News that the US Federal Reserve will continue its QE tapering in the absence of firm evidence that stimulus is still required, did not faze markets this week. Developed markets advanced smartly and India joined the party. The Nifty added 122 points to close 2% up at 6277 after trading in a range of 2.5%. FIIs were strong net buyers this week, with net investment of $194mil, turning the net flow for the month positive. Domestic investors were net sellers of $127mil as average daily trading volumes rose to $2.0bn. Volatility remained subdued with the India VIX trading more to the downside of last week’s close before closing unchanged at 14. Market breadth was strong, with advances outrunning declines by more than 2.5 to one. Concentration was evident at the top of the market with five stocks representing 27% of the Nifty market cap contributing just over half of the points’ gain for the week. Index futures were a strong market as a new three-month contract opened at a premium of more than 1% to cash. Longer-dated over the counter contracts are building in substantial premia past the election period as sentiment swings towards a BJP-led government being elected.
7 Feb 2014
The week ended with markets on an upswing as another weak jobs report in the US diminished the assumption of the Fed having set a pattern of cutting QE by $10bn at each meeting. The news came too late for India to join the party as the Nifty closed 27 points down at 6063, for a loss of 0.4% on the week after trading in a range of 2.6%. FIIs were net sellers of $405mil with domestic institutions picking up the bulk of the selling, buying net cash equities of $355mil. Average daily trading volumes were well below the twelve month average at $1.6bn, however. Volatility continued to edge upwards, with the Indi VIX climbing to 20 before closing at 19 for a gain of two points. In this fairly thin market, concentration became a feature, with four stocks representing 20% of total market cap, making up the whole of the index points’ movement, three on the downside and one on the up. Surprisingly, market breadth was strong, with gains outweighing losses by two to one, in spite of the market decline. Some late buying ensured the index stayed above the 6000 level and index futures closed at a premium of 1.3% to cash.