Weekly market update 17th April: FIIs pull markets higher

Eight consecutive days of gains on the BSE were interupted by a 3% downward correction on Thursday but despite this the markets continued their advance with another week of  gains on both the headline indices. The Sensex ended the week on 11,805, up 218 points or 2% from the previous week.  The Nifty made a more modest gain of 1.3%, ending the week on 3,384 or 42 points higher.

Volumes again grew week-on-week and FII inflows continue to be positive, with 1,400 crore of net purchases being made on Monday and Wednesday alone (the markets were closed on Tuesday). The begining of  April has now seen 7 striaght sessions of positive FII inflow and 3,000 crore of net purchases so far. This figure is higher than for any full month since Feb 2008 and has provided much needed impetus to the rally as domestic institutions have relaxed their buying slightly.

The major movers this week have been the metals infrastructure and auto stocks, advancing heavily on Monday and Wednesday and correcting heavily on Thursday. This pattern was repeated in the Small and Mid Cap sectors which outperformed the major indices on the advances but corrected more heavily on the decline. Banks made solid gains today and will remain in the spotlight next week with HDFC and Axis reporting their results on Monday and Yes Bank also expected to release their numbers next week.

The big corporate news this week was the acquisition of a controling stake in Satyam by many people’s outsiders Tech Mahindra. The stock rallied following the announcement but has since fallen off as the market waits to hear more about management plans to inegrate their massive but ailing new business. Also in the IT space, Infosys reported slighlty below expectation figures for Q409 and expressed the belief that IT and offshoring budgets will be reduced at many of their clients  in FY10. This gloomy forecast is putting pressure on the sector as a whole.

Looking forwards we are now in earnings season proper so the market will once again become driven by domestic news. Although the rally appears to be going strong, the risk to the downside is probably greater than the upside in the short term as disappointing results from some of the bellweather stocks have the potential to trigger a significant correction. However the absence of such disapointments and the continued interest of foreign funds could continue to drive the markets higher.

Elsewhere the other major Asian indices also made ground this week and the Rupee ended the week up against the dollar despite advances in the US domestic markets. The Rupee has now gained 5% since the record low on March 3rd as foreign funds continue to flow into the Asian markets, weakening the US currency.  

Originally posted on moneyvidya.com

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Weekly market update: domestic sentiment still driving rally

This three day trading week saw further gains for the Indian markets, which seemed to ignore a mixed week elsewhere to continue on their upward path. FII inflows were positive in the early part of the week but the real driver of the rally remains the domestic players whose positive sentiment is continuing unabated.

Monday was a positive day globally as the major indices rallied and the Sensex gained 1.8%. Tuesday saw no trading but on Wednesday the markets bucked the global trend as the Sensex advanced 2% while losses were seen almost everywhere else.  Not least in the US where profit booking dragged the Dow down over 2%. Thursday was flat, following a morning rally and afternoon sell-off. The Sensex ended the week on 10,805 up 456 points or 4.4% for the week. The Nifty closed on 3,342, up 131 points or 4.1%. 

The big gainers this week have again been Realty, Metals and Banking with Capital Goods and Infrastructure also gaining ground, including Reliance Industrial Infrastructure which jumped a massive 33% in Thursday trading. The mid cap and small cap indices also had a good week as buying interest continues to increase in companies outside the benchmark indices, indicating a general increase in risk appetite amongst investors. This weeks advance means gains from the previous lows are now approaching 30% and the markets stand at a 6 month high going into voting season.

Other domestic news saw WIP inflation fall again to 0.26% (although CPI remains much higher) and the Index of Industrial Production (IIP) come in at -1.2%. Neither was a huge suprise and had minimal impact on the markets mood. Neither did the announcement that the RBI has monetised 1.5 lakh cr of government debt, increasing the money supply and reducing the need for debt to be issued, but as some analysts have pointed out risking future inflation.

With the market at least acting like it has priced in the worst of the slowdown, the big tests coming up are earnings season and the election. Q4 resuls which beat, meet or are not a great deal worse than expectations will probably support the belief that the worst news is already priced in and may fuel a continuation of the rally. 

However, uncertainty about who will be returned to power will loom heavy throughout the last weeks of April and most of May. This will probably increase volatility and a may reduce buying interest until a government is returned. The mood however appears to be positive for the coming week.

Post originally published on moneyvidya.com

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