The Week That Was!

The Indian markets again witnessed volatile trades in this week. The Sensex and the Nifty ended the week in red loosing 0.67% and 0.43% respectively. This data may look to be listless. But, during the week the Nifty fell below the important psychological levels of 6000 to touch a low of 5962 during the week.Let us take a look at the factors that have played its part on the markets during the week.

The first and the foremost are the corporate earnings. The earnings came in on the expected lines and there are no surprises either on the positive or negative side. Out of the 950 companies that have announced their results till date the aggregate topline growth has been around 13% while the bottomline have grown by 6.64% on YoY basis in an aggregate basis. The markets which were looking forward for the earnings as a trigger have been disappointed.

On the other hand, India's services sector contracted for a seven month in a row, one of the longest consecutive contractions in services sector since financial crisis of 2008-09. Only solace was that we can find is that rate of contraction was slowest in last seven months, an HSBC survey said. The HSBC India Services Purchasing Managers' Index (PMI) - a measure of activity in the services sector increased from 48.1 for the month of December 2013 to 49.6 in January 2014. Any figure below 50 indicates contraction while above that means expansion.

The reasons cited for contraction is tough economic conditions and lower new orders. Slowdown in economy has led to higher competition for new order and weaker underlying demand. Post and Telecommunication was the best performing category among services sector. Financial Intermediation, however, suffered the sharpest downfall in both business activity and new orders.

Despite the contraction, more jobs were created and workers were hired on expectation of growth in the new orders in coming month. According the survey, "service providers were optimistic in January that business activity would expand over the next year".

The other positive thing that has happened during the week is that the FIIs which were in a selling spree turned buyers from Thursday (February 06, 2014). This is certainly a positive indicator as the market movements depend a lot on the FIIs. However, DIIs remained in red during this week too.

Going forward, the markets are likely to take cues from the macro indicators like IIP, WPI and CPI due in next week. Till then, brace for the volatility.