Indian markets consolidated in an extremely short trading week and managed a flat closing. Coming from a long weekend, while there was consolidation on Tuesday, for the next two days markets showed extreme volatility, plunging and then bouncing back to cover the losses. There were weak macro data that kept the markets under pressure throughout the week, amid some sign of selling by FIIs on uncertainty of poll outcome. Traders started the week on a somber note reacting negatively to the disappointing IIP numbers announced late Friday, which slipped to its 9-month low, showing de-growth of 1.9% in February as compared to marginal expansion of 0.1% in January. Later there were other shocks too, as WPI, accelerated to three months high of 5.70% in March, 2014 from its multi month low level of 4.68% (provisional) seen in February, 2014 and as compared to 5.65% during the corresponding month of the previous year. Also, the Consumer Price Index (CPI) based inflation too edged higher to 8.31% in March 2014 from 25-month low level of 8.10% in February, limiting any hopes of any rate cuts by the Reserve Bank of India. Markets turned to their worst on Wednesday and plunged by over a percent and benchmark indices tumbled below their crucial 6,700 (Nifty) and 22,300 (Sensex) levels. Markets defying the positive global cues went into tailspin as traders resorted to profit booking at higher levels on mixed set of earnings announcement and weak macro economic data. However, there was a complete turnaround on the last trading session and markets regained their vigor before going for a long weekend after Federal Reserve Chairman Janet Yellen insisted that the Fed will remain highly accommodative until employment and inflation reach healthier levels. The Bombay Stock Exchange (BSE) Sensex lost 0.12 points to 22,628.84 during the week ended April 18, 2014. The BSE Midcap index was up by 0.83 points or 0.01% to 7,339.29, while the Small-cap index up by 0.83 points or 0.01% to 7,524.01. The Nifty rose by 3.10 points or 0.05% to 6,779.40. On the National Stock Exchange (NSE), CNX Nifty Junior down by 158.15 points or 1.14% to 13,657.90, CNX mid-cap down by 21.00 points or 0.24% to 8,833.40 and Bank Nifty down by 52.95 points or 0.41% to 12,787.25, while CNX IT up by 78.20 points or 0.84% to 9,390.20.
INDUSTRY & ECONOMY NEWS
India's share in global exports and its ranking amongst top exporters remained unchanged in 2013. Although, the country posted a 5 per cent rise over the previous year, by exporting goods worth $312 billion in 2013, its share in world exports remained the same as the previous year i.e. 1.7 per cent. Additionally, the country is ranked 13th amongst top exporting countries as opposed to last year's ranking of 19, but the improvement is only on paper. This development was on account of the European Union being considered as a single member in contrast to the earlier practice of EU member-countries being ranked separately. World Trade Organization (WTO) in its trade forecast report, flagged country's growing Current Account Deficit (CAD) as an area of concern and also pointed country's vulnerability to financial market volatility. However, the report upgraded the expected world trade growth for 2014 to 4.7 per cent from 4.5 per cent estimated earlier.
WORLD MARKET BEHAVIOUR DURING THE WEEK
US MARKET: The US markets moved higher in the passing week after Fed's summary of economic conditions, known as the Beige Book, stated that the US economy picked up in most of the country as the weather improved. The Beige Book, a collection of anecdotes about the economy published by the Federal Reserve, stated that 10 of its 12 districts saw improvement mostly of the modest to moderate variety - but there was a decline in activity in the Cleveland and St. Louis regions. The return of the consumer was seen in most districts, as auto sales improved, a situation that harder data, like the retail-sales report, confirms. The Beige Book is based on information collected from February 24 to April 7, and this one was written by the Richmond Fed. Separately, Federal Reserve Chairwoman Janet Yellen reiterated that the decision on interest rates would be based on employment and inflation. Yellen added that a strong economy with full employment and stable prices is tantalizingly on the horizon. She enlightened that the central bankers and many economists see a return to full employment and stable prices by the end of 2016. There were encouraging reports on the economy front. The number of people applying for unemployment-insurance benefits is sticking close to the lowest level since 2007, signaling that employers are maintaining a slow pace of layoffs. The initial claims for unemployment-insurance benefits reached 304,000 in the week that ended April 12. Industrial production grew more than
forecast in March, and February's data was revised higher to show the biggest monthly advance since May 2010. Industrial production grew 0.7% and February's gain was revised to 1.2% from an initially reported 0.7%.Capacity utilization rose in March to 79.2% from an upwardly revised 78.8% in February. Besides, adding to the sense of strength was a sharp upward revision to February sales. Excluding the 3.1% rise in auto sales, retail sales rose 0.7%, the fastest pace since February 2013. Auto sales increased 3.1% in March, the biggest rise since September 2012.
On the other hand, consumer prices ticked up slightly in March pushed up by higher costs for shelter and food. The consumer price index increased 0.2% in March after a 0.1% gain in February. Excluding volatile food and energy prices, so-called core prices ticked up 0.2%. Core prices moved up 1.7% over the 12 months, up from 1.6% in February. Additionally, the Empire State manufacturing index slipped to 1.3 in April from 5.6 in March. The new-orders and inventories components both fell to negative territory from positive ground, while employment indexes showed a modest rise in employment levels and a slight increase in the average workweek.
EUROPEAN MARKET: The European markets were traded in jovial mood during the passing week after Mario Draghi signaled that the European Central Bank is getting ready to unleash a new unconventional monetary policy in a bid to fight low inflation. The ECB president indicated the strengthening of the euro requires further monetary stimulus. The comment suggests that the ECB's next move will take it where no big central bank has gone before, cutting one of its key interest rates below zero. The rise of the single currency's exchange rate is one of the main reasons euro zone inflation is at a dangerously low level of 0.5%. Draghi's words came after he was pressurized over the dangers of allowing inflation to slide lower - by the IMF, finance ministers and central bank governors from all over the world. Germany's Economics Ministry stated that it is maintaining the country's growth forecast of 1.8% for 2014, reiterating its view that domestic demand will drive growth. Gross domestic product is expected to expand by 2% in 2015. Investor confidence in Europe's largest economy however fell for the fourth month in a row in April, as concerns about Ukraine weighed on sentiment. The six-month expectation index hit 43.2 in April, falling from 46.6 the previous month. The assessment of current conditions rose to its highest level in nearly three years in April, with a reading of 59.5, up from 51.3 in March.
Spanish banks borrowed 184.9 billion euros ($256.8 billion) from the European Central Bank in March, down 3% from February, marking the nineteenth consecutive month of falls. Spain's banks took an all-time high of 411 billion euros from the ECB in August 2012, the year the country was granted 41 billion euros in financial aid for its troubled lenders. Euro zone CPI remained unchanged at a seasonally adjusted annual rate of 0.5%, from 0.5% in the preceding month while Euro zone core CPI fell to a seasonally adjusted annual rate of 0.7%, from 1% in the preceding month. Euro zone current account fell to a seasonally adjusted 21.9B, from 25.4B in the preceding month whose figure was revised up from 25.3B. Euro zone industrial production rose to a seasonally adjusted 0.2%, from -0.2% in the preceding month.
ASIAN MARKET: Indian equity benchmarks snapped the passing week mostly in the red with fresh tension in Ukraine prompting investors to shun cyclical sectors such as travel, auto and technology. Geopolitical concerns returned to the forefront after pro-Russian separatists ignored an ultimatum to leave occupied government buildings in eastern Ukraine as a threatened military offensive by government forces failed to materialize. Chinese Shanghai remained the top loser among the regional gauges, down by around one and a half percent after Premier Li Keqiang said China is not considering strong stimulus and reiterated that economic growth a bit higher or lower than 7.5% is a reasonable range. On the economic front, Chinese economy grew at its slowest pace in six quarters in the first quarter of 2014 with signs of waning momentum already prompting limited government action to steady the world's second-largest economy.
The country's annual economic growth slowed between January and March 2014 to 7.4% from 7.7% in the previous three months while Chinese Industrial Production rose to 8.8%, from 8.6% in the preceding month.Meanwhile, the nation's Retail Sales rose to an annual rate of 12.2%, from 11.8% in the preceding month while Chinese Fixed Asset Investment fell to a seasonally adjusted 17.6%, from 17.9% in the preceding month.
On the flip side, Japanese Nikkei surged over three percent as Japanese Household Confidence rose to a seasonally adjusted annual rate of 37.5. Sentiments also got boost after Bank of Japan's Governor Haruhiko Kuroda stated that aggressive easy policy launched last April will continue and will take Japan out of years of deflation. Kuroda added that the outlook for consumer prices was up, with the year-on-year rate in core consumer prices expected to be around 1.25% for some time, not including a sales tax hike on April 1 to 8% from 5%. Kuroda enlightened that BOJ's mantra will continue with quantitative and qualitative easing, aiming to achieve the price stability target of 2%, by 2015
EUROPEAN MARKET: The European markets were traded in jovial mood during the passing week after Mario Draghi signaled that the European Central Bank is getting ready to unleash a new unconventional monetary policy in a bid to fight low inflation. The ECB president indicated the strengthening of the euro requires further monetary stimulus. The comment suggests that the ECB's next move will take it where no big central bank has gone before, cutting one of its key interest rates below zero. The rise of the single currency's exchange rate is one of the main reasons euro zone inflation is at a dangerously low level of 0.5%. Draghi's words came after he was pressurized over the dangers of allowing inflation to slide lower - by the IMF, finance ministers and central bank governors from all over the world. Germany's Economics Ministry stated that it is maintaining the country's growth forecast of 1.8% for 2014, reiterating its view that domestic demand will drive growth. Gross domestic product is expected to expand by 2% in 2015. Investor confidence in Europe's largest economy however fell for the fourth month in a row in April, as concerns about Ukraine weighed on sentiment. The six-month expectation index hit 43.2 in April, falling from 46.6 the previous month. The assessment of current conditions rose to its highest level in nearly three years in April, with a reading of 59.5, up from 51.3 in March.
Spanish banks borrowed 184.9 billion euros ($256.8 billion) from the European Central Bank in March, down 3% from February, marking the nineteenth consecutive month of falls. Spain's banks took an all-time high of 411 billion euros from the ECB in August 2012, the year the country was granted 41 billion euros in financial aid for its troubled lenders. Euro zone CPI remained unchanged at a seasonally adjusted annual rate of 0.5%, from 0.5% in the preceding month while Euro zone core CPI fell to a seasonally adjusted annual rate of 0.7%, from 1% in the preceding month. Euro zone current account fell to a seasonally adjusted 21.9B, from 25.4B in the preceding month whose figure was revised up from 25.3B. Euro zone industrial production rose to a seasonally adjusted 0.2%, from -0.2% in the preceding month.
ASIAN MARKET: Indian equity benchmarks snapped the passing week mostly in the red with fresh tension in Ukraine prompting investors to shun cyclical sectors such as travel, auto and technology. Geopolitical concerns returned to the forefront after pro-Russian separatists ignored an ultimatum to leave occupied government buildings in eastern Ukraine as a threatened military offensive by government forces failed to materialize. Chinese Shanghai remained the top loser among the regional gauges, down by around one and a half percent after Premier Li Keqiang said China is not considering strong stimulus and reiterated that economic growth a bit higher or lower than 7.5% is a reasonable range. On the economic front, Chinese economy grew at its slowest pace in six quarters in the first quarter of 2014 with signs of waning momentum already prompting limited government action to steady the world's second-largest economy.
The country's annual economic growth slowed between January and March 2014 to 7.4% from 7.7% in the previous three months while Chinese Industrial Production rose to 8.8%, from 8.6% in the preceding month.Meanwhile, the nation's Retail Sales rose to an annual rate of 12.2%, from 11.8% in the preceding month while Chinese Fixed Asset Investment fell to a seasonally adjusted 17.6%, from 17.9% in the preceding month.
On the flip side, Japanese Nikkei surged over three percent as Japanese Household Confidence rose to a seasonally adjusted annual rate of 37.5. Sentiments also got boost after Bank of Japan's Governor Haruhiko Kuroda stated that aggressive easy policy launched last April will continue and will take Japan out of years of deflation. Kuroda added that the outlook for consumer prices was up, with the year-on-year rate in core consumer prices expected to be around 1.25% for some time, not including a sales tax hike on April 1 to 8% from 5%. Kuroda enlightened that BOJ's mantra will continue with quantitative and qualitative easing, aiming to achieve the price stability target of 2%, by 2015
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