Indian Financial Markets Last week

This is on how our equity markets performed this week; this is not only about trading or investment calls on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Here I am trying to jot down the major events, calls by various brokerage houses this last week which will try to help us in making future trading and investment strategies

News


  • On 4 th of April, Mutual funds forty five crores worth of securities.
  • China Q1 trade surplus at USD 670 million and exports were up by 9% in the month of March according to China trade data (news published on 10 April 2012).
  • The operators have still not passed the benefits of third generation mobile services to end users according to Minister of Telecom (India) (news published on 10 April 2012).
  • FII net sold Rs. 328.67 Crores in Equities and DII’s net sold Rs. 190.18 in equity markets, these figures are provisional (news published on 10 April 2012).
  • IPL 5 viewership for the first six matches stand at 90.1 million against 107 million in IPL season 4.
  • Tsunami warning issued and withdrawn after a strong earth quake measuring 8.6 off the Indonesian coast (News on 11 April 2012)
  • Government of India agrees for a special purpose vehicle (SPV) for Goods and service tax (GST) network.
  • On 11 April 2012 FII’s sold net of USD 72.06 million worth of equity shares.
  • National Stock Exchange (NSE) to start futures and options trading of FTSE 100 from 03 May 2012.
  • Service imports stood at USD 6.75 billion Vs. USD 7.33 billion (month on month) according to Reserve Bank of India RBI data.
  • ECB borrowings stood at climb EUR 227.6 billion.
  • On 12 April 2012 FII net buy USD 35.77 in equities.

Comments made by various participants of the Indian financial markets


The bond market will be under liquidity pressure and traders would watch out for any OMO announcement. RBI’s rate action is likely to be the next trigger. The 10-year yield is seen between 8.63-8.70%. – By Suresh Prabhu

The rupee is likely to be marginally negative on weak equity market cues & after the sharp fall in the euro. The range for the day is seen between 51.15-51.55/USD – Green Back Forex

The latest Fed minutes caused investors to question the likelihood of renewed monetary easing. But Greed & Fear would still take the view that another dose of monetary quackery is coming sooner or later. Operation Twist will most likely be replaced by some new scheme of asset purchases at the end of June. We view any pullback in gold to USD 1,500/ounce level as an opportunity to increase positions. – CLSA

We expect the net income of our universe to grow 27.1% YoY and 23.1% QoQ on an overall basis. On ex-Energy basis, we expect net income to grow 10.8% YoY. We expect the net income of the autos, banking, energy and pharmacy to improve while the net income of metals & mining, real estate and telecom may decline YoY. – Kotak Securities

There are mixed cues for the rupee today. Traders may wait a while before taking fresh positions. The range for the day is seen between 50.90-51.30/USD. – Verity Analytics

Higher yields have attracted investor buying. Inflation is expected around 6.70% & may help start the rate easing cycle. The 10-year yield is seen between 8.60- 8.65%. – ICICI Securities

Earnings depression is likely to persist this quarter. During the earnings season, we watch out for surprise breadth, the pace of increase in capital costs, notably interest costs and companies that exhibit pricing power. Even though earnings may outperform the narrow market on top line growth, they are likely to underperform on the bottom-line. – Morgan Stanley

Q4 earnings are likely to post a sharp downtick in revenue growth amid margin contraction across the board. Liquidity, the key tailwind for the rally in Jan-Feb may remain benign globally. We expect easing by the RBI and the growth momentum to improve gradually through FY13. – Religare

We believe the macro factors warrant a delay in policy rate cut & see low probability of a 25 bps cut on April 17. We are now changing our call to only 75 bps cut in policy rates for the rest of 2012 compared with our earlier forecast of 100 bps. – Morgan Stanley

The rupee is expected to be weak on the dollar’s strength & weak equity market cues. The range for the day is seen between 51.50 – 51.85/USD. – Alpari India.

Our top down view has been that Sensex EPS for FY12 and FY13 will be `1100 and `1200 respectively. We still expect FY13 to see downgrades. The stocks we would buy ahead of results are Tata Motors, Dr Reddys and HDFC Bank, while our result sells include M&M, IDFC and Adani Power. – Bank of America Merrill Lynch.

Over the last week we have seen challenges on global macro fronts both from the US and global data, suggesting that sovereign risk is back on the agenda. The muddier profile for global data and the re-emergence of European risks may last a little longer. We are now shifting to a more cautious stance – Goldman Sachs.

Current rally in bonds is on account of falling crude prices, expectation of a repo cut, rumours of RBI buying in secondary market and unwinding of short positions. The 10-year yield is seen between 8.47-8.54%. February IIP is likely to be at 7.5%. – Kotak Mahindra Bank

The rupee is expected to see modest gains on global currency movement & equity market cues. The currency is seen in a range between 51.15-51.35/USD. The IIP number is expected to fall to 6.35% – SPFX India.

India’s market recovery was fairly V-shaped in the fourth quarter, but earnings will likely have a U-shaped recovery with 7% year on year growth for the Sensex. We don’t believe there are big bottom up expectations for the quarter and one should expect only modest earnings revisions post the results, with FY13 earnings growth estimates remaining in the 14-15% level. – Citi Group

Risks to equities remain, but the ECB has removed the biggest tail risk. Earnings growth, valuations and investor positioning offer moderate support. We see global equities grinding higher, with 7% upside to the year-end MSCI All Country Index. – HSBC

The rupee is likely to be stronger on account of dollar weakness. Positive equity market cues & a jump in the Korean won on news of apparent failure of North Korean rocket test should also aid the currency. The range is seen between 51-51.40/USD. – Green Back Forex

Bond prices are likely to trend lower in the near-term. The current rally may lose its steam after the Credit Policy. The 10-year yield is seen between 8.40-8.50% in the near-term. – DSP Blackrock

Risk tremors continue to pick up with Spain the prime catalyst for bad news on the Eurozone. Italian Prime Minister Mario Monti’s labour reform has also run into entrenched union opposition. The deterioration in Europe’s periphery sovereign bond markets is a clear warning signal to the global risk-on trade – CLSA

Large inflows of $27 bn have pushed Asian equity valuations almost back to their 10-year average. While analysts do not appear confident, we expect small changes in economic activity in H2CY12 to boost corporate earnings, leading to consensus upgrades. We are overweight Taiwan, China and India and underweight ASEAN. Our preferred sectors are IT and consumer discretionary. – HSBC

Investment Calls


On 13 April 2012 SP Tulsian recommended to buy Kennametal at rupees 1150 with a target of rupees 1400 (time frame of six months) which is currently trading at 1140.15.

Equity Master on 13 April 2012 recommended to sell ACC at rupees 1260 (this is not an intraday or any other trading call)

Foreign Exchange


  • 09 April 2012 – 51.495
  • 10 April 2012 – 51.981
  • 11 April 2012 – 52.1269
  • 12 April 2012 – 52.2514
  • 13 April 2012 – 52.1004

Period Average – 51.9909, Period low – 51.495 and period high – 52.2514

National Stock Exchange (NSE) nifty movement


  • 09 April 2012 – Nifty closed at 5234.40 with a turn over of rupees 3680.04 crores
  • 10 April 2012 – Nifty closed at 5243.60 with a turn over of rupees 4886.48 crores
  • 11 April 2012 – Nifty closed at 5226.85 with a turn over of rupees 5585.70 crores
  • 12 April 2012 – Nifty closed at 5276.85 with a turn over of rupees 5457.29 crores
  • 13 April 2012 – Nifty closed at 5207.45 with a turn over of rupees 7989.27 crores

(starting from 09 April 2012 to 13 April 2012)

Equity prices trading below book value (price to book value)


Out of top 100 companies, 14 companies were trading below their book value whereas rests of the 86 were trading above book value. Click here to donwload the data of companies trading below book value

Market Outlook


SENSEX important level is 17664. A breakout and close above the same with a stronger positive candle may stage a strong near term to short term rally.

SENSEX important level is 17664. A breakout and close above the same with a stronger positive candle may stage a strong near term to short term rally. Similarly, the low of 16921, may trigger off a sell off. Currently sideways into triangular movement creating the pain of up down movement on alternate days or gap up or gap down without providing intra-day trading movement. The moves come with spike and could not be caught. Thanks to DJIA which recovered strongly from the support and so do FTSE.

Nifty cash now hits the gap of 5287-5305. High made till now is 5299.70; next gap is at 5338-5344. The 50 day average is at 5337. The recent peak is at 5378. A sustained rally is needed to take off these resistances. Stochastic has hit the oversold 2 day back and still not yet hit overbought which leave some scope to test these resistance mentioned earlier or above.