Market Movement during the week 25/10/2013 to 01/11/2013

It was a pre-DIWALI celebration at DALAL STREET this week as Fireworks started at the Dalal Street well in advance with the markets reaching an all time high during the passing week (there will be a Special

Short Muhurat Trading session on November 03, 2013). The Sensex reached its highest level after

5 years and 10 months, while the Nifty too surged to it’s over five years high supported by some improving

macro data and relentless buying by FIIs. However, the start of the week was on a sluggish note with traders taking a cautious stand in run-up to the RBI’s monetary policy review, coupled with a report that showed the Foreign Direct Investment (FDI) into India declined to 8-month low of $1.4 billion in August, down 38 percent year-on-year. However, the real jubilation started the very next day when the Reserve Bank of India (RBI) in its second quarter review of monetary policy FY14, hiked repo rate by 25 bps, which was on expected lines. The RBI, however, rolled back MSF rate by 25 bps to 8.75% and increased the liquidity provided through term repos of 7-day and 14-day tenor from 0.25% of bank deposits to 0.5% with immediate effect. Traders though were concerned with the apex bank’s reducing its growth forecast for the fiscal and its statement that inflation will remain on elevated levels but cheered the move of only modest hike in policy rates. Still the markets continued moving higher and got a boost in the last from the macro front when the core sector industries recorded 8 percent growth in September, highest in the past 11 months. The growth in the eight infrastructure industries was mainly due to expansion in crude oil, steel and electricity production. The week also marked the expiry of the October F&O series on a high note with Nifty witnessing a very encouraging rollover to the next series. The overall market rollover too increased

giving a sense of bullishness in the markets going further. On NSE, Nifty gained by 162.30 points to 6,307.20 & Bank Nifty up by 732.15 points to 11,628.65 while on BSE, Sensex gained 513.29 points to 21,196.81, BSE Mid-cap index was up by 211.92 points to 6,177.40, Small-cap index up by 113.85 points to 5,939.60. On the sectoral front, Bankex up by 830.89 points at 13,276.15, Consumer Durables up by 314.92 points at 6,260.76, PSU up by 247.94 points at 5,863.38, Capital Goods up by 377.93 points at 9,264.52 and Realty up by 54.68 points at 1,378.59 were the top gainers on the BSE sectoral space, while FMCG down 108.51 points at 6,751.68 and IT down 6.00 points at 8,437.43 were

only losers on the BSE sectoral front. FIIs were net buyers in equity segment in the week with a net inflow of

Rs 4819.41 crore and DIIs were net sellers of Rs. 3603.81 crs.

INDUSTRY & ECONOMY NEWS

An expert panel headed by former Planning Commission member Kirit S Parikh, which was constituted as

Finance Ministry was looking to alter the way diesel and cooking fuels are priced to reduce the subsidy burden, has suggested that diesel prices should be hiked by a steep Rs 5 per litre, kerosene by Rs 4 a litre and cooking gas (LPG) rates by Rs 250 per cylinder immediately to cut fuel subsidy bill by Rs 72,000 crore. In its other recommendations, the panel has suggested that the number of subsidized cooking gas cylinders supplied to households in a year should be cut to 6 bottles of 14.2-kg from the current quota of 9, while the panel has also suggested that after the diesel price hike, oil companies should be given a fixed subsidy of only Rs 6 per litre on diesel and any difference between cost of production and retail price should be passed on to consumers and going further the Rs 6 per litre subsidy on diesel should be liquidated in one year to make the fuel completely deregulated or free from price controls.

WORLD MARKET BEHAVIOUR DURING THE WEEK

US MARKET:

The US markets traded almost flat during the week as investors’ assessed Federal Reserve statement that

largely matched forecasts, but also had some Fed watchers saying a policy change could come sooner than

expected. The Federal Reserve fueled speculation that it will begin to slow the pace of stimulus in coming

months with some Fed watchers expecting a taper for the bond buys to begin in March. The Federal Reserve voted 9-1 to continue monthly asset purchases of $85 billion a month, citing an elevated unemployment rate and saying Washington’s economic policies are still holding back growth. The central bank’s decision to stand pat was widely expected. Although the Fed again characterized US growth as moderate and added that the labor market has shown some further improvement, the central bank reiterated that it wants to see unemployment fall toward 6.5% from the current rate of 7.2%. On the economy front, industrial production in September had a solid increase to 0.6% for the second straight month. This is the biggest monthly gain in seven months. Overall industrial production increased at a 2.3% annualized growth rate in the third quarter. Capacity utilization rose to 78.3% in September from 77.9%. This is the highest rate since July 2008. The Chicago purchasing managers index rose to 65.9% in October, to mark the best performance since March 2011. The increase was unexpected. Any reading above 50 indicates expansion. The number of Americans filing for unemployment benefits fell for the third week in a row. Initial claims declined by 10,000 to a seasonally adjusted 340,000 in the week ended October 26. Claims are seen as

good proxy for layoffs, though they reveal less about hiring trends.

Besides, US producer price index slipped a seasonally adjusted 0.1% in September. Excluding the volatile

categories of food and energy, core wholesale prices edged up 0.1%. The core rate, viewed by the Federal

Reserve as better indicator of underlying inflationary trends, has risen a scant 1.2% in the last 12 months. US

consumer prices rose slightly in September because of higher costs for medical care, shelter and all forms of

fuel, but there was barely a whiff of inflationary pressure in the broader economy.

EUROPEAN MARKET:

The European markets remained cautious accompanied by volatility during the passing week after Fed left its

key benchmark lending target, the fed funds rate, unchanged and kept its $85 billion monthly asset- urchasing

program in place. German Chancellor Angela Merkel insisted that the 17-nation euro zone must give itself a

stronger coordination of economic policies to remain competitive and spur growth. Merkel’s comments at the summit of European leaders in Brussels came as her government seeks to convince its partners to hand the EU Commission, the bloc’s executive arm, more powers to oversee member states’ economic policies. Angela Merkel also hit back at a US treasury department report that criticized Germany for running an extended trade surplus. Inflation in euro zone fell to 0.7% year-on-year in October as energy costs fell 1.7% on the year, the lowest reading since November 2009. The inflation rate dropped below 1% for the first time since February 2010. The number of unemployed in the 17-nation euro zone reached a record high in September as the bloc’s nascent recovery failed to generate jobs. The rank of the jobless swelled by 60,000 and stood at a record 19.45 million. Though, the unemployment rate remained steady at 12.2%, the previous month was revised up from 12%. The unemployment rate for the wider 28-nation European Union remained unchanged in September at 11%. ECB consider the unemployment rate unacceptably high as Europe risks losing a generation of young workers it fails to address the problem and revive growth. Retail sale volumes in the UK fell sharply in October, dampening optimism over the UK’s economic outlook. The index of UK retailers plunged to 2.0 in October from a reading of 34.0 in September.

ASIAN MARKET:

Most of the Asian equity benchmarks ended the week’s trade in the positive terrain with Chinese and Japanese bourses leading the rally in the region. Hong Kong benchmark remained the top gainer, gathering around two and a half percentage points after the nation’s total retail sales value in September, provisionally estimated at $35.8 billion, rose 5.1% year-on-year. After netting out the effect of price changes over the same period, the total retail sales volume grew 4.9% in the month. The revised estimate of the value of total retail sales in August increased 8.1% over the same period a year earlier, while the volume of total retail sales grew 7.2%. Chinese Shanghai surged over half a percent after the nation’s manufacturing sector grew at the fastest pace in 18 months in October, adding to signs of a stabilization in the world’s No.2 economy as the government readies a series of key economic reforms. The official Purchasing Managers’ Index (PMI) stood at 51.4 last month, up from September’s 51.1. moreover, Japanese Nikkei surged by around a percentage point after Bank of Japan kept its monetary policy unchanged by a unanimous vote, as was widely expected, while keeping its inflation forecast steady. Bank of Japan raised its growth projection for the fiscal year beginning April 2014 from 1.3% to 1.5%. However, it held to its previous outlook for 1.9% core consumer inflation in fiscal 2015, excluding the effects of a new consumption-tax hike.