The Week Saw Markets In Swing Mode

The markets witnessed a better movement during the week. Both the Sensex and the Nifty have been able to sustain the psychological levels of 20K and 6K respectively. The two main indices closed with a gain of 1.01% and 1.52% respectively.

The rally and the jovial mood of the markets can also be attributed to lower inflation numbers. The latest CPI and WPI inflation numbers have softened in a way that the markets have turned positive. The moderation in the WPI numbers has provided a key support to the markets. The March 2013 WPI inflation numbers came in at 4.89% against 5.96% in March 2013. Earlier, the CPI came in single digits to 9.39% for April 2013 from 10.39% in March 2013. The cooling of inflation bodes well for the country as it indicates that the prices are falling faster than expected. This will help the RBI to cut rates faster and aid the retail banks in transmitting lower rates to their consumers.

On the flip side, the country’s trade deficit leapt to USD17.8 billion for the month of April 2013. This is due to a massive surge in imports of cheaper gold that will increase concerns about the current account deficit (CAD) in Asia's third largest economy.

On the global front, Japan's economy grew at an annual rate of 3.5% in the first 3 months of 2013. The expansion was much better than the expectation of a 2.7% increase. On a quarterly basis, Japan's gross domestic product increased by 0.9%. The consumer spending and exports were particularly strong. Japan's economy had been in a shallow recession as recently as last year, and the positive data should bolster hopes that the country's economic outlook is brightening.

The money inflows from FIIs remained strong last week. They bought equities worth Rs 9759 crore. On a YTD basis, the FIIs have pumped in Rs 70932 crore in the present calendar year. DIIs ended the week in red, selling equities worth Rs 1898 crore. The markets are likely to witness a good movement in the next week too with a decent data on the domestic front as well as rising optimism on the global front. This can be substantiated by the fact that in spite of a wider trade deficit, the markets have been able to sustain the upward momentum.