Level of 6,145 on the Nifty may act as support
As we mentioned in Friday’s closing report, Indian benchmark BSE 30-share Sensex and NSE Nifty opened the week lower but continued to march higher and closed at its highest since 24 January 2014. The level of 6,145 for Nifty may act as an indicator for any change in trend. The positive move of Monday remained unaffected by a weak US market on Friday and Asian markets today. On Friday, the existing-home sales in January showed a bigger-than-expected decline, but unusually poor weather may have played a role, the National Association of Realtors said.
The Sensex opened at 20,695 while the Nifty opened at 6,141. Immediately, the indices hit the days low at 20,637 and 6,131, respectively. The upmove continued until the end of the session where the both indices hit day’s high at 20,829 and 6,192. The Sensex closed at 20,811 (up 111 points or 0.53%) while Nifty closed at 6,186 (up 31 points or 0.50%). The NSE recorded a volume of 46.73 crore shares.
Reserve Bank of India (RBI) governor Raghuram Rajan on Sunday said that inflation remains the biggest threat to growth but bringing inflation down is a challenge.
Moody's Analytics, a research arm of Moody's group, on Monday pegged India's gross domestic product growth at 4.8% in the third quarter of the current financial year. Moody's Analytics said most sectors have underperformed as elevated inflation and financial instability have battered confidence and demand. On the positive side, it said the improving global economy will support exports.
The futures and options for February 2014 F&O contracts expire on Wednesday, 26 February 2014. The stock market remains closed on Thursday, 27 February 2014, on account of Mahashivratri.
US indices closed marginally lower.
The National Association of Realtors said existing home sales fell 5.1% in January to an 18-month low. Sales of standing homes have dropped in five of the past six months.
Dallas Federal Reserve President Richard Fisher said the central bank should continue to taper its bond-buying program that's boosted stocks.
Except for NZSE 50 (up 0.85%) and Straits Times (up 0.19%) all the other Asian indices closed in the negative. Shanghai Composite (fell 1.75%) was the top loser.
Industrial Bank Co. and other unidentified banks have curbed lending to the property sector and related industries such as steel and cement, Shanghai Securities News reported as China said new home prices rose in 69 of 70 cities last month from a year before. But the growth in new-home prices in China's first-tier cities slowed in January, National Bureau of Statistics data showed on Monday.
Group of 20 officials ended their summit on Sunday saying they would look to boost world growth by more than $2 trillion over the next few years under a strategy crafted by the International Monetary Fund. The G-20's final communiqué highlights agreement among central banks to communicate their stimulus-exit strategies clearly and in a timely fashion. The communiqué warned that the global economy faces a period of potential "excessive volatility" harmful to growth as countries adjust their economic policies. "We do not want any surprises," Joe Hockey, Australia's treasurer and G-20 host, said at the conclusion of the summit on Sunday.
Meanwhile, European Central Bank President Mario Draghi Sunday signaled the central bank's March policy meeting could be critical in determining whether the ECB will provide more stimulus to the euro-zone economy. However Draghi dismissed deflation fears, however, saying inflation expectations in the euro zone are anchored in line with the central bank's mandate of just less than 2% over the medium term.
German business confidence unexpectedly climbed to the strongest level in 2 1/2 years in a sign that growth in Europe’s largest economy may accelerate. The Ifo institute’s business climate index, based on a survey of 7,000 executives, advanced to 111.3 in February from 110.6 in January. That’s the fourth monthly gain and the strongest reading since July 2011. European indices were trading mixed while US Futures were trading higher.
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Watch out for a close below 6,085 on the Nifty for a change in the trend
A higher than forecast climb in a measure of US manufacturing in February boosted the sentiments in India stock market. Back of the positive performance from the US on Thursday and over all optimism among the Asian indices on Friday made the indices back home zoom up and cover up almost all of the loss of Thursday.
The BSE 30-share Sensex opened at 20,601 while the NSE Nifty opened at 6,108. The day’s low was almost at the same level. The indices hit the intra-day high at near the end of the session at 20,725 and 6,160. The benchmark closed almost at the near the day’s high. Sensex closed at 20,701 (up 164 points or 0.80%) while the Nifty closed at 6,155 (up 64 points or 1.05%). The NSE recorded a volume of 47.10 crore shares.
On the political front, lawmakers passed a bill to create India's 29th state on Thursday despite chaos in the Parliament, as opponents made a futile last attempt to stop the upper house carving landlocked Telangana from coastal Andhra Pradesh. Thursday's vote fulfils a promise made by the government in 2009, and comes just weeks before a national election in April.
The government's allocation of Rs11,200 crore for capital injection into state-run banks is credit negative as it is much smaller than estimated requirements, global credit rating agency Moody's Investors Service said on Thursday.
India should prepare a plan to respond to volatility in global currency markets that may come as the US Federal Reserve reduces monetary stimulus, the International Monetary Fund staff said in a report. While India’s finances have improved since last year, a coordinated plan is needed in case capital account pressures re-emerge, the IMF said. High inflation remains a “central macroeconomic challenge,” and reducing that “will require a tightening of the monetary stance, possibly over a protracted period, which inevitably will weigh on growth prospects,” the IMF said. The IMF estimates Asia’s third-biggest economy will expand 4.6% in the year to March 2014 and 5.4% in the next year.
India is "stuck in a rut" as weaker consumption and stalled investments prevent the economy from building any sort of momentum, HSBC said in a report on Friday adding "slow recovery" could start post elections. HSBC for now is "underweight" on Indian equities but some of its preferred sectors include energy which is likely to gain from subsidy changes, power (stands to benefit from distribution reform), non-ferrous metals (corporate restructuring) and telecoms (more clarity post the auctions).
US Indices closed in the positive on Thursday. US factory activity accelerated in February at its fastest pace in nearly four years.
The Markit Economics preliminary index of US manufacturing increased to 56.7 in February. On the other hand the Labor Department figures indicated fewer applications for unemployment benefits last week.
Except for Shanghai Composite (down 1.17%) all the other Asian indices closed in the positive. Nikkei 225 (up 2.88%) was the top gainer.
Group of 20 finance ministers meet in Sydney this weekend, with US stimulus cuts and political turmoil from Ukraine to Venezuela stoking concern over emerging-market volatility.
German Finance Minister Wolfgang Schaeuble said in a TV interview broadcast today, 21 February 2014, that emerging markets should get their own houses in order before demanding solidarity from other nations. The troubles in emerging markets would be the main topic discussed by finance ministers and central bank chiefs at the G20 summit in Sydney this weekend, Schaeuble said.
Meanwhile, global rating agency Standard & Poor's today, 21 February 2014, cut its long-term foreign currency rating on Ukraine by one notch to CCC, saying the country's worsening political situation is putting the government's capability to service its debt at increasing risk.
European indices were showing a mix performance, while the US Futures were trading higher.
UK retail sales fell more than economists forecast in January, led by a drop in demand at food and clothing stores. Sales including fuel plunged 1.5% from December, when they surged 2.5%, the Office for National Statistics said on Friday in London. The drop is the biggest since April 2012.