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Sober Inflation Pumps Up Markets

| 5/16/2013 9:04 PM Thursday

Remember Newton’s third law? ‘For every action there is an equal and opposite reaction’. It seems like the Indian bourses are following this principle. The day the data about an unprecedented increase in trade deficit surfaced, the markets nose-dived to shed more than 400 points and recuperated in the following sessions with the same 400 plus points riding high on the news of inflation cooling-off. Stakes are now high in the markets and they are treading in a territory where there is very little room for an upward movement, but it would certainly be interesting to see if the markets would be able to touch a life-time high.

Snapshot
  DateSensexNifty
Open 02-05-2013 19,459.33 5911.4
High 15-05-2014 20,241.96 6,157.10
Low 02-05-2013 19,451.26 5910.95
Close 15-05-2014 20,212.96 6,146.75
Gain For fortnight   753.63 235.35
% Change   3.87% 3.98%

Considering the present state of the markets, the last fortnight was a very crucial one for the bourses as they crossed the psychological mark of 20000 points and stayed afloat above this level. The BSE Sensex opened at 19459 points on May 2 and soon surged with some positive domestic and global cues to cross the psychological mark of 20000 points on May 11. Then came the dismal trade deficit numbers and the markets lost a whopping 430 points in the intraday trade on May 13 to touch 19691 points.

As some consolidation occurred, a sudden drop in the WPI-based inflation to 4.89 per cent for April 2013 boosted market sentiments. The Sensex shot up by 490 points on May 15 to touch its peak of 20241 points before closing at 20212 points, gaining 753 points during the fortnight. On the other hand, the NSE Nifty opened at 5911 points on May 2 and touched 5910 points in the intraday trading itself. It stood at the fortnight’s pinnacle of 6157 points on May 15 before closing at 6146 points, gaining 253 points.

 IndexCountry 02-May-'1315-May-'13Difference % Difference
Dow US 14,700.95 15,215.25 514.3 3.50%
Shanghai China 2,174.12 2,217.01 42.89 1.97%
Hang Seng Hong Kong 22,692.33 22,930.28 237.95 1.05%
Nikkei Japan 13,727.25 14,758.42 1031.17 7.51%
FTSE UK 6,451.30 6,686.10 234.8 3.64%
Dax Germany 7,905.35 8,339.11 433.76 5.49%
Seoul Composite S Korea 1,961.67 1,968.83 7.16 0.36%
Bovespa Brazil 55,919.00 54,667.00 -1252 -2.24%
Taiwan Wtd Taiwan 8,111.43 8,251.82 140.39 1.73%
STI Singapore 3,370.19 3,432.76 62.57 1.86%

It is the repercussion of positivity on the global platform that we are experiencing in our markets. Global indices seem to be in a honeymoon phase with almost every index on a high. The US Dow was the leader gaining 3.50 per cent to touch a historical high. Japan’s Nikkei was a big gainer too with a 7.51 per cent jump followed by Germany’s DAX, UK’s FTSE, China’s Shanghai composite, Singapore’s STI and Taiwan Weighted, which appreciated by 5.49 per cent, 3.64 per cent, 1.97 per cent, 1.86 per cent and 1.63 per cent respectively. On the flip side, Brazil’s Bovespa was the lone index to show a decline of 2.24 per cent.

FIIs bonding with the Indian markets continued in this fortnight too as they bought equities worth Rs 7602 crore till May 11. On the other hand, the Indian mutual funds sold stocks worth Rs 1641 crore at the bourses. The combined turnover of the BSE and the NSE was between Rs 1270 crore and Rs 13129 crore, indicating a high fluctuation in trade during their various sessions.

Individually, 938 stocks appreciated and 1307 stocks declined during the fortnight. There were 55 stocks that remained unchanged. As far as the gainers are concerned, Berger Paints gained by 25 per cent, followed by MMTC, Mphasis, Pidilite and Muthoot Finance, which gained by 22 per cent, 15 per cent, 14.5 per cent and 12.5 per cent respectively. On the other hand, Allahabad Bank was the biggest loser with 11 per cent decline, followed by Wockhardt, Apollo Tyres, JSW Energy and Coal India, which lost by 8.62 per cent, 7.57 per cent, 7.50 per cent and 6.97 per cent respectively.

Considering the current scenario, there are hopes for a 25 basis points rate cut in the Cash Reserve Ratio (CRR) by the RBI in its June review. But to be bullish over this hope doesn’t seem like a sensible idea as the markets are already hovering around a historical high. In fact, taking cues from the global indices seems more logical as some correction can take place in a short term. It is thus advisable that investors book partial profits from their stocks and purchase at dips.

 

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