During the week, Indian markets witnessed two huge rallies, while rest of the days was either of consolidation or correction in the passing week. Traders remained concerned about the weak macro economic data from the domestic front and the worries of Fed’s tapering. However, there was a big surprise as well, as RBI despite all apprehensions, kept its policy rates unchanged. The street was widely expecting the RBI to raise its key repo rate by 25 basis points, given the price rises at both the retail and wholesale levels. However, the RBI governor admitted that the decision to maintain the status quo had been a close-run thing but that the situation merited a pause in the policy tightening war on inflation. RBI's decision was a big relief for the markets and benchmarks rejoiced with gains of over a percent. But the very next day the markets gave most of their gains after the US Federal Reserve announced a modest reduction, or tapering, in its bond buying program. The Fed will reduce its monthly purchases of mortgage-backed securities and US Treasuries to $75 billion per month, down from $85 billion, beginning in January. And if the economy improves at the pace the Fed expects, then the market could foresee the bond-purchase program coming
to an end by late next year. The final day of trade completely changed the whole scenario of the markets weekly performance when the major indices surged by around two percent and took the markets higher by similar magnitude for the week after finance minister P Chidambaram said that India is better prepared than in May to deal with any consequences of the US Federal Reserve’s move to wind down its economic stimulus. He also said that “Government is of the view that the markets had already factored in the US Federal Reserve's decisions and, therefore, is not
likely to be surprised by these moderate changes.” Index wise, Nifty rose by 105.85 points to 6,274.25 while Bank Nifty down by 74.55 points, BSE Sensex gained 364.14 points to 21,079.72,
BSE Mid-cap index was up by 199.99 points, while the Small-cap index up by 160.84 points, BSE-IT up by 495.32 points, Healthcare up by 494.44 points, Realty up by 66.44 points, Teck up by 233.23 points and Auto up by 322.91 points were the top gainers on the BSE sectoral space, while Bankex down 78.97 points was the only loser on the BSE sectoral front. From 30-share Sensex pack, 26 stocks rose and only four fell in the week. Stock wise on nifty, DLF, BHEL, Ranbaxy Lab, Maruti, Cipla, TCS, Lupin, TCS, Wipro, Sesa Sterlite and Infosys were up by more than 5 to 8% during the week while HDFC Bank, Jindal steel, Kotak bank, Ultratech cement, Grasim, BOB, NMDC, Asian paints and ITC were down upto 4% during the week.
INDUSRY & ECONOMY NEWS
In order to boost the country’s manufacturing sector, the committee of manufacturing, chaired by Prime Minister is likely to consider tax incentives and subsidies soon for making the manufacturing sector more competitive. The committee is likely to focus on manufacturing, especially in labour-incentive sectors, which leads to job creation in the country. Furthermore, the committee is expected to consider measures needed to substitute imports in sectors such as telecom equipment and shipbuilding. Dr. Singh had already expressed the need to develop a strong domestic manufacturing base in electronics and telecommunications in order to mitigate burden of growing imports for these sectors. India is expected to import electronics products worth $300 billion, which will be more than the value of the country's imports of petroleum products.
WORLD MARKET BEHAVIOUR DURING THE WEEK
US MARKET:
The US markets snapped its losing streak during the week after Federal Reserve announced a modest reduction, or tapering, in its bond buying program. Bernanke stated that he and other Fed officials -- including current vice chair and Bernanke successor Janet Yellen -- believe the economy will continue to create jobs. The Fed added that it will reduce its monthly purchases of mortgage-backed securities and US Treasuries to $75 billion per month, down from $85 billion, beginning in January. And if the economy improves at the pace the Fed expects, then the market could foresee the bond-purchase program coming to an end by late next year. Meanwhile, the White House made clear that President Barack Obama won’t negotiate over raising the US debt ceiling, after House Budget Committee Chairman Paul Ryan signaled over the weekend that Republicans will make demands for extending it. The Federal Reserve’s balance sheet expanded to a record $4 trillion in the week ended December 18. The Fed balance sheet has been growing as the central
bank has been buying $85 billion a month in Treasuries and mortgage related assets since last January. This is the third program of asset purchases, otherwise known as quantitative easing, that has expanded the Fed’s balance sheet from $891 billion in 2007. There were some encouraging reports on the economy front. US current account deficit narrowed to $94.8 billion in the third quarter, marking the lowest level since the fall of 2009. The gap fell from a downwardly revised $96.6 billion in the second quarter. Also, industrial production climbed 1.1% in November, the biggest percentage rise since November 2012, as utilities output jumped 3.9%. Capacity
utilization rose to 79% from an upwardly revised 78.2% in October. On other hand, the Labor Department stated that initial claims climbed by 10,000 to 379,000 in the week ended December 14. The weekly claims report has seesawed sharply since mid-November, shortly before
the Thanksgiving holiday. The average of new claims over the past month, meanwhile, rose by 13,250 to 343,250 marking the highest level in five weeks. The sales of existing homes in November fell to the slowest pace in almost a year, hit by higher mortgage rates and low
inventory.
EUROPEAN MARKET:
The European markets made good move during the week despite US Federal Reserve announcing tapering earlier than expected citing that the economy has picked up its pace. The European Central Bank (ECB) welcomed a deal among EU finance ministers to set up an agency and network of funds to close troubled banks in the euro zone. The euro zone finance ministers have agreed to create a 55 billion euro ($75billion) mutual fund financed by the banking sector to bail out failing lenders without using taxpayers’ money. In an important development in the region, Angela Merkel was elected to a third term as German chancellor by the lower house of parliament, paving the way for her grand coalition government. Standard & Poor’s downgraded the European Union’s long-term credit rating one notch, citing weaker creditworthiness among the 28-member bloc. S&P lowered its long-term issuer credit rating on the EU to AA+ from Triple-A, with a stable outlook, while affirming the short-term rating at A-1+. Meanwhile, the Bank of England warned that recent strong gains in the pound could pose a threat to Britain’s economic recovery. The minutes of the bank’s December meeting stated that while sterling’s 2% appreciation during the previous month reflected a stronger economic outlook, further significant gains could jeopardize export growth. The central bank added that for the UK’s economic recovery to be sustainable it needs to rely more on export growth and business spending and less on consumer demand. The minutes also noted that
the stronger pound had helped to bring inflation closer to the bank’s target of 2%. Moreover, the euro zone’s current account surplus widened unexpectedly in October to EUR21.8 billion from a surplus of EUR14.9 billion in September. The consumer price inflation in the euro zone held steady in November, unchanged from a preliminary estimate.
ASIAN MARKET:
Asian equity markets exhibited mixed trend during the passing week after the US Federal Reserve said it would start cutting its stimulus next month, in a sign of confidence in the country’s economic recovery. On the regional front, Chinese benchmarks remained the biggest loser, down by over five percent after the country’s manufacturing-sector activity slowed to three-month low, initial results from HSBC’s monthly survey showed. The flash version of the December HSBC/Markit China manufacturing Purchasing Managers’ Index eased to 50.5, down from November’s final reading of 50.8. Hong Kong’s benchmarks too declined around two percent despite the nation’s gross national
income rising to 4.6 percent year-on-year to $550.1 billion in the third quarter, while Gross Domestic Product grew 4.7 percent to $549.7 billion. Bucking the trend, Japanese benchmark surged over three percent during the week after Bank of Japan’s Tankan survey showed an
improvement in Japanese big manufacturers’ business confidence. According to Tankan survey, Japanese big manufacturers’ business confidence improved over the three months to December to its highest level in six years, boding well for Prime Minister Shinzo Abe’s stimulus policies aimed at ending 15 years of grinding deflation. Meanwhile, the country’s exports climbed 18.4 percent y-o-y, beating expectations for an increase of 18.0 percent following the 18.6 percent jump in the previous month. Imports spiked by an annual 21.1 percent versus the forecasted increase of 21.4 percent following the revised 26.2 percent jump a month earlier.
to an end by late next year. The final day of trade completely changed the whole scenario of the markets weekly performance when the major indices surged by around two percent and took the markets higher by similar magnitude for the week after finance minister P Chidambaram said that India is better prepared than in May to deal with any consequences of the US Federal Reserve’s move to wind down its economic stimulus. He also said that “Government is of the view that the markets had already factored in the US Federal Reserve's decisions and, therefore, is not
likely to be surprised by these moderate changes.” Index wise, Nifty rose by 105.85 points to 6,274.25 while Bank Nifty down by 74.55 points, BSE Sensex gained 364.14 points to 21,079.72,
BSE Mid-cap index was up by 199.99 points, while the Small-cap index up by 160.84 points, BSE-IT up by 495.32 points, Healthcare up by 494.44 points, Realty up by 66.44 points, Teck up by 233.23 points and Auto up by 322.91 points were the top gainers on the BSE sectoral space, while Bankex down 78.97 points was the only loser on the BSE sectoral front. From 30-share Sensex pack, 26 stocks rose and only four fell in the week. Stock wise on nifty, DLF, BHEL, Ranbaxy Lab, Maruti, Cipla, TCS, Lupin, TCS, Wipro, Sesa Sterlite and Infosys were up by more than 5 to 8% during the week while HDFC Bank, Jindal steel, Kotak bank, Ultratech cement, Grasim, BOB, NMDC, Asian paints and ITC were down upto 4% during the week.
INDUSRY & ECONOMY NEWS
In order to boost the country’s manufacturing sector, the committee of manufacturing, chaired by Prime Minister is likely to consider tax incentives and subsidies soon for making the manufacturing sector more competitive. The committee is likely to focus on manufacturing, especially in labour-incentive sectors, which leads to job creation in the country. Furthermore, the committee is expected to consider measures needed to substitute imports in sectors such as telecom equipment and shipbuilding. Dr. Singh had already expressed the need to develop a strong domestic manufacturing base in electronics and telecommunications in order to mitigate burden of growing imports for these sectors. India is expected to import electronics products worth $300 billion, which will be more than the value of the country's imports of petroleum products.
WORLD MARKET BEHAVIOUR DURING THE WEEK
US MARKET:
The US markets snapped its losing streak during the week after Federal Reserve announced a modest reduction, or tapering, in its bond buying program. Bernanke stated that he and other Fed officials -- including current vice chair and Bernanke successor Janet Yellen -- believe the economy will continue to create jobs. The Fed added that it will reduce its monthly purchases of mortgage-backed securities and US Treasuries to $75 billion per month, down from $85 billion, beginning in January. And if the economy improves at the pace the Fed expects, then the market could foresee the bond-purchase program coming to an end by late next year. Meanwhile, the White House made clear that President Barack Obama won’t negotiate over raising the US debt ceiling, after House Budget Committee Chairman Paul Ryan signaled over the weekend that Republicans will make demands for extending it. The Federal Reserve’s balance sheet expanded to a record $4 trillion in the week ended December 18. The Fed balance sheet has been growing as the central
bank has been buying $85 billion a month in Treasuries and mortgage related assets since last January. This is the third program of asset purchases, otherwise known as quantitative easing, that has expanded the Fed’s balance sheet from $891 billion in 2007. There were some encouraging reports on the economy front. US current account deficit narrowed to $94.8 billion in the third quarter, marking the lowest level since the fall of 2009. The gap fell from a downwardly revised $96.6 billion in the second quarter. Also, industrial production climbed 1.1% in November, the biggest percentage rise since November 2012, as utilities output jumped 3.9%. Capacity
utilization rose to 79% from an upwardly revised 78.2% in October. On other hand, the Labor Department stated that initial claims climbed by 10,000 to 379,000 in the week ended December 14. The weekly claims report has seesawed sharply since mid-November, shortly before
the Thanksgiving holiday. The average of new claims over the past month, meanwhile, rose by 13,250 to 343,250 marking the highest level in five weeks. The sales of existing homes in November fell to the slowest pace in almost a year, hit by higher mortgage rates and low
inventory.
EUROPEAN MARKET:
The European markets made good move during the week despite US Federal Reserve announcing tapering earlier than expected citing that the economy has picked up its pace. The European Central Bank (ECB) welcomed a deal among EU finance ministers to set up an agency and network of funds to close troubled banks in the euro zone. The euro zone finance ministers have agreed to create a 55 billion euro ($75billion) mutual fund financed by the banking sector to bail out failing lenders without using taxpayers’ money. In an important development in the region, Angela Merkel was elected to a third term as German chancellor by the lower house of parliament, paving the way for her grand coalition government. Standard & Poor’s downgraded the European Union’s long-term credit rating one notch, citing weaker creditworthiness among the 28-member bloc. S&P lowered its long-term issuer credit rating on the EU to AA+ from Triple-A, with a stable outlook, while affirming the short-term rating at A-1+. Meanwhile, the Bank of England warned that recent strong gains in the pound could pose a threat to Britain’s economic recovery. The minutes of the bank’s December meeting stated that while sterling’s 2% appreciation during the previous month reflected a stronger economic outlook, further significant gains could jeopardize export growth. The central bank added that for the UK’s economic recovery to be sustainable it needs to rely more on export growth and business spending and less on consumer demand. The minutes also noted that
the stronger pound had helped to bring inflation closer to the bank’s target of 2%. Moreover, the euro zone’s current account surplus widened unexpectedly in October to EUR21.8 billion from a surplus of EUR14.9 billion in September. The consumer price inflation in the euro zone held steady in November, unchanged from a preliminary estimate.
ASIAN MARKET:
Asian equity markets exhibited mixed trend during the passing week after the US Federal Reserve said it would start cutting its stimulus next month, in a sign of confidence in the country’s economic recovery. On the regional front, Chinese benchmarks remained the biggest loser, down by over five percent after the country’s manufacturing-sector activity slowed to three-month low, initial results from HSBC’s monthly survey showed. The flash version of the December HSBC/Markit China manufacturing Purchasing Managers’ Index eased to 50.5, down from November’s final reading of 50.8. Hong Kong’s benchmarks too declined around two percent despite the nation’s gross national
income rising to 4.6 percent year-on-year to $550.1 billion in the third quarter, while Gross Domestic Product grew 4.7 percent to $549.7 billion. Bucking the trend, Japanese benchmark surged over three percent during the week after Bank of Japan’s Tankan survey showed an
improvement in Japanese big manufacturers’ business confidence. According to Tankan survey, Japanese big manufacturers’ business confidence improved over the three months to December to its highest level in six years, boding well for Prime Minister Shinzo Abe’s stimulus policies aimed at ending 15 years of grinding deflation. Meanwhile, the country’s exports climbed 18.4 percent y-o-y, beating expectations for an increase of 18.0 percent following the 18.6 percent jump in the previous month. Imports spiked by an annual 21.1 percent versus the forecasted increase of 21.4 percent following the revised 26.2 percent jump a month earlier.
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