Uncertain trend in most global markets did not have much of an impact on domestic markets as they surged to new lifetime highs after many sessions of consolidation. Worries about higher interest rates are affecting most markets and the recovery in oil prices is not helping matters either.
The declining rupee has not affected the markets negatively so far, unlike this October when a weak rupee led to some selling by overseas hedge funds. The weak rupee is in fact having a positive impact on technology stocks as their margins would improve.
The markets opened on a weak note on Monday as the frontline indices lost nearly 2 per cent each. The indices declined sharply in mid-morning trades as stocks of oil marketing companies slid on higher oil prices.
The indices turned volatile on Tuesday as they gave up all their gains in late afternoon trades. The decline was once again led by stocks of oil marketing companies joined by pharmaceuticals and banking.
ONGC started its rally on Tuesday and closed with gains on all three subsequent sessions. Higher oil prices and expectations of an interim dividend are driving the stock and there is also talk of some aggressive overseas forays. ONGC had come under severe criticism from sections of the government recently.
The rally in ONGC was the principal support for the market during the week. Other biggies like Reliance Industries, TCS and Infosys pitched in towards the end of the week.
Wednesday saw the indices closing a per cent higher, recovering part of the ground lost on Monday. On Thursday, the markets saw a sharp surge in the closing hour which helped the indices to recover from the early weakness.
Friday was record setting time once again for the indices. After opening on a sedate note, both the frontline indices powered past their previous lifetime highs with ease. The Sensex recorded a new intra-day high of 9081 and managed to close above the 9000 mark for the first time. The Nifty recorded a new lifetime high of 2761.
The Sensex added 106 points or 1.18 per cent during the week and the Nifty went up by 58 points or 2.15 per cent over the week. The better performance of the Nifty was mostly on account of strong gains in ONGC and TCS, which have higher weights on the Nifty.
Mid-caps were once again more subdued during the week. As seen in recent weeks, the volatility in frontline stocks is mostly absent in smaller stocks as trader interest is clearly in the large caps. There were significant out performers in the mid-cap space during the week like Titan and Godrej Industries. The CNX Mid-Cap 100 index gained 29 points or 0.74 per cent during the week.
Domestic economic and regulatory action
- The mid-year economic review of the central government has projected a growth rate of 7 per cent for the current year, somewhat lower considering the 8 per cent growth achieved during the first half. The government expects both the service and manufacturing sectors to grow around 10 per cent each. Farm sector growth has been projected at 3 per cent.
The review has voiced concerns about the deceleration in electricity generation and mining. The performance of the oil sector was also lower than expectations. These critical sectors can pull down the overall growth rates in subsequent quarters as a decline in the infrastructure sector impacts other sectors with a lag.
- The finance minister is much more bullish than the official economic review. Though he did not give any specific targets, he expects the economy to do better in the second half than in the first. That would mean a growth rate in excess of 8 per cent for the second quarter and full year as well. The minister expects year end inflation to be around 5 per cent.
India has emerged as the second most preferred destination for foreign investment ahead of the US, according to a survey conducted among private companies and executives. The US was voted as the second most preferred destination followed by India last year. China continues to maintain its first position. (See: India pushes past the US as global FDI hotspot: AT Kearney )
- Wholesale price inflation for the week ended 26 November rose to 4.54 per cent from 4.32 per cent for the previous week. Inflation was above 7 per cent during the same week of last year as higher oil prices started to have its impact.
- Weak November despatch figures reported by the large cement companies have baffled many analysts. After encouraging numbers reported during the previous 2 months, the numbers were expected to improve during the month. The industry reported a growth rate of just above 2 per cent for November as against 5 per cent during October.
The weak volume numbers has led to some sell-off in cement stocks during the week. These stocks had seen a significant rally in the previous weeks on expectations of strong demand and a price hike. Lower despatches have also meant that prices have remained more or less at the same levels. Most companies were confident in October and early November about a price hike of Rs5 to Rs7 per bag.
As volume growth has remained subdued even as they enter the last quarter of the current financial year, managements of cement companies are not as confident as they were about double digit growth rates. The culprit once again, according to them, is adverse weather conditions in the form of heavy rains in most southern states.
Though these stocks could remain subdued for a quarter or so, their longer term outlook remains positive considering the huge investments expected in infrastructure and export opportunities.
- Mobile telecom companies are in no mood to slow down as the industry clocked record number of subscriber additions in November. Lower tariffs and cheaper handsets are driving volume growth for the industry. The large operators have come out with innovative schemes to attract more customers.
GSM operators recorded growth of around 5 per cent during the month and the total subscriber base crossed 55 million. The total mobile subscriber base of Bharti crossed 15 million during the month. However, the absolute number of additions by Bharti during the month was lower than the number two player, BSNL.
In the CDMA space, Tata Teleservices scored over Reliance Infocomm for the second month, adding nearly 9 lakh subscribers during the month. With this, the company's total subscriber base has crossed 7 million. Tata Teleservices is an unlisted company, though its subsidiary Tata Teleservices Maharashtra is listed.
US markets, global economy and oil
- US markets had another subdued week as economic data continued to give a strong outlook for the economy. Ironically, too much of strength on the economic front is bad news for the US stock markets these days. Markets reckon that continuing economic growth would prevent the US Fed from ending the interest rate hikes.
Higher crude prices were another reason for the tentativeness in US markets. After a gap of more than a month, higher energy costs have once again got the markets worried. Higher fuel costs had started affecting consumer spending after the third quarter and retail sales during the current holiday season is not as good as earlier expectations.
- Even as some of the major Euro zone countries are showing signs of an improvement in both manufacturing and services, the British economy is slowing down. Britain has been the best performing large European economy by quite a distance for many years now. This year, however, the government expects growth to slow down to 1.75 per cent as against earlier forecasts of 3.5 per cent. This would be the lowest growth rate in more than a decade and a half. The UK government is blaming higher oil prices for the deceleration.
- The recovery in Euro area and Japan has prompted the Organisation of Economic Cooperation and Development (OECD) to revise upwards the growth targets for OECD member countries to 2.7 per cent this year. This is a full percentage higher than its earlier forecast. The organisation expects growth rate to increase to 2.9 per cent next year.
- Crude prices once again went past the $60 per barrel mark on forecasts of colder weather in the northern hemisphere. After remaining strong in the first two days of the week, crudedeclined during the middle of the week on higher than expected US inventories. Expectations of higher winter demand pushed prices above $61 by the end of the week.
*Disclaimer: The author may have positions in the stocks mentioned above at the time of writing this article. This analysis/report is only for the purpose of information and is not an investment advice. Readers are advised to consult a certified financial advisor before taking any investment decisions. While efforts have been made to ensure the accuracy of the information provided in the content the author or publisher shall not be held responsible for any loss caused to any person whatsoever.