Saturday, 12 October 2013

Weekly Market Update - 7 Oct to 11 Oct 2013

This was a week which started the earnings season and quite as expected, the individual stocks are going to influence the markets for some time to come. The markets started the week with a positive bias and ended the week at a high note on the back of good Infosys Q2 results.
The highlights of the week are :

  • RBI cuts MSF by 50bps. Agrees to lend banks for 7-day and 14-day period instead of overnight.
  • Trade deficit narrows to 30-month low. 
  • IIP at 0.6% in August.

The RBI began the week on a good note by cutting the MSF by 50bps signalling its comfort with the present currency stability. Markets felt confident that the days of liquidity tightening may be over now and reacted with a spurt.

Further boosting the mood in the week was the better than expected trade deficit numbers which fell to a 30-month low for the first time. At a low $6.8bn, the trade deficit numbers scripted a whole new story for the markets. Exports rose by 11.2% and imports have fallen by 18.1%, thus narrowing the trade deficit. This is a good boost to the measures taken by the govt. and the RBI to cut our import bill. The markets have started buzzing with the rumours that the Current Account Deficit (CAD) may well be curtailed below the govt.’s red-line of $70bn.

However, the IIP numbers for August stood at a paltry 0.6% signifying that the factory output still needs to play catch-up. Maybe the next month’s numbers will be painting a better picture on this front too.

Investor confidence seemed to be in full swing with the sensex rising 255pts on the last day of trade on the back of good Q2 results from Infosys. As if to play fiddle to the positive mood, the RBI governor clarified at the panel meeting at IMF that India would not need funds from the IMF for the next five years. This effectively shuts out any pessimistic views about India’s growth story in the long run and also IMF’s own overtly-conservative growth projection of India at 3.8% in 2013-14.

The positive mood built up during this week is certainly going to have positive vibes throughout the month. One possible spoilsport may be the decision on US debt-ceiling which is due on 17-18 Oct. Otherwise the earnings season is in the earnest and individual stock performances to be watched for market swings.