Weekly Market Update - 29 Jul to 2 Aug 2013

The markets saw a lot of red this week. The RBI not changing key rates in its policy review and no concrete signs of revival of the rupee weighed heavily on the markets and the resulting lack of direction took the market and the rupee downwards. Some of the key highlights this week are as follows :

• RBI monetary policy review leaves the key rates unchanged.
• Cabinet approves the easing of FDI norms.
• NSEL payment crisis. 
• Govt. hikes subsidy rates for exporters to 3%.

The major highlight of the week which inevitably set the trend for the whole week was the RBI monetary policy review. The key rates were left unchanged which was by itself a very disappointing development for the market. Added to this, RBI did not give any time line for rolling back the liquidity curbs that it put in place recently. This gave a sense that there is a long way to go for any turnaround and added to the general sense of disappointment.

Continuing the steps to revive the economy, the cabinet approved various steps to ease FDI in various sectors, notably in retail FDI. Also, subsidy rates for exporters have been hiked to 3% in a bid to boost the exports and curtail the CAD. The categories of exports which are eligible for the subsidy have also been revised to include more goods.

Investor confidence still did not revive and markets remained in the negative. As if adding salt to wounds, the NSEL payment crisis with Rs.5,500Cr worth of trading positions outstanding, resulting in NSEL suspending trading for two weeks, added to the panic in the street.

Nothing seems to be going right for the market and the steps being taken by the RBI and Govt. to curb the slide of the rupee and instill some confidence in investors are proving to be non-events at best.

The coming week may also see some dismal performance as investor confidence is still taking a beating. Already, news is doing the rounds that IIP numbers due to be released on 12th August will be very unattractive with barely any signs of growth. All we can do is to wait and watch for what the govt. and the RBI are planning to do for the revival of the economy.

For seasoned investors and those who take stocks seriously though, it may be a good opportunity to pick some good stocks at very attractive levels after thorough research. Our posts on Timing the Stock Market and Stock Investments and Market Volatility support this line of thought.