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Monthly Market: Markets decline 3% in February
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Friday, March 4, 2011 |
| | | Market Commentary | | | | Markets decline 3% in February | | | The start of 2011 was bad and the markets continued its downfall in February on geopolitical tensions, concerns over 2G scam, poor IIP data and foreign funds outflows
 Major news for the month: - December IIP at 1.6% versus 2.7%
- Inflation eases to 8.23% in January
- Indian Economy to grow at 8.75 -9.25% in FY12
- India?s GDP grows by 8.2% in Q3
- Rail Budget 2011: More new trains and no fare hikes
Indian Indices
Bears again took their control over the Indian markets in February 2011. Unrest in Egypt over resignation of President Hosni Mubarak, concerns of political instability over the 2G spectrum scandal after former telecom minister A Raja alongwith his private secretaries and DB Realty?s Managing Director Shahid Balwa were arrested by the Central Bureau of Investigation for their role in the 2G scam coupled with violence in Libya leading to a rise in crude oil prices to a 30-month high level disrupted the investor sentiment. Foreign institutional investors (FIIs), the key drivers of Indian markets, reduced their exposure owing to such tensions leading to a further decline. India?s index of industrial production (IIP) data fell to 1.6% for the month of December 2010 as compared to 2.7% seen in previous month also weighed on the markets.
However, easing inflation for January 2011 at 8.23% from 8.43% seen in December 2010 and India?s gross domestic product at 8.2% for the third quarter provided some support.
On February 25, 2011, India?s Railway Budget and Economic Survey 2011-2012 were tabled. According to the Economic Survey for the year 2011-2012 laid down by the Finance Minister Pranab Mukherjee, the economy is expected to grow at 8.75 -9.25% in FY12. The Railway Budget 2011-2012 was populist at best as passenger fares and freight rates were kept unchanged by the Railway Minister Mamata Banerjee. On the last day of February, Mr Mukherjee presented the Union Budget. As per his view, the economy is set for double-digit growth in coming years and has regained pre-crisis growth momentum
The domestic indices witnessed huge volatility during the month. The Sensex and the Nifty swung 1,395 points and 422 points respectively. During the month, the domestic indices hit the seven-month low level. Wrapping off the month, the Sensex settled at 17823, down by 504 points  or 2.75% and the Nifty fell 173 points or 3.14%, at 5333.
Global indices
All the global indices ended the month in the positive territory except Sensex (down by 2.75%) and Hang Seng (fell by 0.47%). China?s Shanghai Composite was the top performer of the month rising by 4.10%. Following that Japan?s Nikkei and US Nasdaq indices rose by 3.77% and 3.04% respectively.
 Sectoral and stock screening
All the sectors ended the month with losses except BSE Fast Moving Consumer Goods (FMCG) up 1.96%. BSE Realty was the worst performer of the month declining by 11.08%, followed by BSE Health Care (HC) and BSE Capital Goods (CG) down by 8.3% each and BSE Power fell by 8.05%. Rest of the sector indices slid in the range of 0.23-7.21%.
| | | | Going into 'A' group stocks, top three gainers of the month - Welspun Corp surged by 25.81%, Housing Development & Infrastructure (HDIL) rose by 20.15% and Hindustan Copper gained by 17.69%. Top three losers of the month - Punj Lloyd slid by 36.49%, Reliance Communications dropped by 29.85% and Unitech lost by 29.6%.
FII/MF activity
A sharp spike in crude oil prices due to geopolitical tensions in the Middle East and North Africa, kept the FIIs away from Indian markets. The FIIs have sold Indian stocks worth net of Rs4,585.8 crore as compared to net sell of Rs4,812.90 crore seen in January 2011. The local investors remained net buyers this month as they purchased Indian shares worth a net of Rs1,436.4 crore as compared to net buy of Rs199 crore seen in the previous month, a rise of over five times.
| | TOP MOVERS (GROUP A) |  | | | | | | | | Welspun Corp | 190.35 | 25.81 | | | | | Hindustan Copper | 297.40 | 17.69 | | | | | | | | | | | | | |
| FII/MF ACTIVITIES | | | | | | | Gross purchase | 57,851 | 13,203 | | | | | Net investment | -4,586 | 1,436 | | | | | | | | | | | | | | | | FROM SHAREKHAN FUNDAMENTAL RESEARCH DESK | | | | | Focus shifts back to inflation and volatility in crude oil prices: Despite the lack of any significant policy changes or reforms, the finance minister has managed expectations and has not come out with any negative surprises in the budget. With this key event behind us now, the focus has shifted back to inflation and global cues (especially the political tensions in middle east and its fallout on crude oil prices). Given the fragile situation in middle east, we expect the volatility in crude oil prices to conmtinue as a drag on the markets in March also. However, any large down move should be seen as an opportunity to gradually accumulate quality stocks.
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posted by Anonymous @ 2:50 AM  |
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