Market awaits further direction: Weekly Market Report

Moneylife Digital Team 27 October 2012

Medium term outlook shows a downward bias

The Indian market settled marginally down in the holiday-shortened week on subdued global cues and with most of the companies coming out with not-so-impressive corporate results. The slowing economic growth—not only in India, but across the world—has raised fresh concerns, going ahead. Investors will continue to focus on earnings reports and will keep a watch on the Reserve Bank of India’s review of the monetary policy for the second quarter, due on 30th October.

The Sensex ended the week at 18,625, down 57 points (0.30%) and the Nifty finished 20 points (0.35%) down at 5664. The Market is in an indecisive zone. However, the bias is downward for the medium-term.

The market settled in the positive on Monday on a clutch of better-than-expected quarterly earnings from blue chips. However, selling pressure in heavyweights saw the benchmarks settling lower on Tuesday. Resuming after a day’s break, the market settled in the green on Thursday despite a high degree of volatility due to the F&O contracts expiry. The indices closed in the red on Friday on the back of disappointing earnings reports and global concerns.

The BSE Capital Goods index gained 2% while BSE Consumer Durables (down 4%) and BSE Fast Moving Consumer Goods (down 3%) were the main losers in the sectoral space.

The top gainers on the Sensex were Mahindra & Mahindra (up 7%), Larsen & Toubro (up 4%), ICICI Bank, TCS and NTPC (up 2% each). The losers were led by Jindal Steel & Power (down 5%), ITC, State Bank of India (down 4% each), Tata Motors and Hindustan Unilever (down 3% each).

The major gainers on the Nifty were M&M (up 7%), L&T (up 5%), IDFC (up 4%), BPCL and Axis Bank (up 2% each). Punjab National Bank (down 9%), Jindal Steel, Power Grid Corporation (down 5% each), Bank of Baroda, ITC (down 4% each) were the key losers on the benchmark in the week.

It is widely expected that the RBI, in its policy review next week, might keep all key rates unchanged on account of prevailing high inflation that stood at 7.81% in September. However, some analysts expect that the central bank may cut the cash reserve ratio (CRR), the proportion of deposits that banks have to keep with the RBI, by 25 basis points.

A reshuffle of the Union Cabinet is expected to take place on Sunday, 28th October. External affairs minister SM Krishna has tendered his resignation on Friday, which has been accepted by the prime minister. Information and broadcasting minister Ambika Soni, social justice and empowerment minister Mukul Wasnik, tourism minister Subodh Kant Sahai, MoS justice and empowerment Mahadev Khandela submitted their resignations on Saturday. The reshuffle of the Union Cabinet, which could be the last before 2014 Lok Sabha elections, is expected to see induction of new faces in the government.

In international news, the US economy reported a 2% annual growth in the third quarter of 2012 over 1.3% GDP growth in the previous quarter. Also, consumer sentiment in the US rose to 82.6 in October, the highest level recorded in the last five years, according to the Thomson Reuters/University of Michigan's final reading on the overall index. However, US markets settled lower in the week on a clutch of weak earnings reports and nervousness ahead of the presidential elections in the world’s biggest economy.

In the Eurozone, policymakers on Thursday said that Greece would need an additional 30 billion euros ($39 billion) to make up for its deep recession and delay in overcoming deficit targets.

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