Saturday, 28 September 2013

Weekly Market Update 23 Sep to 27 Sep 2013

The market started with a bust, continued its lacklustre performance throughout the week and ended with more downside. This in short was the story of the week past.

  • Lacklustre week in markets.
  • Govt. releases borrowing calendar for H2 2013.
  • Forex reserves rise. Respite for Rupee.
  • India’s first strategic oil storage to be ready by Jan 2014.

It seems that the RBI policy review the week before, has driven down the hard realities of the economy to meet the boys on the market. The lacklustre performance of the whole week where market was flat on most days with some intraday volatility, only signifies that nobody is really sure as to what comes next. Expectations are rife that the RBI may raise rates in future policy reviews too, in order to curb inflation further, which will have a negative effect on growth. There is another branch of analysts which feel that there may be no further rate hikes. But, nobody really is expressing the possibility of a rate reduction happening before the year end. With RBI making its intentions clear, it is but natural that market sentiment adjusts to some painful days ahead. The banking stocks led the muted mood in the past week as they were the first to react to the RBI policies.

In a further development, the govt. released the borrowing calendar for the second half of the financial calendar and said that the borrowing will be to the tune of Rs. 2.35LCr and will end by February. The govt. sources have indicated that this will be enough to cap the fiscal deficit at 4.8% and the govt. is committed to the target.

In a respite to the rupee, India’s forex reserves rose by $2.03Bn in the week ended Sep 20th. In the days ahead we may have a much more stable rupee in the market which may have some positive role to play.

India’s first strategic oil storage facility will be ready by Jan 2014 according to the Oil Minister. This facility combined with two more which may come up in the later part of 2014 will be used to store crude oil in order to insulate India from supply side constraints for the short term and give some cushion against price fluctuations.

What happens next week will be interesting to see. The market performance in the last week may be partially attributed to expiry week and profit booking. What happens in the next week will be the real indicator of the market mood and what to expect in the coming weeks. However, we can expect reactionary performance to any global or domestic cues such as any clarity by the Fed on whether it will start monetary tightening by the year end. To get the real pulse of the market, it is necessary to filter out these reactionary performances focus on the market sentiment otherwise.