Nifty, Sensex in an uptrend: Weekly Market Report

The indices will move up as long as the rupee remains stable, but the gains in Nifty above 5,700 may be limited

Raghuram Rajan the new governor of Reserve Bank of India (RBI) announced his plans for strengthening the battered rupee. This helped markets close positive for the second consecutive week. The Sensex rose 650 points (or 3.49%) to close this week at 19,270 while the Nifty settled at 5,680, rose 209 points (or 3.81%).


The BSE 30-share Sensex closed positive on Monday, ignoring negative news of the GDP growing a mere 4.4% in Q1, the slowest growth since the January-March quarter of 2009. The HSBC Manufacturing PMI, sank to 48.5 in August from 50.1 in July, the lowest reading since March 2009.


On Tuesday, Sensex broke the trend of four days of consecutive gains and ended in the negative, on the rising fears about a potential US military strike on Syria, which may lead to steep rise in the crude oil prices. The rupee reached closer to its all time low of Rs68.80 per US dollar.


Sensex rose on Wednesday despite news of the HSBC Services PMI slipping to 47.6 in August, the weakest since April 2009, from 47.9 in July as new business dried up. Next day, steps taken by RBI to stabilize the currency and the measures to reassure investors by the new governor of RBI helped the market to close positive for the second consecutive session. The positive move continued on Friday when Sensex closed above 19,000.

The top two gainers among the other indices on the NSE were Bank Nifty (10%) and Finance (8%) while top two losers were IT sector (2%) and Media (1%).


Among the Nifty-50 stocks, the top five gainers were BHEL (20%), I C I C I Bank (19%), IndusInd Bank (16%), ONGC (16%) and Jaiprakash Associates (15%) while the top five losers were Sesa Goa (7%), Tata Power (7%), Hero MotoCorp (6%), Infosys (2%) and H C L Technologies (2%).


Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors were:


Top ML sectors


Worst ML sectors


Oil & Gas






Consumer Products








Software & IT Services


Financial Services






Sensex, Nifty up move may continue: Friday closing report
The up move will be in doubt if the Nifty closes below 5,630 
The indices opened positively but soon plunged into the red. In the mid-morning session, indices regained strength and edged higher. Today, for the first time after 15 trading sessions, the Sensex and Nifty managed closing above the psychological levels of 19,000 and 5,600 respectively.
The Sensex opened at 19,072 while the Nifty opened at 5,617. The Sensex moved in the range of 18,929 and 19,294 and closed at 19,270 (up 290 points or 1.53%) while the Nifty moved in the range of 5,566 and 5,689 and closed at 5,680 (up 87 points or 1.56%). The National Stock Exchange (NSE) recorded a volume of 70.57crore shares.
On NSE, the top gainers among other indices were PSE (3.12%); Infra (3.06%); Bank Nifty (2.88%); Finance (2.66%) and Energy (1.89%). The top five losers were Media (0.69%); PSU Bank (0.64%); MNC (0.46%); Auto (0.23%) and Realty (0.10%).
Of the 50 stocks on the Nifty, 32 ended in the green. The top five gainers were 
ICICI Bank (7.64%); Bharti Airtel (5.81%); Cipla (5.23%); ONGC (5.15%) and
Asian Paints (4.83%). The top five losers were Bank of Baroda (2.70%); Coal India (2.49%); Tata Power (2.41%); Sesa Goa (2.38%) and Lupin (1.90%).
The stock market will remain closed on Monday on account of Ganesh Chaturthi.
Foreign minister Salman Khurshid, while interviewed by a business channel, said that the oil minister, Veerapa Moily, will, on 16 September 2013, announce plans for lowering fuel consumption. Today, the partially convertible rupee was hovering at 65.71, stronger than its close of 66.01/02 recorded on Thursday, 5 September 2013.
Except for Nikkei 225 (down 1.45%), NZSE 50 (down 0.16%) and Taiwan Weighted (down 0.06%) all the other Asian indices ended in the green. Shanghai Composite was the top gainer at 0.83%.
Leaders of the world's biggest economies at the G20 summit in Russia struggled with threats to the global economy because of the ongoing Syrian conflict and possibility of an invasion, as well as a potential stimulus exit of US Federal Reserve. The BRICS countries pledged yesterday in St Petersburg to create a $100 billion pool of currency reserves to guard against economic and currency shocks. China will contribute $41 billion to a pool of BRICS reserves, with Russia, India and Brazil each adding $18 billion and South Africa providing $5 billion, according to a statement issued yesterday. The BRICS countries, which also agreed to seed a new development bank with $50 billion of capital, are seeking a shield against unintended negative spillovers from unconventional monetary policies in developed economies, according to statements issued during the G20 summit. .
Japan and India have decided to expand a bilateral currency swap facility to $50 billion from $15 billion, the two countries announced on Friday after bilateral talks on the sidelines of a G20 summit. The expanded facility would boost the financial backing for the rupee.
US indices closed in the green on Thursday. On one hand there was solid US jobs and service sector data while on the other hand plunging orders for factory goods highlighted uncertainty around the economic outlook.
The influential US nonfarm payroll report for August 2013 is due for release today, 6 September 2013. The employment numbers will be keenly watched given the implications for the timing of the Federal Reserve's plan to begin slowing the pace of its monetary stimulus.
The pace of growth in the US services sector accelerated in August to its fastest pace in almost eight years, an industry report showed on Thursday. The Institute for Supply Management (ISM) said its services index rose to 58.6, its highest since December 2005, from 56 in July. The reading handily topped economists' consensus expectations for 55 and beat the high end of forecasts.
Payroll provider ADP found that American businesses added 176,000 jobs in August. That was just below the 198,000 added in July but close to the past year's average monthly gain.
European indices were trading in the red while the US Futures displayed mix performance.
The international credit rating agency Moody's said Friday that it has upgraded its outlook for Germany's banks as they have improved their financial strength and stemmed their losses. "The outlook change reflects that, following a year of reduced crisis-related losses and improved capital strength, German banks are now more able to withstand shocks," it said.
German exports unexpectedly fell in July, even as economic recovery gathered pace in the 17-nation Euro area, its biggest trading partner. Exports, adjusted for working days and seasonal changes, fell 1.1% from June, when they gained 0.6%, the Federal Statistics Office in Wiesbaden said today.


Surprise pick-up in credit growth in India?

Higher credit growth is typically seen as a sign of better growth in India, but it is believed that the sudden surge reflects ongoing substitution from external borrowing into bank credit due to a weaker rupee, says Nomura in its research note

Credit growth in India has suddenly picked up. After falling through 2012, non-food credit growth has risen from a low of 13.8% y-o-y in April to 17% as of 23 August. This is according to a research note prepared by Nomura Financial Advisory and Securities (India) Private Limited. The non-food credit growth rate over the last six years is shown in the chart below:

But this does not give the complete picture. According to Nomura, higher credit growth is typically seen as a sign of better growth, but it is believed that the sudden surge reflects ongoing substitution from external borrowing into bank credit due to a weaker rupee. Money raised through commercial paper is being substituted by working capital from banks given higher short-term rates, and firms may be drawing down their credit lines in fear of a future liquidity squeeze.

This credit growth is a short-term observation. Nomura adds that given the ongoing demand destruction, it is unsustainable. This demand for credit will fall sharply once this substitution phase passes, concludes the research note.


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