Saturday, 6 July 2013

Weekly Market Digest 01 Jul to 05 Jul 2013

The upside of the last week had its aftereffects in the beginning of this week too. But a mixture of news and the woes of falling rupee persisted and all in all it was a pretty unpredictable week filled with market volatility. The main highlights of the week were as follows :

  • HSBC June PMI stands at 50.3%.
  • Rupee more than 60/$ for most part of the week.
  • 32% above normal rainfall in June brings cheers. 
  • Telecom commission approves 100% FDI in telecom sector.
  • Govt. passes national food bill ordinance.
  • FM asks PSU banks to cut base lending rates.
  • Raise in oil prices expected due to unrest in Egypt.
  • 26 aspirants to new banking licences to be issued by RBI.

The market remained rangebound throughout the week as mixture of data flowed in and no big developments during the week. The falling rupee was the worst performing currency and stayed at more than 60/$ for the most part.

The HSBC June PMI stood at 50.3% barely hovering on what is seen as the border of expansion and contraction of economy. The data also showed that the domestic demand had weakened. Adding to the negative news was the expectation that the political unrest in Egypt may lead to rise in oil prices which in turn may play more havoc with the depreciating rupee. This is in addition to the already entrenched fears that the govt. may push fuel prices in response to the depreciation in rupee value.

There was some positive news too. We are particularly blessed with good monsoons this year with met department reporting that there has been 32% above normal rainfall in June with good distribution throughout the country and the weather may be favourable in July and August months too. This will certainly be good for agriculture. The favourable conditions in agriculture may carry over to the economy as a whole leading to better growth in the second half.

In a further development, the telecom commission approved 100% FDI in the sector. Industry watchers felt that it will be good for the sector which is awaiting some steps to ease its debt burden.

In a bid to stimulate growth, the FM has asked the PSU banks to cut their base lending rates. This was due to the view held by some that high interest rates were one of the reasons for slowing the economic growth. Though it is better for the industry, the banking stocks felt the pressure of this directive in the immediate aftermath.

The last two trading sessions ended on the upside on the back of expectations of good US job data and other global cues. Like this week, the next week also may see some positivity in the first two trading sessions. What happens after that depends on whether the Sensex and Nifty maintain themselves above their key technical levels. Also we can expect a lot of stock specific action as the earnings season will be starting shortly.