Low budget proposals weigh on high hopes; market lose over 2% for week
The Indian markets slumped in the passing week as the high hopes of the Street from the Union and Rail Budget 2013-14 were dashed. The government's reform measures to boost the economy were highly expected to be extended in the budget, but Finance Minister P Chidambram concentrated on fiscal prudence and achieved the fiscal deficit target for FY2013 at 5.2 percent instead of 5.3 percent targeted in the last budget, further setting a target of 4.8 percent for FY2014. Though, there were lots of announcements keeping in mind the Foreign Institutional Investors (FIIs) but there was a language confusion that the proposed sub-Section (5) of Section 90 could mean that the Tax Residency Certificate produced by a resident of a contracting State could be questioned by the Income Tax Authorities in India that spooked the markets , prompting investors to sell. However, there was a clarification next day from the Finance Ministry that Income Tax Authorities will not question resident status after the Tax Residency Certificate (TRC) is produced by foreign institutional investors, but it could not do much and markets snapped the week with cut of over 2 percent. Though, the major indices ended in green on three out of five days, but the fall witnessed in other two days was massive and the markets seemed gasping for breadth with a carnage in the midcap, triggered by huge selling in some stocks on margin call.While, the rail budget turned out to be a non-event, the Union Budget was low on expectation. This was not enough, the real GDP growth moderated further in the third quarter of the current fiscal to 4.5%, as compared to 5.3% in the previous quarter and 6% in the same quarter last fiscal due to the slowing pace of growth in agriculture, mining and manufacturing sectors. However, marking a forty-seventh consecutive month of rise and the quickest rate in nine months, the seasonally adjusted HSBC manufacturing Purchasing Managers' Index (PMI) rose to 54.2 in February, up from 53.2 in January, but the reason proved too little to cheer up the markets.
BSE movement for the week
The Bombay Stock Exchange (BSE) Sensex shaved off 398.49 points or 2.06% to 18918.52 during the week ended March 1, 2013. The BSE Mid-cap index was down by 288.08 points or 4.36% to 6320.95 and the Small-cap index down by 369.44 points or 5.63% to 6195.32. On the sectoral front, Realty down by 181.72 points or 8.60% at 1931.40, PSU down by 361.61 points or 5.00% at 6866.07, Oil & Gas down by 415.40 points or 4.59% at 8644.57, Metal down by 436.25 points or 4.56% at 9124.80 and Bankex down by 613.25 points or 4.43% at 13241.87 were major losers on the BSE sectoral space, while Consumer Durables (CD) up by 264.98 points or 3.71% at 7401.46, IT up by 157.97 points or 2.39% at 6763.05 and TECk up by 65.50 points or 1.71% at 3888.49 were top gainers on the BSE sectoral front.
NSE movement for the week
The CNX Nifty plunged by 130.60 points or 2.23% to 5719.70. On the National Stock Exchange (NSE), Bank Nifty down by 528.90 points or 4.38% to 11540.05, CNX IT up by 124.85 points or 1.79% to 7117.70, while CNX mid-cap down by 298.75 points or 3.77% to 7622.40 and CNX Nifty Junior down by 246.35 points or 2.09% to 11560.95.
FII transactions during the week
Foreign Institutional Investors (FIIs) were net buyers in the equity segment during the week with gross purchases of Rs 20129.00 crore and gross sales of 19999.80 crore, leading to a net inflow of Rs 129.20 crore. They stood as net buyers in the debt segment as well with gross purchases of Rs 6518.50 crore against gross sales of Rs 3995.70 crore, resulting in a net inflow of Rs 2522.80 crore.
Industry and Economy
The eight core sector industries grew by 3.9% in January 2013, up from 2.2% in the same month in 2012, mainly on the back of negative growth witnessed in the production of crude oil, natural gas, fertilizer and cement. However, the cumulative expansion of these industries in April-January period of 2012-13 slowed to 3.2% from 5% in the same period of the previous year. On the positive side, petroleum refinery production grew by 10.5% in January 2013 compared to a negative growth of 4.6% in January 2012. On a collective basis, it registered a growth of 7.3% during April-January 2012-13 compared to 3% growth during the same period of 2011-12.
Outlook for the coming week
The Indian markets are likely to see some recovery in the coming week, with Budget a matter of the past. Traders will be analyzing the various impacts of budget proposals and will proceed accordingly after the carnage witnessed in the Budget week.
Investors would also watch out for the HSBC Services PMI slated to be announced on March 5. India's services sector logged a growth at its strongest pace in year during January and after a good manufacturing PMI for February, there will be high expectations for the Services to improve further.
Auto stocks too will remain in the limelight after announcing the monthly sales numbers, traders will be analyzing their performance in the backdrop of the budget announcements and its further impact on the sector.
The telecom stocks too are likely to remain in action as Finance Minister P Chidambaram has said that the present uncertainty in the telecom sector will be resolved and spectrum will be auctioned. Spectrum auction for airwaves in the 800 megahertz (MHz) band, popularly known as the CDMA band will take place on March 11, the day on which the auction of 900 and 1800 MHz band spectrum was supposed to take place.
Apart from the capital market there will be a buzz in the debt market too with the government's 2013/14 gross borrowing target of Rs 6.29 trillion. There is a clarification expected next week by the government on its gross gross borrowing estimates that had sent bonds to their worst day in seven months.
On the global front, investors will be eyeing ISM Non-Mfg Index data of US on March 5, followed by ADP Employment Report and Beige Book details on March 6, Jobless Claims and finally Employment Situation data on March 8.
Top Gainers
During the week, CNX Nifty touched the highest level of 5878.40 on February 25, 2013 and the lowest point of 5671.90 on February 28, 2013. On the last trading day, the Nifty closed at 5719.70 with a weekly loss of 130.6 points or 2.23%. For the coming week, 5634.93 followed by 5550.17 are likely to be good support levels for the Nifty, while the index may face resistance at 5841.43 and 5963.17 levels.
US Market
The US markets showed some strength in the passing week with minor gains after Federal Reserve Chairman Ben Bernanke sent a strong signal that he backed the continuation of the central bank's $85 billion bond-buying program. Bernanke warned that the Fed's innovative policy could not completely offset the drag to the economy this year from fiscal policy. He urged lawmakers to defuse the sharp automatic spending cuts, known as the sequester. Bernanke added that Fed policy was not fostering a bubble in the stock market and US banks would not suffer serious damage if Italy was forced to write down its debt.
Meanwhile, the automatic federal budget cuts of $85 billion looked certain to kick in after a pair of bills to replace them failed in the Senate. Neither a Democratic nor a Republican bill aimed at replacing the so-called sequester was able to get enough support to win a test vote on Thursday. While senators from both parties hadn't expected passage, the bills represented a last-ditch legislative effort to replace the across-the-board cuts to domestic and military spending. However, the budget cuts for fiscal 2013 would not take effect all at once. Instead, they would go into effect gradually through the end of the fiscal year on September 30. In total, the sequester would cut about $1 trillion over nine years.
On the economy front, a gauge of consumer confidence jumped up in February, led by brighter expectations, after dropping in the prior month. The Conference Board stated that its consumer-confidence index rose to 69.6 in February, the highest level in three months, far exceeding estimates of 62.3. January's level was revised to 58.4 from a prior estimate of 58.6. The US economy grew in the final three months of 2012 but just barely instead of shrinking for the first time since the end of the recession as originally reported. Separately, the number of people who applied for jobless benefits dropped in the most recent weekly data. Initials claims for regular state unemployment-insurance benefits dropped 22,000 to 344,000 in the week ended February 23, according to the government.
European Market
The European markets were reeling under pressure during the passing week after the Euro crisis got ignited again thanks to the Italian election and worse growth prospects. The German chancellor Angela Merkel met with Italy's president in Berlin, wishing him success as he forms a new government. Angela Merkel expressed confidence that Italy will emerge from its post-election deadlock. Italy held an inconclusive general election this week that left the country with no workable majority in parliament. Besides, Germany Finance Minister Wolfgang Schaeuble stated that Italy's inconclusive election had raised the risk of market turmoil spreading to other euro countries and urged Italian politicians to form a stable government quickly.
On the economy front, euro zone manufacturing activity appeared no closer to recovery last month, when a dire performance in France offset a return to growth in Germany, a business survey showed. Manufacturers helped lift the 17-nation bloc out of the last recession, but purchasing managers' surveys showed activity in France, the euro zone's second-biggest economy, has now contracted for a year. In contrast, German manufacturing expanded for the first time since February last year, joining Ireland as the only countries surveyed in the bloc to show growth in manufacturing activity.
Markit's Euro zone Manufacturing Purchasing Managers' Index (PMI) remained at January's 47.9 last month, just pipping an earlier flash reading of 47.8 but holding below the 50 level that divides growth from contraction for the 19th month running. Germany's PMI bounced to 50.3 from January's 49.8, while France's reading came in at 43.9, above the previous month's 42.9 but well below the 50 mark for the 12th month.
Asian market
Asian equity indices exhibited optimistic trend during the passing week with all the major indices, barring Singapore's Straits Times ending the week's trade in the green, thanks to Italy's successful bond auction that bolstered investor confidence in the global economic recovery and helped underpin appetite for riskier assets. Back on regional turf, Japanese Nikkei garnered nearly two percent gains during the week as the Prime Minister Shinzo Abe moved a step closer of having a proponent of his aggressive monetary easing policies become head of the Bank of Japan, after the government submitted its nominee for the top job to parliament.
Nikkei also got some support after the Ministry of Communications and Internal Affairs of the country said that core inflation in Japan was down 0.2 percent on year in January. Overall CPI was down an annual 0.3 percent after showing contraction of 0.1 percent in December. A separate survey from the internal affairs ministry showed that Japanese jobless rate slipped to 4.2 percent in January from revised 4.3 percent in December. The number of unemployed persons in January was 2.73 million, a decrease of 180 thousand or 6.2 percent from the previous year.
Chinese Shanghai Composite remained the top gainer among other Asian peers gaining about two percent, largely supported by bargain buying following steep fall in the passing week and on hopes that the revised rules on qualified foreign institutional investors will boost the domestic stock market. However, gains on the upside were muted after survey results from Markit Economics showed that China's manufacturing sector growth slowed unexpectedly in February due to a fall in foreign orders and slower expansion of output, dampening hopes of economic rebound at the start of the year. The HSBC Manufacturing Purchasing Managers' Index dropped to 50.4, a 4-month low from 52.3 in January.
The Indian markets slumped in the passing week as the high hopes of the Street from the Union and Rail Budget 2013-14 were dashed. The government's reform measures to boost the economy were highly expected to be extended in the budget, but Finance Minister P Chidambram concentrated on fiscal prudence and achieved the fiscal deficit target for FY2013 at 5.2 percent instead of 5.3 percent targeted in the last budget, further setting a target of 4.8 percent for FY2014. Though, there were lots of announcements keeping in mind the Foreign Institutional Investors (FIIs) but there was a language confusion that the proposed sub-Section (5) of Section 90 could mean that the Tax Residency Certificate produced by a resident of a contracting State could be questioned by the Income Tax Authorities in India that spooked the markets , prompting investors to sell. However, there was a clarification next day from the Finance Ministry that Income Tax Authorities will not question resident status after the Tax Residency Certificate (TRC) is produced by foreign institutional investors, but it could not do much and markets snapped the week with cut of over 2 percent. Though, the major indices ended in green on three out of five days, but the fall witnessed in other two days was massive and the markets seemed gasping for breadth with a carnage in the midcap, triggered by huge selling in some stocks on margin call.While, the rail budget turned out to be a non-event, the Union Budget was low on expectation. This was not enough, the real GDP growth moderated further in the third quarter of the current fiscal to 4.5%, as compared to 5.3% in the previous quarter and 6% in the same quarter last fiscal due to the slowing pace of growth in agriculture, mining and manufacturing sectors. However, marking a forty-seventh consecutive month of rise and the quickest rate in nine months, the seasonally adjusted HSBC manufacturing Purchasing Managers' Index (PMI) rose to 54.2 in February, up from 53.2 in January, but the reason proved too little to cheer up the markets.
BSE movement for the week
The Bombay Stock Exchange (BSE) Sensex shaved off 398.49 points or 2.06% to 18918.52 during the week ended March 1, 2013. The BSE Mid-cap index was down by 288.08 points or 4.36% to 6320.95 and the Small-cap index down by 369.44 points or 5.63% to 6195.32. On the sectoral front, Realty down by 181.72 points or 8.60% at 1931.40, PSU down by 361.61 points or 5.00% at 6866.07, Oil & Gas down by 415.40 points or 4.59% at 8644.57, Metal down by 436.25 points or 4.56% at 9124.80 and Bankex down by 613.25 points or 4.43% at 13241.87 were major losers on the BSE sectoral space, while Consumer Durables (CD) up by 264.98 points or 3.71% at 7401.46, IT up by 157.97 points or 2.39% at 6763.05 and TECk up by 65.50 points or 1.71% at 3888.49 were top gainers on the BSE sectoral front.
NSE movement for the week
The CNX Nifty plunged by 130.60 points or 2.23% to 5719.70. On the National Stock Exchange (NSE), Bank Nifty down by 528.90 points or 4.38% to 11540.05, CNX IT up by 124.85 points or 1.79% to 7117.70, while CNX mid-cap down by 298.75 points or 3.77% to 7622.40 and CNX Nifty Junior down by 246.35 points or 2.09% to 11560.95.
FII transactions during the week
Foreign Institutional Investors (FIIs) were net buyers in the equity segment during the week with gross purchases of Rs 20129.00 crore and gross sales of 19999.80 crore, leading to a net inflow of Rs 129.20 crore. They stood as net buyers in the debt segment as well with gross purchases of Rs 6518.50 crore against gross sales of Rs 3995.70 crore, resulting in a net inflow of Rs 2522.80 crore.
Industry and Economy
The eight core sector industries grew by 3.9% in January 2013, up from 2.2% in the same month in 2012, mainly on the back of negative growth witnessed in the production of crude oil, natural gas, fertilizer and cement. However, the cumulative expansion of these industries in April-January period of 2012-13 slowed to 3.2% from 5% in the same period of the previous year. On the positive side, petroleum refinery production grew by 10.5% in January 2013 compared to a negative growth of 4.6% in January 2012. On a collective basis, it registered a growth of 7.3% during April-January 2012-13 compared to 3% growth during the same period of 2011-12.
Outlook for the coming week
The Indian markets are likely to see some recovery in the coming week, with Budget a matter of the past. Traders will be analyzing the various impacts of budget proposals and will proceed accordingly after the carnage witnessed in the Budget week.
Investors would also watch out for the HSBC Services PMI slated to be announced on March 5. India's services sector logged a growth at its strongest pace in year during January and after a good manufacturing PMI for February, there will be high expectations for the Services to improve further.
Auto stocks too will remain in the limelight after announcing the monthly sales numbers, traders will be analyzing their performance in the backdrop of the budget announcements and its further impact on the sector.
The telecom stocks too are likely to remain in action as Finance Minister P Chidambaram has said that the present uncertainty in the telecom sector will be resolved and spectrum will be auctioned. Spectrum auction for airwaves in the 800 megahertz (MHz) band, popularly known as the CDMA band will take place on March 11, the day on which the auction of 900 and 1800 MHz band spectrum was supposed to take place.
Apart from the capital market there will be a buzz in the debt market too with the government's 2013/14 gross borrowing target of Rs 6.29 trillion. There is a clarification expected next week by the government on its gross gross borrowing estimates that had sent bonds to their worst day in seven months.
On the global front, investors will be eyeing ISM Non-Mfg Index data of US on March 5, followed by ADP Employment Report and Beige Book details on March 6, Jobless Claims and finally Employment Situation data on March 8.
Top Gainers
- TCS up by 3.21% was the top gainer on Nifty for the week - Tata Consultancy Services , a leading IT services, consulting and business solutions organisation has been chosen as a Leader in Life Science Drug Safety Services (DSS) by the prominent global market intelligence firm IDC. The company got leadership position due to its large life science customer base, broad industry-centric services portfolio, competitive pricing, and strong commitment to growth ensure that the company will continue to be a leading service provider to the industry over both the near and long term.
- JP Associates up by 2.85% was another top gainer on the Nifty - Jai Prakash Associates made a good bounce back after announcements of infrastructure boost in the Budget. The company has reported 64.19% fall in its net profit at Rs 110.93 crore for the quarter as compared to Rs 309.77 crore for the same quarter in the previous year.
- Siemens down by 9.50% was the top loser of the week on Nifty - Siemens launches SIMATIC S7-1500 controller family along with updated version of its Totally Integrated Automation Portal (TIA Portal). The new generation of controllers is characterized by high performance and efficiency and offers numerous benefits such as integrated motion control, plant security, and safety applications that are easy to implement. Greater efficiency is represented in particular by the innovative design that enables simple commissioning & safe operation, by the configurable diagnostic functions that provide the plant status and by the integration into the TIA Portal for simple engineering and low project costs.
- Reliance Infra down by 9.08% was another major loser on the Nifty - Reliance Infrastructure recently announced the launch of online chat service for its 28 lakh Mumbai suburban power consumers.The company has reported 58.57% rise in its net profit at Rs 659.37 crore for the quarter ended December 31, 2012 as compared to Rs 415.82 crore for the same quarter in the previous year. However, total income of the company has decreased by 20.53% at Rs 3698.54 crore for quarter under review as compared to Rs 4654.07 crore for the quarter ended December 31, 2011.
During the week, CNX Nifty touched the highest level of 5878.40 on February 25, 2013 and the lowest point of 5671.90 on February 28, 2013. On the last trading day, the Nifty closed at 5719.70 with a weekly loss of 130.6 points or 2.23%. For the coming week, 5634.93 followed by 5550.17 are likely to be good support levels for the Nifty, while the index may face resistance at 5841.43 and 5963.17 levels.
US Market
The US markets showed some strength in the passing week with minor gains after Federal Reserve Chairman Ben Bernanke sent a strong signal that he backed the continuation of the central bank's $85 billion bond-buying program. Bernanke warned that the Fed's innovative policy could not completely offset the drag to the economy this year from fiscal policy. He urged lawmakers to defuse the sharp automatic spending cuts, known as the sequester. Bernanke added that Fed policy was not fostering a bubble in the stock market and US banks would not suffer serious damage if Italy was forced to write down its debt.
Meanwhile, the automatic federal budget cuts of $85 billion looked certain to kick in after a pair of bills to replace them failed in the Senate. Neither a Democratic nor a Republican bill aimed at replacing the so-called sequester was able to get enough support to win a test vote on Thursday. While senators from both parties hadn't expected passage, the bills represented a last-ditch legislative effort to replace the across-the-board cuts to domestic and military spending. However, the budget cuts for fiscal 2013 would not take effect all at once. Instead, they would go into effect gradually through the end of the fiscal year on September 30. In total, the sequester would cut about $1 trillion over nine years.
On the economy front, a gauge of consumer confidence jumped up in February, led by brighter expectations, after dropping in the prior month. The Conference Board stated that its consumer-confidence index rose to 69.6 in February, the highest level in three months, far exceeding estimates of 62.3. January's level was revised to 58.4 from a prior estimate of 58.6. The US economy grew in the final three months of 2012 but just barely instead of shrinking for the first time since the end of the recession as originally reported. Separately, the number of people who applied for jobless benefits dropped in the most recent weekly data. Initials claims for regular state unemployment-insurance benefits dropped 22,000 to 344,000 in the week ended February 23, according to the government.
European Market
The European markets were reeling under pressure during the passing week after the Euro crisis got ignited again thanks to the Italian election and worse growth prospects. The German chancellor Angela Merkel met with Italy's president in Berlin, wishing him success as he forms a new government. Angela Merkel expressed confidence that Italy will emerge from its post-election deadlock. Italy held an inconclusive general election this week that left the country with no workable majority in parliament. Besides, Germany Finance Minister Wolfgang Schaeuble stated that Italy's inconclusive election had raised the risk of market turmoil spreading to other euro countries and urged Italian politicians to form a stable government quickly.
On the economy front, euro zone manufacturing activity appeared no closer to recovery last month, when a dire performance in France offset a return to growth in Germany, a business survey showed. Manufacturers helped lift the 17-nation bloc out of the last recession, but purchasing managers' surveys showed activity in France, the euro zone's second-biggest economy, has now contracted for a year. In contrast, German manufacturing expanded for the first time since February last year, joining Ireland as the only countries surveyed in the bloc to show growth in manufacturing activity.
Markit's Euro zone Manufacturing Purchasing Managers' Index (PMI) remained at January's 47.9 last month, just pipping an earlier flash reading of 47.8 but holding below the 50 level that divides growth from contraction for the 19th month running. Germany's PMI bounced to 50.3 from January's 49.8, while France's reading came in at 43.9, above the previous month's 42.9 but well below the 50 mark for the 12th month.
Asian market
Asian equity indices exhibited optimistic trend during the passing week with all the major indices, barring Singapore's Straits Times ending the week's trade in the green, thanks to Italy's successful bond auction that bolstered investor confidence in the global economic recovery and helped underpin appetite for riskier assets. Back on regional turf, Japanese Nikkei garnered nearly two percent gains during the week as the Prime Minister Shinzo Abe moved a step closer of having a proponent of his aggressive monetary easing policies become head of the Bank of Japan, after the government submitted its nominee for the top job to parliament.
Nikkei also got some support after the Ministry of Communications and Internal Affairs of the country said that core inflation in Japan was down 0.2 percent on year in January. Overall CPI was down an annual 0.3 percent after showing contraction of 0.1 percent in December. A separate survey from the internal affairs ministry showed that Japanese jobless rate slipped to 4.2 percent in January from revised 4.3 percent in December. The number of unemployed persons in January was 2.73 million, a decrease of 180 thousand or 6.2 percent from the previous year.
Chinese Shanghai Composite remained the top gainer among other Asian peers gaining about two percent, largely supported by bargain buying following steep fall in the passing week and on hopes that the revised rules on qualified foreign institutional investors will boost the domestic stock market. However, gains on the upside were muted after survey results from Markit Economics showed that China's manufacturing sector growth slowed unexpectedly in February due to a fall in foreign orders and slower expansion of output, dampening hopes of economic rebound at the start of the year. The HSBC Manufacturing Purchasing Managers' Index dropped to 50.4, a 4-month low from 52.3 in January.
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