After a sharp run up, Nifty may move sideways to down over the next few weeks
The BSE 30-share Sensex closed the week that ended on 11th April, at 22,628.96 (up 269 points or 1%), while the NSE’s 50-share Nifty closed at 6,776.30 (up 82 points or 1%) for the week. Last week we had suggested that indices would be weak this week. They held up and moved higher.
On Monday, both the benchmark indices showed weakness for almost the entire session but bulls took over the reins by the end of the session. Nifty closed 6,695 (up 0.70 points or 0.01%). The highlight on Monday was Sun Pharma acquiring Ranbaxy Lab for $4 billion in an all-stock transaction. This resulted in Sun Pharma being the top gainer in Sensex stocks on both Monday and Wednesday.
The World Bank trimmed its 2014 growth forecast for developing East Asia but said the region's economies were likely to see steady growth in the next couple of years helped by a pick-up in global growth and trade.
The stock markets were closed on Tuesday on account of Ram Navami.
On Wednesday, Nifty closed, at its new all time high, at 6,796 (up 101 points or 1.51%). Moody's Investors Service said that the banking systems in ASEAN and India are resilient to the financial impacts of the reduction of monetary stimulus by the US Federal Reserve, or the risk of higher interest rates more generally.
On Thursday the optimism in the global arena also played on the sentiments back home. This resulted in Nifty hitting a new high again, though the market managed to close only marginally higher. Nifty closed at 6,796 (up 0.20 points).
The minutes of the March 18-19 US Fed meeting showed that the Fed they would wait for a "considerable time" following the end of its bond-buying program before finally raising interest rates.
A huge fall in the US indices pulled global indices (including Indian indices) lower on Friday. Nifty closed at 6,776 (down 20 points or 0.30%). After market hours, industrial production data were released, which turned out to be weak. Industrial production again slipped into negative territory and contracted 1.9% in February 2014 due to poor performance in manufacturing, especially capital goods. Factory output as measured by the index of industrial production (IIP) showed a decline of 0.1% during the 11-month period from April to February, compared with growth of 0.9% in the corresponding period a year earlier. The market would remain closed Monday on account of Ambedkar Jayanti.
For the week, among the other indices on the NSE, the top two performers were Smallcap (4%) and PSU Bank (4%) while the worst two performers were Media (1%) and IT (1%).
Among the Nifty stocks, the top five stocks for the week were Sun Pharma (10%); NMDC (8%); Ambuja Cements (7%); Kotak Mahindra (7%) and Cairn India (6%) while the top five losers were Jindal Steel & Power (6%); Tech Mahindra (4%); Hero MotoCorp (3%); United Spirits (3%) and Lupin (3%).
Of the 1,424 companies on the NSE, 998 companies closed in the green, 387 companies closed in the red while 39 companies closed flat.
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were:
|ML Top sector||ML Worst sector|
|Con_EPC_Infra||5%||Lifestyle & Leisure||-1%|
|Cement||5%||Oil & Gas||0%|
|Energy||4%||Software & I T Services||0.00%|
March is seasonally a positive month for the trade balance and hence, the latest data show a significant deterioration in India’s trade deficit
India’s trade deficit widened to a larger-than-expected $10.5 billion in March from $8.1 billion in February, on weak exports and a sharp rebound bunched-up payments in oil and gold imports due to easing of restrictions. Imports, excluding oil and gold, remained weak, indicating sluggish domestic demand.
March is seasonally a positive month for the trade balance and hence, the latest data show a significant deterioration, said Nomura in a research note.
It said, "The first quarter of 2014 current account is tracking -0.5% of GDP versus a mild surplus last month, but better than -0.8% in Q4 2013. We expect the current account deficit to widen to 2.3% of GDP in FY15 versus 1.8% in FY14 as a result of the easing of gold import restrictions and better domestic demand. That said, we expect net capital inflows to easily finance this deficit".
During March, India’s export growth continued to contract at -3.2% from 3.7% in February, while import growth rebounded sharply to -2.1% from 7.1%.
A sharper-than-expected jump in imports, mainly of oil and gold, was the main reason. Oil imports rose 17.7% from -3.1%, perhaps due to bunched up payments because of recent Indian rupee-US dollar appreciation. Gold imports rose to around $2.8billion from $1.4 billion in February, likely due to easing of some restrictions on gold imports. Excluding oil and gold, imports contracted by 11.0% following a 10.5% drop in January, suggesting that domestic demand remains very weak, Nomura said.
"As gold restrictions are relaxed further and growth starts to rise during the latter half of FY15 (year ending March 2015)," Nomura said, "we expect the current account deficit to widen to around 2.3% of GDP in FY15, larger than in FY14, but still within the sustainable range. With growth bottoming out and our expectations of a gradual improvement in the macro-economic environment after the elections, we expect net capital inflows to be more than sufficient to finance the current account deficit."
"We expect the Reserve Bank of India (RBI) to continue to proactively build its defence against any external shocks by accumulating FX reserves and discouraging short-term debt flows. In line with this view, our Asia FX strategists see scope for strong Indian rupee performance over the medium term, and forecast US dollar/Indian rupee at 59.5 by end-2014 and 57.5 by end-2015," the note added.