A See-Saw Week

The Indian indices closed on a flattish note this week. The markets look like a boat without a captain, with only cues from the global peers giving them direction. For instance, the indications of an impending QE tapering that were announced in the FOMC minutes sent tremors through the market, and heavy sell-off by FIIs was seen in Thursday's session. Let's take a roundup of other such factors that were driving the markets in the week gone by.

The week started off on a positive note, and news from the government front lent a boost. The government, which was again seeing to have lapsed into political inertia, is looking to kickstart the reforms process again. To begin with, it is gearing itself for another round of the disinvestment drive. So far, just about Rs 1323 crore has been raised through this process as against the budgeted target of Rs 40000 crore for FY14, as poor market conditions had jolted the ambitious plans of divesting stake in PSU companies.

The Department of Disinvestment (DoD), Ministry of Finance is finalising its plan to tap the market. According to some senior officials of the department, 3 big issues, viz. Coal India, IOC and Power Grid, are set to hit the market by December end. The government is expecting to raise around Rs 15000 crore from these issues. Road shows have already commenced across the globe, with a strong entourage of government and company officials on the job.

In addition, the government also approved 20 FDI proposals worth Rs 915.83 crore. Prominent among the approvals was that for Singapore Airlines - a Rs 303.18 crore proposal to set up a 49:50 JV for domestic and international passenger airlines in India. Another Rs 1400 crore FDI proposal of Federal Bank has been referred to the Cabinet Committee for Economic Affairs (CCEA), whose meeting will take place soon.

On the debt side, FIIs have been on a selling spree. The foreign outflows witnessed in the debt market from August-September have played heavily on the Indian economy. As a result, the average yield on securities spurted from 7.63% in Q1 to 8.56% in Q2, a rise of 93 basis points in a just three months' time. During this period, the public debt of the government has also risen considerably due to the declining rupee.

Another significant recent development was the declaration of the US Federal Open Market Committee (FOMC) meeting minutes on November 20. With the FOMC hinting at early tapering of bond purchases over better economic data, the equity markets reacted with significant southward movement. Apart from this, the apex bank was expected to throw some light on the issuance of new banking license in this month, which is likely to give a breath of life to the markets.

But wait, the GDP numbers for the September quarter would be announced on November 29, 2013. At 4.4%, the growth for the June quarter was quite disappointing, and with hardly any pick-up on the macro front, the possibility of any significant improvement in this quarter too looks bleak. The expectations are of a figure as low as 4.4%-4.6%, and anything below 4.4% would upset the markets.

Looking at the current scenario, it can be said that the markets are likely to remain volatile in the next week too. Therefore, investors are advised to tread cautiously. The other factor that needs to be tracked closely is the INR movement which has crossed Rs 63 mark per USD.