Listless Week End With Nominal Gains

This week the Indian markets witnessed almost flat trades with the Sensex and the Nifty closing with gains of mere 0.24% and 0.08% respectively.

We are in the middle of the Q3FY14 result season, which was considered as the major trigger. But none of the results have been on the encouraging side that could have given the markets a boost. This is the reason, why the markets failed to sustain the 6300 levels during the week.

However, in a recent development, a special committee headed by Deputy Governor Urjit Patel has came out with certain suggestions. The RBI panel said that the central bank should make moves to lower India's consumer inflation, which has been close to 10% in recent months, to 8% within the next 12 months and to 6% in next two year, before adopting the target. This transition path should be clearly communicated to the public.

Accordingly, the Committee has recommended that Open-market operations (OMOs) have to be detached from Fiscal operations and instead linked solely to liquidity management. OMOs should not be used for managing yields on government securities.

The Expert Committee recommended revising the reduction in Statutory Liquid Ratio (SLR) of banks, to a level in agreement with the requirements of Liquidity Coverage Ratio (LCR) prescribed under the Basel III framework.
It can be said that the report's recommendation wants risks to be hedged and managed which would bring India in line with global norms by placing less importance on wholesale price inflation.

On a stock specific front, the results of engineering major Larsen & Toubro came in better than expectation which led to a smart rally in the stock. While on the other hand, HDFC Ltd. has witnessed lower than expected results.

On the foreign inflows, the FIIs continues to remain bullish on the Indian markets as they bought equities worth Rs 2100 crore so far in this month. On the other hand the DIIs remain consistent sellers in equities.

Going forward, all eyes will be on Dr Raghuram Rajan when he comes up with the third quarter review on January 28, 2014. The outcome of monetary policy meet will decide the future course of the markets.