Sandy-Eyed RBI

The RBI has veered away from the government’s path once again and maintained status quo on the interest rates. On the other hand, the corporate results have been better than expected. It is just a matter of time before the markets get back on an upward growth trajectory, says Saikat Mitra.

The markets are yet to get into a festive mood, and the RBI’s move of maintaining status quo on the interest rates has further restricted the attempt at gathering momentum. The last fortnight saw them end on a rather flat note, with the Sensex and Nifty declining by 0.39 per cent and 0.64 per cent respectively. The RBI’s meeting was being eagerly awaited as there were expectations of a rate cut. However, it only saw the regular reduce the Cash Reserve Ratio (CRR) for the second consecutive time by 25 basis points.

On the other hand, the Q2FY13 report card of India Inc. has been quite good, with the results coming in better than expected. For the 669 companies that had declared their results till October 30, the topline has witnessed a growth of 14.42 per cent and the net profit registered a gain of 21.41 per cent on a YoY basis. This is indeed a good sign. It is expected that the results of the remaining companies will also be ahead of expectations.

On the global front, the US markets are reeling in the aftermath of hurricane Sandy that lashed the US East Cost, forcing a closure of the markets there for two consecutive days. Although put on the backburner due to this natural catastrophe, the US Presidential election is the most important event that is being looked forward to by investors across the globe. In Europe, stocks climbed, heading for a fifth straight month of gains as Air France-KLM Group and Deutsche Lufthansa AG (LHA) posted earnings that beat estimates. On the data front, certain important data will be released in the next fortnight, which includes the jobless claims, consumer confidence, GDP and new home sales numbers.

Coming back to India, on a sectoral basis, most of the indices have closed in the red. With a little bit of volatility that the markets are witnessing at this juncture, some renewed interest is being seen in safe sectors like FMCG and Healthcare. The BSE Auto index, which went up by more than one per cent, has been the top performer during the fortnight. It was followed by the BSE FMCG index (+0.95 per cent) and the BSE HC index (+0.73 per cent). Out of the 13 sectoral indices, nine ended in losses. Leading the draggers this time is the BSE PSU index (-3.40 per cent). The BSE Power (-3.18 per cent) and the BSE Consumer Durables index (-2.97 per cent) took second and third positions respectively in terms of underperformance.

The money flows remained muted this time, with FIIs pumping in a net Rs 691 crore. DIIs ended the fortnight in the red, selling off equities worth Rs 494.90 crore in the last fortnight in equities. The markets are witnessing a temporary blip and are hoping to take the next step forward after looking at the implementation of the reforms processes. The markets seem to be in an optimistic mood and we could see some smart rallies in tandem with the festive mood. We wish all our readers a very happy and prosperous Diwali!