CANDLE WHO'S HANDLE.
It was a week of extreme surprises for the stock markets.
On one hand, the Fed Chairman Ben Bernanke pleasantly surprised markets and fuelled a rally across the globe by refraining from reducing its massive economic stimulus.
On the other hand, market sentiment back home dampened after the new Reserve Bank of India governor, Dr. Raghuram Rajan, in an unexpected move, raised the repo rate by 25 basis points to 7.5%. The central bank also revised the Marginal Standing Facility by 75 basis points to 9.5%. Meanwhile, WPI inflation rose at the fastest pace for six months in August, driven by an 18% jump in food prices.
The inflation surged to 6.1% in August against 5.79% in July.
Banks are likely to show substantial MTM loss on their AFS investments in the current quarter as medium and long term bond yields are unlikely to come-off by the end of the month.
Considering deepening growth slowdown, we do not envisage further repo rate hike in FY14. If the rupee continues to appreciate, then the MSF rate could be reduced further and the overall liquidity window under LAF would be expanded. With major events out of the way, the coming week will see rejigs in portfolios. Investors can do some cherry-picking in case of major fall in fundamentally sound counters.
Nifty Future VWAP as below;
Equities fell and the rupee weakened on Friday following a surprise
decision by the Reserve Bank of India (RBI) to raise the repo rate, at
which banks borrow from the central bank.
The rupee ended at 62.28 to a
dollar against the previous close of 61.78, a weakening of 0.81 per
Government bond yields rose sharply. RBI would auction
government bonds for a notified amount of Rs 15,000 crore on Monday, due
to which sentiment in the bond market might continue to be bearish.
Sensex earning estimates as below;
On the global front, the focus for next week will start with the
national elections in Germany, Europe's biggest economy, to be held on
Sunday, 22 September 2013. Recent polls suggest neither of Germany's two
main parties -- the Christian Democratic Union and the Social
Democratic party -- will secure enough votes with their traditional
coalition partners to cross the 46% hurdle needed to form a government,
making a grand coalition between the two the most likely outcome. Also
the Market Economics will release the HSBC China Flash Manufacturing PMI
for September 2013 on Monday.
On domestic front trend in
investment flows of foreign institutional investors (FIIs) and movement
in other emerging markets may determine near term trend for our markets.
The market may also remain volatile next week as it would have
Advances vs Decline as below;
Stock specific Wipro will be in focus as the
stock enters the 50-unit CNX Nifty index on Friday, 27 September 2013.
Wipro will replace Reliance Infrastructure in Nifty.
Markets extended the positive momentum forward after Fed Chairman refrained from reducing its massive economic stimulus. Nifty managed to close above 78.6% retracement of the entire decline since May. In the past Nifty has failed to sustain on a prolonged basis after breaking out above 6,000 levels hence more confirmation is needed with breakout above previous peak of 6,229 in order to reinforce the positive stance.
FII activity as below ;
FIIs were net buyers in both Cash and Index future segment. Nifty futures rolled at around 29% and Bank Nifty at around 18%.The weighted average price for Nifty is around 5720 while that for the BankNifty is at 10720. On option front, Nifty 6100 call has seen buying since last few trading session, while put writing was visible 5900 and 5800 strike. For the week, Nifty might trade in the range of 5900-6250. Metals, Cement and Power stocks has seen long addition in last few trading session.
Sectoral Performance as below;
Aug eight infrastructure industries data is expected to arrive on Sept 25 towards Sept 30.
The US markets slipped on Friday, as investors
reacted to the uncertain signals from US central bankers. The selloff
intensified in the last few minutes of trading but despite of that
benchmark indexes still managed to post a third week of gains.
trading session of the week had one Federal Open Market Committee
member signaling the Fed could curb stimulus next month and another
critical of the decision not to taper in September. Federal Reserve Bank
of St. Louis President James Bullard stated that the decision not to
begin tapering followed weaker economic data, and that a small taper
could start in October. Bullard added that tapering is more likely if
the labor market continues to improve. Kansas City Fed President Esther
George stated that markets were ready for reduced stimulus to begin, and
the central bank’s failure to follow through on expectations hurt its
credibility on Wall Street.
Meanwhile, defying a
White House veto threat, the Republican-led House of Representatives
passed a bill that would keep the government open through mid-December
and also eliminate funding for President Barack Obama’s health-care law.
The bill is part of a two-pronged strategy to attack Obama’s health
law. Republicans are also aiming to cripple the law in return for
agreeing to raise the US debt ceiling, which Treasury Secretary Jack Lew
says the debt will be hit in mid-October. House lawmakers approved the
budget bill by 230 to 189, mostly on a party-line vote. House Speaker
John Boehner and other Republicans insist their party has no interest in
a government shutdown or defaulting on the US debt.
Dow Jones Industrial Average lost 185.46 points or 1.19 percent to
15,451.10, the S&P 500 was down 12.43 points or 0.72 percent to
1,709.91, while the Nasdaq dropped 14.66 points or 0.39 percent to
Indian ADRs closed in red on Friday;
ICICI Bank was down 1.63%, HDFC Bank was down 1.39%, Tata Motors was
down 0.92%, Infosys was down 0.63% and Dr. Reddy’s Lab was down by
Nifty Future Index Sept month expected to close bullish above 6119-6150, as per technical's breakout resistance found at 6189, 6209. Index optimistic and bullish.
Rock N Roll