Markets Witness Flat Weekly Close; RBI Meet Eyed

The week preceding this one was eventful. In that week, we saw FDI in multi-brand retail getting passed in the Rajya Sabha with the support of the BSP.

As compared to this, this week has been without incident and the markets witnessed a flat closing in the red. The Sensex and the Nifty closed the week marginally down, declining by 0.55% and 0.47% respectively. Both the indices reached their 52-week highs on Dec 11, but were unable to sustain those levels and fell marginally due to some profit booking.

The flatness witnessed in the frontline domestic indices was in contrast to the other global indices. The week saw some important data being released. The IIP figure, which was released on Dec 12, saw the fastest growth in the last 14 months to grow at 8.20%. The Consumer Price Index (CPI) inflation number for Nov 2012 came in at 9.9%, which showed an increasing trend and was up from 9.75% for Oct. The Wholesale Price Index (WPI) inflation data for Nov 2012 came in on Dec 14. This figure stands at 7.24%, which is lower than that of 7.45% for Oct 2012.

On the global front, the markets closed the week in the green. The highest gainer for the week among the leading indices is the Shanghai Composite, gaining 4.30%. This can be attributed to the positive data that was released in the month of Nov 2012.

In the US markets, the US Federal Open Market Committee (FOMC) came out with a plan to buy long -term treasury bonds worth USD 45 billion per month. The move is in addition to the Fed’s existing programme of buying USD 40 billion per month of mortgage-backed securities. This step will infuse more liquidity into the system, which will thereby boost consumer spending and in turn help the US economy grow.

On the European front, the European Finance Ministers took a step towards bringing the region’s largest lenders under a single supervisory authority. The European Central Bank (ECB) was chosen to act as the regulatory body for the European banking system from 2014 onwards. Most European stocks rose, with the benchmark gauge heading for a fourth weekly gain, as measures of manufacturing in China and the Euro area increased and investors awaited progress in the American budget talks. Going forward, what steps the US takes in regard to the Fiscal Cliff will be watched closely worldwide.

The INR depreciated this week in comparison with other currencies. The Euro strengthened to an eight- month high against the Yen as the European Union chiefs pledged to seek a joint strategy for handling failing banks, boosting demand for the region’s assets.

Crude oil witnessed some up-move in the last week. However, it fell a bit from the highs owing to the US stockpiles. With some better sentiments in the domestic market, where there are quite a few IPOs on offer, the money has moved towards equities and there is a mild decline in the prices of precious metals.

In the broader market all the indices have closed the week on a negative note. On the sectoral basis, out of the 13 indices, 9 have closed in the red. This week, the major gainer is the BSE Auto index, closing the week with a gain of over 2%. This is followed by the BSE Bankex (+0.58%) and BSE HC (+0.14%). The main draggers this week have been the BSE CD index, which closed the week with a decline of more than 4.5%. The other draggers were BSE Power (-3.23%) and BSE CG (-2.59%).

The money inflows from FIIs remained strong in the last week. FIIs pumped in Rs 7954 crore in equities during the week, taking the total to 1155331 crore for the present calendar year. DIIs ended the week in the red, selling off equities worth Rs 1339 crore.

Going forward, the markets are eyeing the RBI monetary policy review meet that is slated for Dec 18. The RBI’s decision will be the key trigger going forward. We believe that there will be some amount of volatility in the markets, but with a positive bias.