Nifty may head lower again given strong macro headwinds
As suggested by us on Wednesday (Is BSE Sensex likely to move up on Thursday?, the market today broke the seven days of losing trend and ended in the positive. The National Stock Exchange (NSE) recorded the rise on a lower volume of 52.69 crore shares. However, there was little conviction in today’s rally has the market fell later in the day below the opening level.
The Sensex opened at 20,351 and hit a high of 20,569 from where it went down 221 points to the level of 20,348. The Sensex closed at 20,399 (up 205 points or 1.02%) while the Nifty which opened at 6,037 and hit the low almost at the same level. The Nifty hit a high of 6,102 and closed at 6,056 (up 67 points or 1.11%).
Except for Pharma (down 0.76%) all the other indices on the NSE closed in the positive. The top five gainers were Auto (3.00%); Bank Nifty (2.74%); Realty (2.48%); PSU Bank (2.32%) and Infra (2.31%).
Of the 50 stocks on the Nifty, 38 ended in the green. The top five gainers were Axis Bank (6.06%); Tata Motors (5.34%); Jaiprakash Associates (5.09%); Tata Steel (4.84%) and Bank of Baroda (3.76%). The top five losers were Coal India (3.54%); Cipla (2.33%); Sun Pharma (1.82%); Asian Paints (1.62%) and TCS (1.11%).
Of the 1,230 stocks on the NSE, 760 rose, 403 fell while 67 remained unchanged.
Reserve Bank of India (RBI) governor, Raghuram Rajan, tried to assure on Wednesday that India will be able to fund current account deficit and would be able to deal with a global market sell-off. He also assured that he would move slowly if needed in winding down an oil window that provides dollars directly to state-run oil companies, while announcing a bond purchase of Rs80 billion on Monday to inject liquidity in markets.
The headline inflation accelerated to an eight-month high of 7% in October, mainly driven by higher fuel and manufactured goods prices, government data showed on Thursday. Wholesale prices, India's main inflation measure, had risen 6.46% in September. Food prices rose 18.19% year-on-year in October, slower than an annual rise of 18.4% in September. The WPI inflation reading for August was revised to 6.99% from 6.1%.
The stock markets will remain closed tomorrow, 15 November 2013 on account of Moharram.
The US market indices closed at a new high yesterday. Janet Yellen, nominated to be the next chairman of the Federal Reserve, fuelled the speculation that she will continue the central bank's stimulus policy as chairman.
All the Asian indices ended in the green. Nikkei 225, top gainer, was up 2.12%. European indices were trading in the green. US Futures were trading marginally higher.
Inflation trajectory will head southwards from January 2014 onwards on the back of better harvest and approaching electoral cycle, forecasts a SBI research note
WPI (wholesale price index) inflation touched 7% in Oct’13 (SBI projection at 6.98%). Though the increase in inflation was on expected lines, the worrying thing is that August 2013 inflation numbers were revised upwards to 6.99% from 6.1%, observes a SBI research note.
On closer examination, SBI finds that this increase was driven by across the board revision, with primary articles and imported items playing the spoilsport. SBI believes that, even though there is significant disinflationary impetus currently in the economy, the robust increase in corporate sales in second quarter may be partly juxtaposed with the fact that this may have been more because of some price pass through rather than being volume driven.
WPI inflation figures for October 2013 and the revised figures for August 2013 are given below:
SBI believes that for CPI (consumer price index) to touch 9% (as per RBI target), the downward trend in core CPI must continue, but such a downside is capped, based on trend analysis. Thus, any meaningful decline in WPI & CPI should be dictated purely by food price trajectory.
SBI believes that inflation trajectory will head southwards from January 2014 onwards on the back of better harvest and approaching electoral cycle. “We don’t anticipate any rate adjustment in December 2013 monetary policy,” forecasts the research note.
Housing inflation has remained stubborn in double digits even during the period of economic slowdown. Increased number of working population and aspiration for better living standards has pushed urbanisation in India and increased demand for housing. The SBI housing diffusion index clearly shows that despite economic downturn, the house price index of 3 -month and 1-year ahead is showing positive trend in the Q1FY14, concludes the SBI research note. The table for housing inflation is given below:
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