Fickle Trade Marks End Of Week

A volatile trade at the markets, in the last week, marked the end of the January 2013 series. The main indices - Sensex and Nifty - closed the week in red, declining by 1.60% and 1.25% respectively, while the quarterly results are expected to boost markets.

The RBI Governor, D Subbarao lived up to his reputation of surprising the streets, as he slashed the Cash Reserve Ratio (CRR) by 25 basis points to 4%, which would be effective from the fortnight beginning Feb 9, 2013. The reduction in CRR would infuse around Rs 18000 crore into the system. There has been limited rejoice at the markets as a 25 basis points cut in the key policy rates were already discounted by the markets.

On the other hand, the corporate results have also been better than expected, but there has been some negative development in the US that has played a spoilsport. Till date, a total of 781 companies have come out with its quarterly numbers. On an aggregate basis, the topline and the bottomline grew by 14.94% and 64.53% respectively on a YoY basis.

On the global front, for the Dec 2012 quarter, the USA has posted a negative GDP growth for the first time after the June 2009 quarter. Cuts in defence spending and a decline in stockpiles saw the US economy contracting by 0.1% for the fourth quarter of the last year. The last such occurrence in 2009 was in the wake of the financial meltdown in the country.

On the European front, the Union has been battling a debt crisis for a while. This crisis has led to a contraction in the region’s economy too. As the governments of the European nations are forced to adopt austerity measures, the demand in the region has been hit significantly. This has naturally impacted its trade partners, the heat of which is reflected in the fourth quarter of the US GDP.

The money inflows from the FIIs remained strong in the last week. The FIIs pumped in Rs 5590 crore taking the total to a whopping Rs 21203 crore for CY13. The DIIs again remained in red and in the month of January, they have sold equities worth Rs 4713.

The quarterly results will be the main trigger that can give a direction to the markets going forward.  However, there are expectations that have tried to build up around the budget, which is scheduled for this month-end. Going forward, we expect the markets to remain volatile in the next week going forward.