Weaker GDP Numbers To Remain An Overhang

The possible tapering of QE and improvement in the US GDP are what made the dollar stronger. The US GDP has seen a remarkable turnaround in the second quarter of the calendar year. The revised estimate for growth in the GDP for the April-June quarter is 2.5% on a quarter on quarter basis and 0.7% on a year-on-year basis. The QoQ GDP growth managed to beat the consensus expectations of 2.2%. The growth figure was also substantially higher than the government's earlier estimates of 1.7% for the second quarter thanks to the healthy rise in exports.

On the domestic front too, there have been concerns that has been playing spoilsport for the currency. With the depreciating currency, doubts have been raised on the twin deficit front. However, the Finance Ministry has said that it will be able to contain the CAD at the targeted levels. But in a recent development, the fiscal deficit has reached 63% of the target for FY14. India's fiscal deficit during the April-July 2013 period was Rs 3.41 trillion, or 62.8% of the full-year target, government data showed on Friday.

The other significant development is that the GDP number for Q1FY14 has came in at 4.4%, well below the street's expectation of 4.8% and also below what the government had foreseen. The numbers indicate a serious need for the government to improve the business sentiment in the country. Besides, it also indicates that the interest rate hikes earlier in the fiscal have hit the economy hard.

On another front, the Parliament passed the Food Security Bill this week. Ratings agency Moody's has pointed out that India's plan to provide cheap grain to the poor is credit negative. This will further worsen the government's weak finances. The other major bill that was passed was the Land Acquisition Bill.

With the same concerns and deteriorating domestic cues, precious metals have also witnessed better appreciation. Gold and silver both closed higher by 4.64% and 4.87% respectively during the week.

The broader markets closed the week on a negative note. The BSE Mid-Caps closed with a loss of 1.09%, while Small-Caps closed lower by 1.07%. On a sectoral basis, 9 of the 13 indices closed the week in red.

Money inflows from FIIs continued to remain weak, as they sold equities worth Rs 5115 crore during the week. On the other hand, DIIs ended in the green, buying equities worth Rs 1169 crore.

The GDP data will remain an overhang for the markets and we may see more volatile sessions in the coming week.