Nifty, Sensex to enter a corrective period

After four weeks of rally, there is not much of trigger left to take the market higher. A period of profit-booking and correction is likely to set in

This week was full of surprises and extreme volatility with US Fed abstaining from tapering its monetary stimulus while Reserve Bank of India (RBI) making changes to its monetary policy by increasing the repo rate. We believe that the market will settle into a period of lower volatility. The indices may correct either on Monday or on Tuesday. However, the first sign of it will be a close below 5,930, followed by a break of 5,800.


The BSE 30-share Sensex rose 531 points (or 2.69%) to close the week at 20,264 while the Nifty settled at 6,012, up 162 points (or 2.76%). This is the fourth consecutive week of positive closing.


The Sensex closed marginally higher on Monday, after hitting an intra day high, highest since 25 July 2013. Market which opened on a positive note on the back of Larry Summers withdrawing his nomination to lead the US Federal Reserve, was pulled down post the announcement of inflation data. On Tuesday and Wednesday, the Sensex ended in the positive again ahead of the monetary policy of Federal Reserve of the US and the policy announcement of the RBI on the 20th September. With the US Fed not to immediately cut back on the monetary stimulus, the Sensex, on Thursday, hit a high, highest since 11 November 2010 and closed in the positive for the fourth consecutive session. However, the RBI raised its key policy rate on Friday, much against market expectation. The repo rate was raised by 25 basis points to 7.5% from 7.25% which made Sensex break its four days of positive move and fall by 383 points.


With the US Fed refraining from reducing the economic stimulus, the government is looking at an opportunity to step up growth to 6.5% by March 2014, Dipak Dasgupta, the finance ministry's principal economic adviser told Reuters. The government's current growth forecasts range from about 5.3% to 6% for the fiscal year ending in March 2014.


Among the other indices on the NSE, the top two gainers this week were Bank (5%) and FMCG (5%) while the loser were Realty (3%) and Smallcap (1%).


Among the Nifty-50 stocks, the top five gainers were


Grasim Industries (12%); Maruti Suzuki (12%); BPCL (11%); Asian Paints (10%) and G A I L (8%) while the top five losers were Ranbaxy (27%); BHEL (5%); Hero MotoCorp (3%); D L F (3%) and Sesa Goa (3%).


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


Top ML sector


Worst ML sector










Telecom services




Consumer Products






Real estate




Fitch Ratings cut India's growth forecast for 2013-14 to 4.8%

Fitch said that the scope of India's economic growth has been rendered by the falling rupee

Fitch Ratings cut India's growth forecast for 2013-14 to 4.8% from its earlier estimate of 5.7%. The agency also slashed the projection for the next financial year to 5.8% from 6.5% projected earlier, “underlining the severity of the growth shock.”


The agency said that the scope of India's economic growth has been rendered by the falling rupee.


“The prospects for a swift turnaround in the economy have been further dented by the sharp 20% depreciation in the exchange rate since the end of May due to increased financial market concerns over India’s large current account deficit,” said Fitch Ratings in its 'Global Economic Outlook' report released on Thursday.


On the fiscal front, it said that the government is likely to cut budget expenditures, other than fuel subsidy, to meet its fiscal deficit target of 4.8% of the GDP.


Nifty, Sensex suffer first major reverse over the last two weeks: Friday closing report

The indices may struggle for a day before a correction starts

Today the domestic indices opened cautiously ahead of the mid-quarter policy review. The market was moving flat until the Reserve Bank of India (RBI) came in with its surprise decision of raising its key policy rate when the indices crashed and hit its days low in the pre-noon session. The market recovered a lot of ground but ended in the negative, breaking the four days of rise on the Sensex and three days of up move on the Nifty.


The Sensex and Nifty opened lower at 20,616 and 6,105. The indices hit a high of 20,678 and 6,131. Post the rate cut by RBI, the indices crashed to the day’s low of 20,051 and 5,933. the Sensex closed at 20,264 (down 383 points or 1.85%) while the Nifty closed at 6,012 (down 103 points or 1.69%). The National Stock Exchange recorded a volume of 92.75 crore shares, among the highest ever.


The RBI has raised its key policy rate viz. the repo rate by 25 basis points to 7.5% from 7.25%. The Reserve Bank of India in its mid-term policy review stated that inflation will be higher than the initial forecast. "What is equally worrisome is that inflation at the retail level, measured by the Consumer Price Index, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence", said RBI. However, the good monsoon may ease some pressure on the retail inflation, the central bank added. The RBI kept the cash reserve ratio (CRR) unchanged at 4%.


The RBI has also simultaneously decided to start unwinding the exceptional measures it had taken since mid-July to tighten liquidity with a view to dampening volatility in the foreign exchange market. As a first step, it has decided to reduce the marginal standing facility (MSF) rate by 75 basis points with immediate effect. Furthermore, the minimum daily maintenance of the CRR prescribed by the Reserve Bank of India (RBI) has been brought down from 99% of the requirement to 95% from the fortnight beginning 21 September 2013. The timing and direction of further actions on exceptional measures will be contingent upon exchange market stability, and can be two-way, the RBI said. Further actions need not be announced only on policy dates, the RBI said. However, any further change in the minimum daily maintenance of the CRR is not contemplated, the RBI said.


India's gold imports will resume after a two-month gap as the government and banks today sorted out how new rules on overseas purchases should work, a trade ministry source told. At least 20% of the gold imports must be turned around for exports as per a July 22nd rule.


Fitch Ratings cut India's growth forecast for the current financial year to 4.8%, saying weak demand is a large drag on the economy. The sharp cut in the growth forecast comes when the country faces challenges such as slowing growth, exchange-rate woes and concerns about the current account deficit. Fitch also cut India's growth rate projection for FY15 to 5.8% from the June forecast of 6.5%. In September 2012, the ratings agency had projected a growth of 7.5% for FY15.


US indices had mixed outcome. Nasdaq Composite closed in the positive while the Dow Jones and S & P 500 closed in the negative.


Billionaire investor Warren Buffett said that politicians not lifting the U.S. debt ceiling would be "pretty damn dumb". "The market is not going to fall apart," Buffett said in an interview aired on CNBC on Friday, because markets will only expect politicians to act irrationally for a certain length of time. Still, he called the possibility of such a debt standoff "disturbing."


Except for Shanghai Composite (up 0.29%), Hang Seng (up 1.67%) and KLSE Composite (up 0.50%) all the other Asian indices ended in the negative. Jakarta Composite, the top loser, down 1.86%.


European indices were mostly trading in the red as were the US Futures, after.


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