Fundamental

Overview

• The main Indian stock indices closed broadly unchanged as local markets swung back and forth throughout the week. Concerns about US rate hike, China slowdown and geopolitical tensions partly offset encouraging domestic economic data and steady FII inflows.
  
  

• Data on Friday showed wholesale price inflation eased to a nine-month low of 4.68% in February, while other reports last week showed a sharp fall in consumer prices and a slight uptick in industrial output.
  
  

• The Government raised more than US$900mn by selling a 9% stake in Axis Bank. The Centre also raised more than INR 3,150 crores through the CPSE ETF.
  
  

• Meanwhile market regulator SEBI ordered Financial Technologies to sell its stake in MCX-SX stock exchange and four other entities. SEBI ruled that the Jignesh Shah led FT is ‘not fit and proper’ to hold stake in any stock exchange.
  
  

• The Government allowed more banks to import gold in what appeared to be the start of easing of import curbs. Shares of Titan Industries gained following the Government’s announcement.
  
  

• Mr. Chandrasekhar Kakal, Senior Vice President and Member of Executive Council, Infosys, conveyed his intention to resign with effect from April 18.
  
  

• Shares of Maruti Suzuki rallied on its plan to seek approval of minority shareholders for its investments in Gujarat plant. Maruti also scrapped the “mark up" cost that it would have had to pay Suzuki on every vehicle produced in Gujarat plant.
  
  

• Cairn Energy Plc halted its US$300mn share buy-back in Indian unit, citing ongoing tax dispute with the Government.
  
  

• TCS shares fell after media reports quoted officials as saying at an analyst meet that revenue growth in Q4FY14 will be weaker than Q3FY14.
  
  

• On the global front, the Federal Reserve Chairman Janet Yellen said that the QE stimulus would most likely be finished by the fall and that a rate hike could come as soon as early as mid-2015.
  
  

• Prior to the press conference, the Fed said that it will continue trimming, or tapering, its monthly bond buying program by another US$10bn, to US$55bn a month.
  
  

• The Fed also said in its statement that it was dropping its 6.5% unemployment threshold for hiking interest rates, instead saying that it will strive for maximum employment and 2% inflation before any rate change.
  
  

• The US Dollar rallied as markets brought forward Fed hike call while gold headed for its biggest weekly fall in six months.
  
  

• Meanwhile, overwhelming majority of Crimeans voted to break away from Ukraine on Sunday. The referendum was deemed illegal by the EU and the US, which imposed a series of sanctions on Russia.
  
  

• Crimea’s parliament passed a vote to proclaim the region an independent state and formally seek Russia’s permission to rejoin the country as a republic.
  
  

• Russia annexed Crimea, raising the prospect of more punitive measures from the West but President Vladimir Putin said he does not want to partition Ukraine.
  
  

• China's yuan fell to a one-year low against US dollar, prompting Goldman Sachs to cut its growth estimates for the world’s second largest economy. The Hang Seng China Index moved into Bear Market after a 20% drop from Dec. 2.
  
  

• As far as global economic data is concerned, construction on new US homes fell slightly in February, but in a sign that work will pick up as the weather warms, builders filed more permits to start new projects.
  
  

• Consumer prices in the US rose in February because of higher food and housing costs, but overall inflation remained muted, according to the latest government figures.
  
  

• Sales of existing homes declined in February to the slowest annual pace since July 2012, the National Association of Realtors reported.
  
  

• The Philadelphia Fed’s manufacturing index rebounded in March to a reading well above forecasts, while the Conference Board’s leading economic index increased in February.
  
  

• The euro briefly fell below the US$1.39 level against the US dollar on Tuesday after a March survey of German investor confidence came in lower than anticipated. The ZEW indicator dropped 9.1 points to 46.6 versus expectations of a 52 reading.
  
  

This Week’s Market Round-Up - Sensex & Nifty end week mostly flat...

• The BSE Sensex and the NSE Nifty were down ~0.20% each during the week.
  
  

• The BSE Mid-Cap index gained ~1.70% and the BSE Small-Cap index climbed ~2.4%.
  
  

• The NSE Bank index rose by ~0.30% and the INDIA VIX closed near ~16.18.
  
  

• Maruti Suzuki, Hindalco, Tata Steel, Jindal Steel and HUL were the top five gainers in the Nifty this week.
  
  

• M&M, Gail India, ONGC, IDFC and BPCL were the top five laggards in the Nifty this week.
  
  

• Polaris Financial, Amtek India, Monnet Ispat, Mercator Lines and Amtek Auto were the top gainers of the week in the BSE 500 index.
  
  

• Sunteck Realty, REI Agro, IOC, Alok Industries and M&M Financial were the notable losers in the broader market this week.
  
  

• In terms of sectors, tyres, Shipping, Beverages, Hospitality, Media, Logistics, Logistics, Healthcare, Paints, Metals and Auto Parts were the main winners of the week.
  
  

• Energy, Packaging, Airlines, Paper and Real Estate sectors were the notable losers.
  
  

Market Outlook - Neutral in Short-Term; Bullish in Medium-Term...

• We see Indian stocks being volatile through the end of FY14 due to uncertain macro-economic outlook and the overhang of elections. However, in the medium- to long-term there could be some recovery once the upcoming Lok Sabha elections are out of the way and the next Government starts to address the imbalances in the economy.
  
  

• In its latest monetary policy review, the RBI unexpectedly increased the repurchase rate by a quarter percentage point to 8.0%. The cash reserve ratio (CRR) was left unchanged at 4.0%. The reverse repo stands adjusted to 7.0% while the marginal standing facility (MSF) rate and the bank rate are at 9.0% each.
  
  

• The rationale for the rate hike was that the conditions the RBI had set for a pause - decline in both core CPI and core WPI - in its December policy guidance were not met. The central bank also anticipates upside risks to its 12-months’ CPI forecast of 8%.
  
  

• However, the policymakers did acknowledge that economic growth remains under pressure. The RBI indicated that a pause would be maintained going forward if disinflationary forces pan out as per its baseline projections.
  
  

• The governor stated that RBI is yet to formally adopt the flexible inflation targeting regime, as suggested by the Urjit Patel Committee. However, the central bank commentary indicated that the role of headline CPI in policy action has increased and seems to have a CPI target of 8% in 12 months and 6% in 24 months. The 12-month CPI target should be achieved comfortably and hence rates could remain unchanged longer than anticipated.
  
  

• The RBI said that since the December review, the global recovery is gaining traction, led by the US economy but it is still uneven. But, uncertainty continues to surround the prospects for some emerging economies due to domestic economic problems. Financial market contagion from EMs is a clear potential risk, the RBI said.
  
  

• Global markets will continue to track the ongoing economic recovery in the US, especially in light of the Federal Reserve’s QE tapering.
  
  

Sectoral Outlook - Bullish on IT, bearish on PSU banks...

• BFSI - We remain bearish on PSU banks sector as we expect the on the asset quality side to prevail for a while. On the other hand, we like select Private Banks.
  
  

• Automobiles - Our outlook is neutral to positive. We expect revival in FY15 due to good monsoon, resilient rural demand, improved policy climate and election-related spending. Meanwhile, tractor growth has been strong in FY14 on the back of satisfactory monsoon.
  
  

• Capital Goods - We are neutral to bullish on this sector in medium to long run as we are near the bottom of the cycle and expect revival in capex cycle towards the second half of FY15. With the government adopted various majors towards clearing projects stuck at various stages, the demand for capital goods is expected to revive in the longer run.
  
  

• Cement - Our call on the Cement sector is bearish as demand is likely to remain subdued till there is a pickup in the overall economic activity.
  
  

• Consumption - Although persistently high CPI inflation and slow income growth has hurt consumer demand for the past few months, there could be some revival in this space if CPI inflation abates and borrowing costs starts to fall. Rural consumption could get support from good monsoons and election-related Government spending.
  
  

• Infrastructure - We are neutral to bullish on this sector from a long-term perspective. Recent initiatives adopted by the Government in terms of fast tracking project clearances would revive investments in the infrastructure sector. Besides, RBI keeping interest rates steady and expectations of rate cuts in the long run would reduce the financing cost of the projects.
  
  

• IT - We are bullish on this sector as growth in the US economy is picking up and last year’s sharp fall in INR vs USD is also aiding overall margins.
  
  

• Real Estate - We are bearish on this sector. Slow demand environment in most markets have impacted sales. Stressed balance sheets of the realty companies have also hit their performance.
  
  

• Pharmaceuticals - Pharma companies continues to do well in the export markets, and the rupee depreciation would further help them report better margins.
  
  

Outlook:

• The Indian markets next week will largely move to the beats of FII flows and global market trends. F&O expiry could lead to some volatility.
  
  

Technical

Round-up: Range-Bound...

• After taking support at 6432 levels, the NSE Nifty opened the week on a positive note and made a high of 6574.Thereafter Nifty was trading in the range of 6540-6470. Finally the NSE Nifty closed at 6493 with a marginal loss of -0.18%.
  
  

• Infra, FMCG sectors outperformed while IT stocks was under pressure
  
  

Nifty Outlook: Neutral...

• Nifty Index continued to make higher highs and higher bottom on daily chart.
  
  

• It is also trading above its short term and medium term moving averages indicating strength in the markets.
  
  

• Technical Oscillator RSI have entered into overbought zone which warrants some caution for short term. We may see further consolidation/correction in short term before market resumes its uptrend.
  
  

• Our current short term view on Nifty is neutral and we expect Nifty Index to traded in range of 6450-6600 range in coming week. Break of this range would lead to further rally in either side.