Sensex, Nifty to turn weak: Weekly Market Report

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  
Shipping 7% Sugar -3%
Industrial Intermediates 5% Media -2%
Con_EPC_Infra 5% Lifestyle & Leisure -1%
Cement 5% Oil & Gas 0%
Energy 4% Software & I T Services 0.00%



Will, probate and use of trust for specific beneficiaries
Speaking at a Moneylife Foundation interactive seminar, Advocate Sachin Gupta, explained the importance of a Will, what is a probate and what is the role played by Trusts for specific beneficiaries

A Will is a legally valid document that allows you to choose who gets your self-earned assets after your death. Any person who is not a minor and is of sound mind can make a Will and a person who dies without making a Will is considered Intestate. What is important while making a “good” Will is the content of the Will. After organising several sessions on Wills, Moneylife conducted another seminar on “The Essentials of a Good Will”. 
Sachin Gupta, an advocate and partner at Negandhi Shah and Himayutullah, Advocates and Solicitors, who has wide ranging experience in matters of litigation, was the speaker of the event. He covered the topics related to intestate Succession, legal terms used while making a Will, types of Wills, including Conditional Wills, Joint Wills and Mutual Wills. He also discussed why it is important to make a Will, what probate is, and what the role of Trusts is. 
While talking about the laws governing Intestate Succession, he pointed out Acts which are followed in different religions. The Hindu Succession Act, 1956 applies to Hindus, Buddhists, Jains and Sikhs. The Indian Succession Act, 1925 applies to Christians. Parsis have their own Succession Laws. Muslim succession laws are not codified but are based on their religious texts. Shias and Sunnis have different inheritance laws. Muslims can make an oral Will and it does not need attestation. Armed forces engaged in war, or an expedition and Seafarers are permitted to make an oral Will or Privileged Will. 
Explaining the simple reason of creating a Will, Mr. Gupta pointed out that a Will ensures proper distribution of assets as per your wishes and appoints executors or creating trusts for specific beneficiaries. Further, talking about the Trusts, he mentioned Trust can be registered under the Indian Trusts Act. Testator, who is making the Will, can transfer funds and property to the Trust which becomes the holding vehicle. Trustee manages the trust as per the trust deed. Further, testator can access and control assets while alive and decide on distribution too.  A Trust is especially useful when you have to provide for a special child or have multiple families due to divorce/ re-marriage. It remains out of creditors’ clutches; confidentiality is maintained since beneficiaries are not disclosed. Trust carries highest taxes in India, plus administrative expenses. A trust protects assets from probate. 


Surprise deterioration in India's March trade deficit

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.


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