Saturday, 14 December 2013

Weekly Market Update - 09 to 13 December 2013

The Sensex and Nifty hit historic highs on the first trading day of the week riding on the back of what was percieved as a good outcome of assembly elections. But, the euphoria did not last long and old fears gripped the markets in a bear hug. Data on IIP and CPI released also aided the disappointment.
The highlights of the past week are :

  • Senex touches historic high of 21326pts on Monday. Nifty follows suit with a closing of 6363pts after touching 6400 mark intraday. 
  • Oct IIP and Nov CPI data released. Paint a bleak picture. Hopes of revival are still a mirage.
  • Trade deficit narrows but exports too fall.
  • Slump in auto sector continues. November too showing a drop.

The markets were expecting a certain outcome of the state elections and when their expectations came true (never mind the possibility of re-elections in Delhi) the markets surged on superficial euphoria. This marked the start of the week but the reality was too quick to catch-up and the coming days were negative.

The first disappointing news was that the growth in exports was at a five-month low at 5.86%. The trade deficit did narrow to $9.2bn owing to the steep fall in imports by 16.37%. The markets were still reading the fine-print behind these figures when SIAM data showed that car sales have fallen by 8% in November continuing its decline for a full year. Expectedly this led to a drag in the auto sector stocks bringing the markets down a little more.

The next couple of days witnessed a negative bias in anticipation of the IIP and CPI data releases. The data though spelt double trouble. The October IIP data showed a contraction of 1.8% smashing hopes of any signals of bottoming-out and revival. The IIP data for October was on a high base, so the extent of alarm over the IIP figure may be too much. The real worry is the CPI inflation which has hit a high figure of 11.24% in November, the highest contributor again being the food inflation. The October CPI too has been revised from 10.09% to 10.17%.

The last trading session saw the markets reacting to the IIP and CPI figures and falling even further. Global cues also firmed the bear grip due to the possibility of early QE taper grew in the wake of good US jobs data.

The next week will see the release of WPI data which may follow the same trend as the CPI data. The markets may start off cautiously with a negative bias as the RBI mid-quarter policy review is due on 18th December. The expectation is that we are in for another round of rate-hikes as the inflation is still way ahead. Just how much of an interest rate hike will be announced remains to be seen. The ballpark figure is a hike of 25bps but anything higher may lead to a steep tumble. We may also finally come to know of any QE taper plans in this week which may also act as a trigger. Overall, the coming week has a lot of negative triggers in store.

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