Markets were on fire for the seventh consecutive week and touched a 7-month high with both the indices Sensex and Nifty breaching the 18,000 and 5,500 levels respectively on the back of strong global cues and foreign inflows. This rally was also led by buying by funds and retail investors. On the sectoral front, Realty, Power and Capital goods gained ground.
Foreign Institutional Investors (FIIs) bought shares worth Rs 4,518.09 crs including provisional data of February 17, as against Rs4,040.80 crs last week.
Also during the week with the Q3 results season having ended, there was significant price action seen in pivotal counters from large sectors like Banking, Capital Goods and Autos. Tata Motors was in limelight after it announced record Q3 consolidated profits of Rs 3406 crs which were way ahead of market expectations. This saw the stock spurt by almost 6.% during the week. State Bank of India was also up 5% at Rs 2,459 and ICICI Bank gained 2% to Rs 990.40 on Friday on fresh buying by institutional investors.
On the other hand capital goods majors like Bharat Heavy Electricals was trading up 9.7% at Rs 312.20 and Larsen & Toubro surged 2.5% to Rs 1,484 levels. There was renewed interest in power equipment players after the Supreme Court overturned the Delhi High Court verdict that allowed Italian boiler manufacturer Ansaldo Caldaie Boilers to bid for providing equipment to NTPC. The court upheld NTPC's decision to disqualify the Italian firm from participating in this Rs 16,000 crore power equipment tender. This has increased chances of BHEL to bag a sizeable share of this Rs 16000 crs order.
On the policy side the central government under directions from the PMO announced that Coal India would have to work out firm Fuel Supply Agreements (FSAs) with independent power producers who were under tremendous pressure to raise power output.
This decision will undoubtedly put pressure on Coal India as any under delivery from its side would attract penalties and it would have to make up this shortfall from imports. However from a longer term perspective this is a welcome move as the government looks serious to address the core concerns facing the power sector. The Coal India stock was down by 5% over the week while other IPPs like Adani Power, Reliance Power, Lanco Infratech and Jindal Power were all up by 5 to 9% over this week. Finally the Nifty closed at 5564 levels from 5381 last week showing a rise of 3%
Meanwhile on the domestic macro side, headline inflation slowed to its lowest level in more than two years in January as food prices fell, increasing the pressure on the central bank to cut rates to battle the country's economic slowdown. The WPI India's main gauge of inflation, rose 6.55% from a year earlier, its slowest rise since November 2009, broadly in line with the 6.60% average forecast after a rise of 7.47% in December.
The clear decline in headline WPI has increased the chances of a repo rate cut by the Reserve Bank of India (RBI) in its March 15 monetary policy meeting. The rupee's rebound in January has also partially helped inflation to ease. Hence going ahead it is certain that Reserve Bank of India would start cutting interest rates in the quarter beginning April 1, as it looks to stimulate an economy that is headed for its slowest growth in three years. The central bank had a 20-month tightening cycle that ended in October.
Also on the global front, market will closely watch developments in Europe. Euro-zone finance ministers will reportedly take a final decision on the second bailout package for Greece at their meeting in Brussels on February 20, 2012.
Meanwhile the economic data from US has remained somewhat positive. The U.S. Industrial Production was unchanged in January 2012 following the upwardly revised gain of 1% seen in December 2011. The U.S. Retail Sales also increased 0.4% in January 2012 after being flat in December 2011.
However the GDP growth in the 17 member nation euro zone fell 0.3% in Q4 of 2011 from the prior three months, the first drop since Q2 of 2009. In the year, the economy grew 0.7%. Germany GDP also fell 0.2% in Q4 from Q3 of 2011 but France's economy expanded by 0.2% in Q4 from Q3.
For the coming week, the Indian market is likely to remain strong led by Global markets, albeit choppiness is not ruled out in the shortened trading week and the F&O clearing for the month of February 2012. Some profit taking could materialize as the markets have seen a sharp upside purely on the strong liquidity from the FIIs which still continues to be strong.
However with crude prices firming up to over 103$ per barrel and the brent placed at around $120 a barrel any further upside here could put a short term break to the market upside. Also with the state elections results expected over the next two weeks and a lot of economic data to be released from the first week of March 2012 onwards, like the Economic Survey, Union Budget for 2012-13 and a likely rise in petrol prices are some of the important new flows the markets would have to be prepared for.
All in all we expect the Nifty to trade with a positive bias, and one could see the Nifty witnessing some profit booking and some consolidation now before it resumes its upward journey again. In the near term 5450 for the Nifty will be a strong support and on the upside 5600 will prove to be a strong resistance.
Mr Avinnash Gorakssakar is the Founder & Director of www.MoneyInvestments.in, a stock market advisory company. He can be reached at email@example.com.
Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. The author does not accept any liability whatsoever arising from the use of any of the above contents.
Disclaimer: The author has taken due care and caution to compile and analyze the data. The recommendations are his/her personal views. He/she shall not accept any liability whatsoever arising from the use of any of the above content.
Sources have been mentioned at relevant places in the article. In spite of this, the author does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.
The author may or may not hold positions in the stock.
- Technical Calls: Bank of India, Hexaware
- SMC Commodity Report (Metals & Energy)
- SMC Banking Derivative Daily
- Way2wealth's Daily Technical Bites
- Way2wealth Morning Note
Have a question?
CFP - Keynotes Financial Opiniery