Saturday, 14 September 2013

Weekly Market Update - 10 Sep to 13 Sep 2013

“The worst may be over for India” is the new punchline doing the rounds in economic circles in the country. So, if you have not heard it yet then better get up to date because this may well become a slogan in the coming days. The past week saw a bullish market on a resurgent streak piggybacking on positive global and domestic cues.

Following are the highlights of the past week:
  • Week starts with Sensex surging 727pts in a single day. Biggest single day gain since 2009.
  • Exports data show a growth of 13% and trade deficit narrows.
  • IIP rises to 2.6% beating expectations. Marginal fall in CPI too.
On the back of previous week’s positive mood, mostly created by the new RBI governor’s maiden speech and key announcemnts, the markets started this week with a bang. The Sensex posted a rise of 727pts in a single day. It was the biggest rise in a single day since 2009. The reasons, apart from the positive announcements by the RBI were, the US taming down its intentions of offensive on Syria which gave a respite to the international crude prices, stabilising rupee and to some extent short covering.

Bolstering the mood was the data which came in later showing that the exports have boosted to 13% and consequently the trade deficit narrowed to $10.91. This gave a further impetus to the markets to continue the positive streak. Towards the end of the week, the markets did show some marginal downside on the back of profit booking and also as investors and traders were cautious about the upcoming Federal Open Market Committee (FOMC) meeting and the maiden monetary policy review by RBI governor Raghuram Rajan on Sep 20th.

In other developments, the IIP numbers for july stood at 2.6% at a 4-month high beating expectations. the CPI also moderated to 9.52% in August from the earlier 9.64%. The Prime Minister’s Economic Advisory Council (PMEAC) revised its growth forecast to 5.3% from the earlier 6.4% which is still very optimistic. The PMEAC has cited good monsoons and the hope of revival of industry as reasons for such an optimistic forecast.

The next week may see the markets reacting to the positive IIP and CPI numbers and also to the realistic forecast given by the PMEAC. The other development that is going to weigh in on the markets is the FOMC meet and RBI monetary review. Though analysts are saying that there may not be any extreme steps taken and also that the effect of rollback of US monetary stimulus has already been factored in by the markets, it is nonetheless going to give some cautious note. We can expect some more dramatic measures in the RBI policy review and going by what the governor has said, we may need to be ready for some unpopular measures too.