levels and put investors in a relative more comfortable area.

On the domestic front, in terms of sectors, realty changed the most over the week with a rise in 5.97 per cent over the week. Consumer Durables too was seen growing by over 5 per cent. Auto stocks saw moderation due to a disappointing domestic result by Tata Motors on one hand and an outstanding performance by Mahindra & Mahindra on the other. The banking sector was trading higher because of positive results from Kotak Mahindra which had a rise in PAT by 6.5 per cent at Rs.443 crore. At the same time, SBI faced major losses on Friday, plunging by 4 per cent as bad loans continued the rise. Though the net profit of the bank was up by 136 per cent YoY, gross NPA as a proportion of total advances rose from 4.44 per cent to 4.99 per cent.

Among individual stocks, movements were dominated by the quarterly results. Due to the outperformance of Wockhardt, the scrip saw a 17.53 per cent rise in the week. The PAT growth of the company was 91 per cent YoY. Apollo Tyres displayed double digit growth in revenues resulting in a 8.25 per cent appreciation in stock price. At the same time, Bharti Airtel was the top loser with a capital depreciation of 13.48 per cent in the stock price due to bad results. On the back of poor results, even the stock prices of SBI and GMR Infra fell, SBI due to the rise in NPA and GMR Infra due to a net loss of Rs.94 crore. Indiabulls was majorly sold by investors after a report by Canada based research firm Veritas stated in its report, "the sole purpose of IBREL is to bilk institutional and retail investors for the benefit of select insiders."

FII and DII turnover saw similar trends as the past with FII inflows being positive and DIIs largely selling. The net buying over the week though has reduced in terms of FIIs from approximately Rs. 4900 crore in the previous week to Rs.3031.7 crore this week.

Overall, the week saw some positivity in the U.S. jobs data, shrinking trade deficit, lower Chinese inflation and some weakness because of the Italian economic contraction, weak Chinese data, pressured Japanese manufacturing and a contracting Singapore economy. The Indian markets reacted well on the positive cues globally through the week and also on being supported by the hopes from Chidambaram. This saw a downward trend on the release of the IIP data though. For the next week, we expect global markets to open flat to negative because of the Chinese trade data. Indian markets too will be affected by this and will open flat to negative.