Carrying on from last week, the week gone by saw the main indices moving up further. It was the fourth consecutive week of gains for the Sensex/Nifty as they took out the intermediate highs of 17004/5099 and also closed above the 200 day EMA. W-o-W, while the Sensex gained 2.82%, the Nifty was up by 3.09% over the same period. Reflecting the positive sentiments, market breadth was positive in all the four trading sessions of the week.
Key Events
Indian Markets
India's central bank unexpectedly cut the amount of deposits lenders need to set aside as reserves for the first time since 2009 and signaled future interest-rate cuts, joining BRIC nations in shielding growth. Stocks rose. The Reserve Bank of India reduced the cash reserve ratio to 5.5 percent from 6 percent, it said in a statement in Mumbai today. The move adds around 320 billion rupees ($6.4 billion) into lenders, it said
Cotton production in India, the second-biggest grower, will be lower than earlier forecast after diseases cut yields in the states of Maharashtra and Andhra Pradesh, said the nation's textiles commissioner. The harvest may reach 34.5 million bales of 170 kilograms (375 pounds) each in the year that began Oct. 1, against 35.6 million bales estimated on Nov. 15, Textiles Commissioner A.B. Joshi told reporters in Mumbai after a meeting of the Cotton Advisory Board. India produced 32.5 million bales in 2010-2011.
The International Monetary Fund cut its forecast for global growth and warned that the European debt crisis threatens to derail the world economy. India is expected to grow 7 percent in 2012, 0.5 percentage point less than in September forecasts.
India's economic growth is weakening more than anticipated and inflation remains 'high' as the rupee's fall threatens to stoke price pressures, the central bank said, signaling it may leave interest rates unchanged. 'The growth slowdown, high inflation and currency pressures, complicate policy choices,' the Reserve Bank of India said in a report yesterday before its rate decision in Mumbai. The 'critical factors' ahead will be 'core inflation and exchange rate pass-through,' it said, adding that keeping the 'liquidity deficit' in acceptable limits is also a priority.
Outlook of the week
We would now be closing 2012 January on a firm note, irrespective what would happen in the couple of days left to close. The reason for this firm finish and the extent of the gains is not new and has been spoken a lot buy ‘pundits’ on TV. With earnings season looking decent so far, though bulk of the big names (SBI amongst them) reporting next week, it could prove very crucial. Especially for setting the tone for February 2012. My sense is that we could see a pull back of anywhere from 3%-5% due to the fact that SBI’s numbers could disappoint, also host of financial services/banks could post negative surprises. On the flip side, such a strong momentum that was set in so far, clearly warrants that we consolidate or pull back marginally and push higher over time. FY13 could prove to be a consolidation year from corporate and then we move onto higher ground with passing years.
Sources:
HDFC Securities Weekly wrap of the Market
Right Horizons Equity Desk for Outlook for the coming week
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