The indices may rally for a day or two before a pause or a decline
The S&P BSE 30-share Sensex closed the week that ended on 18th July at 25,642 (up 617 points or 2.47%), while the NSE’s 50-share CNX Nifty closed at 7,664 (up 204 points or 2.75%) for the week. Previous week, we had mentioned that Indian indices may rally. This week began with lot of indecisiveness on the bourses. Although Nifty hit its lowest level since 5 June 2014, it managed to recover and closed at 7,454 (down 5 points or 0.07%), on Monday. The highlight of the day was the inflation, based on the WPI, eased to 5.43% in June 2014, from 6.01% in May 2014.
According to the SABB/HSBC Emerging Markets Index (EMI), India saw the steepest expansion in output since February 2013. SABB/HSBC EMI is a monthly indicator derived from the PMI surveys. It indicated stronger output growth across global emerging markets in June.
Breaking five days of negative moves, the benchmarks closed Tuesday near the day’s high. Nifty closed at 7,527 (up 73 points or 0.97%). The data released by the government after trading hours on Monday showed the annual rate of inflation, based on the combined consumer price indices (CPI) for urban and rural India, eased to 7.31% in June 2014, from 8.28% in May 2014.
As we anticipated last week, the market saw a big jump on Wednesday with Nifty closing at its highest level since 7 July 2014. Nifty closed at 7,624 (up 98 points or 1.30%). India's trade deficit stood at $11.76 billion in June 2014, which was higher than the trade deficit of $11.28 billion in June 2013.
The Reserve Bank of India (RBI) has announced incentives to issue long term bonds for a minimum maturity of seven years, to raise resources for financing long term projects in infrastructure sub-sectors and affordable housing.
The leaders of the BRICS countries agreed to create a $100 billion BRICS Bank named as New Development Bank and a reserve fund of the same size to challenge Western dominance over global finances. The first term of the presidency of the bank will be held by India.
The positive data coming from the US said, where the Federal Reserve said in its Beige Book business survey, that the economic growth was modest to moderate in the latest period, as all 12 of its districts reported stronger consumer spending and expanded manufacturing, helped to keep up the market move.
Back home, on Thursday, Nifty closed at 7,640 (up 16 points or 0.21%). On Friday, after opening lower, the benchmarks managed to close in the positive for the fourth consecutive session. Nifty closed the week at 7,664 (up 23 points or 0.31%).
Banking stocks and finance stocks were in focus after market regulator Securities and Exchange Board of India (SEBI) put out draft regulations for infrastructure investment trusts and RBI put out the draft guidelines for those seeking a license to set up a payments bank or a small bank.
For the week, among the other sectoral indices on the NSE, the two top performers were Metal (7%) and Bank (7%), while the two worst performers, FMCG and Pharma ended flat. Among the Nifty stocks, the top five stocks for the week were Tata Steel (12%), Hindalco Industries (11%), IDFC (10%), Axis Bank (10%) and ICICI Bank (9%); while the top five losers were Hindustan Unilever (3%), Bajaj Auto (2%), GAIL (2%), Infosys (2%) and Dr. Reddy's Lab (2%).
Of the 1,449 companies on the NSE, 1,087 companies closed in the green, 335 companies closed in the red, and 27 companies closed flat.
Out of the 27 main sectors tracked by Moneylife, the top five and bottom five sectors for this week were: