Nomura's Economic Surprise Index suggests that negative economic data surprises are more likely in the coming weeks, says Nomura
Nomura's economic surprise index for India (NESII) is a tactical tool and captures the direction and momentum of economic data surprises in India. Historically, it has shown a strong correlation with India’s financial markets. The NESII correctly indicated negative market returns ahead in May 2013 and positive returns in end-August 2013, points out Nomura.
The recent trends of the index are shown in the chart below:
NESII is a weekly index and comprises equally-weighted surprises in economic data (IP, WPI, GDP and PMI) released during a week. A reading above zero indicates a positive economic data surprise and one below zero indicates a negative data surprise.
From September 2013 the NESII had been rising, reflecting continued upside surprises in PMI (Purchase Manager’s Index) data, and more recently, the sharp fall in WPI (wholesale price index) inflation in December. The NESII is currently close to the +1 standard deviation band, reports Nomura.
Nomura analysts say that the NESII is mean reverting, which indicates an increasing probability that it will start to retrace back towards zero in the coming months. A falling NESII would indicate that economic data are likely to surprise negatively, possibly because consensus expectations are now too optimistic.
If the Nifty goes below 6060, it may test 6000 or lower. A short-term rally may be possible only on a close above 6,125 on Monday
Yesterday we had suggested that the indices may stage a small rally till 6,150 but it may be met with selling. Today, Nifty remained under pressure and could only go up to 6098. It appears that the downmove is not yet over even though the index managed closing with marginal gains.
The Sensex opened at 20,545 while the Nifty opened at 6,083. The Sensex moved in the range of 20,448 and 20,572 and closed 20,514 (up 16 points or 0.08%) while the Nifty moved between 6,067 and 6,098 and closed 6,090 (up 16 points or 0.26%). The NSE recorded a volume of 59.15 crore shares.
India's consumer inflation should ease in the next two months, and will fall to 8% by the end of the year, Reserve Bank of India (RBI) Governor Raghuram Rajan was quoted as saying in an interview with TV news channel on Thursday.
The Reserve Bank of India (RBI) yesterday laid out a road map to deal with a surge in bad loans in the banking system. The framework outlines a corrective action plan that will offer incentives for early identification of stressed assets by banks, timely revamp of accounts considered to be unviable and prompt steps for recovery or sale of assets in the case of loans at the risk of turning bad.
The fiscal deficit touched Rs 5.16 trillion during April-December, or 95.2% of the full year target, compared with 78.8% a year ago, government data showed on Friday.
Net tax receipts were at Rs 5.18 trillion in the first nine months of the current fiscal year to March 2014, while total expenditure was Rs 11.64 trillion.
Finance Minister P Chidambaram is widely expected to slash investment spending to meet the budgeted target of 4.8% of gross domestic product, highest among BRICS nations of Brazil, Russia, India, China and South Africa.
RBI governor Raghuram Rajan warned of a breakdown in global policy coordination a day after the Federal Reserve further cut stimulus, weakening emerging-market currencies from the rupee to the Turkish lira.
US indices closed in the positive on Thursday. The US economy expanded rapidly in the final quarter of 2013, the Commerce Department said on Thursday as consumers shrugged off a government shutdown, with the data fueling hopes of even faster growth ahead. The gross domestic product grew at 3.2% annual pace.
The number of people who sought US unemployment benefits near the end of January rose to the highest level in six weeks, but it's unclear whether the increase is the residue of holiday-season distortions or reflects a deterioration in the labor market. The less-volatile, four-week average rose by a fraction.
Among the Asian indices which were trading today, Nikkei 225 (down 0.62%) and NZSE 50 (up 0.51%).
Japanese industrial production rose 1.1% on month in December, the Ministry of Economy, Trade and Industry said Friday, on a demand rush ahead of an April sales tax increase.
Japanese consumer prices rose at their sharpest rate in over five years in December, the government said Friday. The core consumer price index, which excludes volatile fresh-food costs, climbed 1.3% from a year earlier in December, faster than a 1.2% gain in the previous month, according to data released by the Ministry of Internal Affairs and Communications. It was the biggest rise since a 1.9% increase in October 2008.
Employment data released Friday also suggested a strongly recovering economy. The jobless rate fell to 3.7% of the work force, down from 4% in November and the lowest rate since December 2007.
European indices were trading in the red and US Futures were also trading sharply lower.
Consumer prices rose an annual 0.7 percent after a 0.8 percent gain in December, the European Union’s statistics office in Luxembourg said today. The euro-area unemployment rate held at 12 percent in December, a separate Eurostat report showed today. That’s down from a high of 12.1 percent in September.
While Unilever is fined Rs8 lakh, others like Brooke Bond Group, Unilever Overseas Holdings, Unilever UK & CN Holdings, Brooke Bond South India Estates, Unilever Overseas Holdings and Brooke Bond Assam Estates are fined Rs7 lakh each
Market regulator Securities and Exchange Board of India (SEBI) has imposed a fine of Rs50 lakh on seven promoter entities of Hindustan Unilever Ltd (HUL) for delays in disclosures dating back to 2006.
In an order, SEBI said, the disclosures were periodic ones regarding shareholding and voting rights in the Indian unit of Unilever Plc. “Though it may not be possible to ascertain the monetary loss to the investors on account of default by the Noticees, the details of the shareholding of the Noticees and timely disclosure thereof, were of significant importance from the point of view of investors as that would have prompted them to buy or sell shares of the company,” SEBI said in its order.
While Unilever is fined Rs8 lakh, other six entities Brooke Bond Group Ltd, Unilever Overseas Holdings AG, Unilever UK & CN Holdings Ltd, Brooke Bond South India Estates Ltd, Unilever Overseas Holdings BV and Brooke Bond Assam Estates Ltd are fined Rs7 lakh each.
SEBI said, "The disclosures obligations under Substantial Acquisition of Shares and Takeovers (SAST) Regulations are critical and an important component of the legal regime governing substantial acquisition of shares and takeovers. In the absence of these timely disclosures, the investors will be deprived of important information at the relevant point of time. It is also evident that the Noticees have committed the defaults on more than one occasion and as such, the default on the part of the Noticees is repetitive in nature”.
The rules require every person holding over 15% in a company to make yearly disclosures of the stake they hold. Promoters are also required to make disclosures of shareholding and voting rights.