Volatility Rules The Markets

The markets witnessed swing trades during the week, crashing at the beginning of the week and recovering in the last two trading sessions. The Sensex and Nifty recovered from their lows to close the week with a marginal declining of 0.42% and 0.66% respectively.

Earlier this week, the central bank came out with certain measures to tap the free fall of the currency. As per the measures announced, the RBI will conduct open market operations (OMOs) to purchase bonds worth Rs 8000 crore from the market starting August 23, 2013. The apex bank will purchase long-term securities, which are offering a coupon rate of 8.15% and maturing in 2022. As of now, it is not planning to touch bonds maturing in 2013, 2026 and 2030.

On the other hand, the country's net export of services (the difference between exports and imports) has jumped up by 35.5% YoY to USD 17.4 billion. This is certainly a better performance as compared to a decline of 1.99% seen during the fourth quarter of 2012-13, and gives something to cheer about in a rather sluggish economy. On a yearly basis, service exports have improved by 14% to USD 37.9 billion whereas imports of services have remained flat.

On the global front, the Flash PMI numbers for August 2013 from Europe and USA have come out much better. This raises the question of whether the economies in these countries are showing any improvement. To get a clearer picture of this, however, one has to wait until the June quarter GDP numbers are out.

The Flash Manufacturing PMI numbers for China were released on Thursday, August 22. This was recorded at 50.1, reaching a four-month high. In July, this reading came in at 47.7, indicating a contraction in the manufacturing sector. The August reading has shown an expansion again. The PMI numbers for the Euro zone have also remained healthy, with the composite PMI at 51.7 indicating the fastest recovery in the economy in the last two years.

On a stock-specific front, L&T has bagged two different orders totalling Rs 1071 crore. The first one is from Tamil Nadu Transmission Corporation for the supply, erection, testing and commissioning of a 400 KV double circuit quad line of 274 km in Tamil Nadu. Apart from these, its 'Building and Factories' business vertical has received orders worth Rs 433 crore from its various ongoing projects. HDFC and ICICI Bank announced that they have increased their benchmark rates by 25 basis points.

On the policy front, the Telecom Regulatory Authority of India (TRAI) has recommended that the Foreign Direct Investment limit in news channels and FM radio services be raised from 26% to 49%, subject to clearance by the Foreign Investment Promotion Board (FIPB).

Money inflows from FIIs continued to remain weak, as they sold equities worth Rs 1097 crore during the week. On a YTD basis, FIIs have pumped in Rs 64315 crore in the Indian equity markets. On the other hand, DIIs ended the week in the green, buying equities worth Rs 508 crore.

The rupee is likely to remain an overhang on the markets, and hence, volatility in trades cannot be ruled out in the coming week.