Saturday, 13 July 2013

Weekly Market Update - 8 Jul to 12 Jul 2013

The markets started with a volatile note at the start of the week. It was soon evident that it is now all important to tame the rupee which started to fall wildly, even crossing the 61/$ mark. As steps were taken to stem the fall and as some good news poured in towards the end of the week, the indices saw a rise with nifty closing above the 6000 mark. The rupee too saw some recovery to close at 59.56/$.
The highlights of the past week are as follows :

  • Steps to stem the rupee fall start in the earnest as it is now evident that the problem cannot be wished away.
  • US fed chief soothes world markets by saying that monetary policy will be accommodating.

It has become evident that an economic crisis of sorts is looming if the fall in currency is not stemmed at the earliest. Hence the RBI and Govt. machinery have started steps in full swing to check the downward spiral of rupee :

  • RBI bans banks from trading in currency derivatives. SEBI increases margin for non-bank traders.
  • RBI asks OMCs to bid for dollars from a single bank (SBI) to curb volatility of currency.
  • The finance ministry has revealed that the country has foreign reserves which can sustain only about 6 months of imports. Govt. mulls floating sovereign bonds to replenish the reducing foreign reserves. 
  • Further increasing the import duty on Gold is also on the cards.

In the second part of the week the markets saw a big upside. This was mainly due to the fact that US Fed chief has said that monetary policy will be accommodating. Essentially this is being interpreted to say that the Fed will not rollback stimulus package in a hurry. The Fed chief has also said that record low interest rates will continue even if unemployment falls to 6.5%.

The market mood was further enhanced due to the better than expected Q1 results of Infosys. The nifty surged ahead to close above the 6000 mark which is seen by many as a psychological level.

At the end of the week the govt. released the economic data. The June CPI increased to 9.87% from the earlier 9.31%. June CPI food inflation was at 11.85%. This has again caused some worry of increasing inflation. IIP no. was also depressing as it contracted by 1.6% which is at a 11 month low. One positive, however, was that the trade deficit which till recently was at a 7-month high dropped to $12.2bn in June. The import of Gold and Silver dropped 22.8% YoY at USD 2.45bn in June which is another positive.

Which way the market will go the next week will be difficult to say. Surely breaching the 6000 mark is a big positive and the momentum may keep the markets positive for sometime. The economic data on the other hand is mixed and does not really give any reason to cheer. The earnings season has started and there will be the effect of individual stocks too on the performance of the index. All in all, it is safe to say that positivity may continue but the mood is very fragile and in the absence of more positive news, we may see some fall too in the coming days.