ShareKhan Newsletter Blog

 Market Commentary 

Bulls get hold of Bears this Week on RBI's move 

Benchmarks rose after RBI boosted investor sentiments by keeping key rates unchanged in its mid-quarter monetary policy review. The Sensex shut shop gaining 1.75% while the Nifty rose 1.71% for the week ended December 20, 2013.

Major Headlines for the week:

• November WPI Inflation at 7.52%
• Forex reserves up $4.4 bn as of December 6
• RBI mid-quarter policy review; keeps repo rate unchanged
• External borrowings drop to US$1.93bn in October 2013 

Indian indices:

• Welcome to the 'Weekly Market Wrap' for December 21, 2013. Indian stocks surged after the Reserve Bank of India (RBI) surprised markets by keeping its main lending rate viz. the repo rate unchanged at 7.75% after mid-quarter monetary policy review on Wednesday, December 18, 2013. Investor sentiment was also boosted by stock market regulator Securities and Exchange Board of India's (Sebi) decision to rationalize the rules on trading of thinly-traded stocks. The barometer index, the S&P BSE Sensex, regained the psychological 21,000 mark. The market fell in three out of five trading sessions in the week just gone by.
  
  The BSE Mid-Cap index rose 3.17% and the BSE Small-Cap index rose 2.62%. Both these indices outperformed the Sensex.
  
  The S&P BSE Sensex rose 364.14 points to 21,079.72. The 50-unit CNX Nifty rose 105.85 points to 6,274.25.

Major events:

• India's headline inflation surged past analysts' expectations to a 14-month high of 7.52 percent in November, government data showed on Monday, after food prices rose at the fastest clip since June 2010. 

• RBI's stance turned out to be a pleasing surprise to the street which had factored in a 25bps repo rate (the rate at which RBI lends money to commercial banks) hike and was speculating on whether the RBI would hike cash reserve ratio (CRR), which is the minimum fraction of the total deposits which commercial banks have to keep with RBI. Repo rate remained unchanged at 7.75%, reverse repo rate stayed at 6.75%, MSF and Bank rate at 8.75% and CRR at 4%

Weekly market trend from December 16, 2013 - December 20, 2013:

• Indian shares ended choppy session in red on December 16, 2013; as higher-than-expected November wholesale price inflation upped the probability of a rate hike by the RBI. The BSE Sensex slipped 0.27% and the Nifty was down by 0.22%. Markets slumped for a fifth consecutive session on Monday as investors pared positions in blue-chip stocks raising expectations of a rate hike by the central bank when it meets on December 18 for monetary policy review and the U.S. Federal Reserve's policy meetings later this week. The S&P BSE Sensex shed 56.06 points to close at 20659.52 while Nifty slipped 13.70 points to end at 6154.70

• Indian shares fell for a sixth consecutive session on December 17, 2013; as rate sensitive stocks such as HDFC Bank continued to tumble a day before the RBI is widely expected to raise interest rates at its policy review. The BSE Sensex slipped 0.23% and the Nifty was down by 0.25%. Benchmarks ended flat with a negative bias on Tuesday as investors turned cautious and booked profits in bank shares on fears that the RBI might hike key rates by over 25 basis points on the back of rising inflation levels. The S&P BSE Sensex shed 47.38 points to close at 20612.14 while Nifty slipped 15.65 points to end at 6139.05

• Indian shares snapped 6-day losing streak on December 18, 2013; led by gains in rate-sensitive stocks after the central bank surprised investors by keeping rates on hold despite talking tough on inflation. The BSE Sensex rose 1.20% and the Nifty was up by 1.27%. Benchmark closed on strong note as hope rally pushed frontline stocks to higher levels on Wednesday. Indices were euphoric as Government bonds and stock markets rallied after the Reserve Bank of India (RBI) surprised investors by keeping rates on hold despite surging in retail and wholesale price inflation, but it kept the door open to more rate hikes saying further moves will be data-driven. The Sensex closed at 20,859.86, up by 247.72 points, while the Nifty rose by 78.10 points to close at 6,217.15 

• Indian shares fell on Thursday, December 19, 2013; marking their seventh losing session out of eight as blue chips such as ICICI Bank fell after the U.S. Federal Reserve announced the start of its tapering, raising concerns about foreign investor sales. The BSE Sensex slipped 0.73% and the Nifty was down by 0.81%. Benchmark shares indices ended lower amid fears that foreign institutional investor would reduce their allocations to emerging markets including India thereby hurting incremental inflows after the US Federal Reserve Bank announced gradual reduction in its monetary stimulus measures. The S&P BSE Sensex shed 151.24 points to close at 20708.62 while Nifty slipped 50.50 points to end at 6166.65

• Indian shares marked their biggest single-day gain in nearly a month on Friday December 20, 2013; as Reliance Industries jumped after the government allowed it to charge higher prices for gas from April. The BSE Sensex rose 1.79% and the Nifty was up by 1.74%. Benchmark indices ended firm with Sensex closing above 21,000 mark led by buying in heavyweight sectors like oil & gas, banks and technology. Gains in IT and Oil and Gas heavyweights helped the indices to remain in the positive territory for the entire day. The Sensex closed at 21,079.72, up by 371.10 points, while the Nifty rose by 107.60 points to close at 6,274.25

Global indices:
Majority of the global markets closed on a positive note except Shanghai Comp which fell by 5.07% and Hang Seng dropped by 1.87%. Top Gainers: Dax100 rose by 4.37%, CAC 40 surged 3.30% and Nikkei gained 3.03%.

Sectoral and stock screening:
All the 13 sectoral indices closed in the green zone in the week gone except S&P BSE Bankex down 0.61%. The topmost gainers were - S&P BSE IT surged by 5.79%, followed by S&P BSE HC which rose 5.25%, S&P BSE Teck up 4.86% and S&P BSE Auto gained 2.68%.

Looking at the 'A' group stocks, the top three gainers of the week were - Aurobindo Pharma up by 26.97%, GlaxoSmithKline Pharma rose 19.99% and Jammu & Kashmir Bank up by 12.55%. The top three losers of the week were - Sobha Developers fell by 9.23%, Pipavav Defence slipped by 9.06% and Gitanjali Gems dipped by 7.31%.

FII/MF activity

The foreign institutional investors (FIIs) have been the net buyers of the Indian stocks to the tune of Rs5188.00 crore and the domestic investors bought Indian shares worth a net of Rs465.70 crore as on December 19, 2013.