30 Nov 2013

Thanksgiving interrupted trading week

The world’s leading powers negotiated a temporary stay on Iran’s nuclear development plans at the beginning of the week, removing a long-standing risk to oil supplies. In the US, the Conference Board’s index of leading economic indicators showed growth for the fourth month in a row in October on the strength of factory orders and housing starts. Thanksgiving interrupted the trading week in the US and markets there were pretty flat. In India, however, the Nifty added 181 points to close 3% up at 6176 after trading in a range of 3.2%. FIIs sustained their buying with net purchases of $88mil and domestic investors sold a net $140ml as daily trading reached an average of $2.2bn. Volatility was more or les stable, with the India VIX trading between 19 and 22 before closing a point higher at 21. Market breadth was strong with advances ahead of declines by 7 to one; there was some concentration in Nifty trading, happily involving four of our holdings worth about 15% of market cap contributing a third of the points’ gain for the week. Confidence in sustained upward momentum was reflected in the futures market where the three month contract closed at a premium of 2.4% to cash.

23 Nov 2013

Healthy premium

The Banking Committee has sent Janet Yellen’s appointment to the floor of the Senate for a vote early in December while equity markets moved sideways on an absence of data. The Dow crossed a landmark by rising above 16,000, but it sparked little enthusiasm for scaling further heights.

The Nifty eased back by 61 points to close 1% down at 5995 after trading in a range of 4%. Average daily trading volume slipped back below the $2bn level as fears of FII outflows took hold. These were not supported by the evidence, however as FIIs continued with net buying, of $352mil this week, offset by a roughly equal volume of domestic selling. Volatility stayed around the same level as last week, rising to 22 early in the week before subsiding back to 20 to close a point higher. Market breadth was negative with declining stocks outnumbering advances by more than three to one. Concentration was not a feature this week, however, with points’ contributions fairly evenly distributed. Index futures closed at a healthy premium again: 2.3% to cash.

10 Nov 2013

Sentiment remains strong

After the Diwali holiday on Monday, Indian markets joined the world in a soft week. By Friday, the EU had downgraded its GDP growth forecast, the ECB had cut its base rate and the 'tapering' scare had been reignited in the US by job figures which suggested the economy had ridden out the shutdown. In the US new jobs are added at a much faster rate than expected. The Nifty shed 166 points to close 2.6% down at 6141 after trading in a range of 3.6%. Daily trading volumes moved up to the twelve month trading average at $2.4bn as FIIs sustained their buying with net $147mil of purchases.The domestic institutions were the heavier net sellers, of $313mil. Volatility was stable as the India VIX traded between 18 and 20, before closing a point higher at 20. Declining stocks outnumbered advances by four to one as concentration became a feature again. Five stocks representing just 23% of Nifty market cap accounted for 58% of the points’ loss on the index. Nifty futures closed at a premium of 2.2% to cash.

Just one result this week, Indraprashtha gas reported revenues ahead by 18.1% but profits down by 6.5% as the cost of imported LNG ate into margins. As the reporting season draws to a close, the overall picture looks like positive surprises on revenues came in at 44% with negative at 23%; at the bottom line, earnings surprises were 44% positive and 37% negative, reflecting broad margin pressure. An analysis of the IT sector shows the strongest revenue growth for six quarters: 14%, with the leading names to the fore. In geographic markets, Europe grew by 21% and now represents 28% of the total; the US grew by 12% but is still the major marketplace at over 40%. 

The market holds near recent highs as sentiment remains strong. Political commentary is talking up the prospects for a BJP-led outcome to next May’s election which would be expected to be much more business-friendly and drive market momentum sharply upwards. The state elections due around month-end will give an early guide.