23 May 2014

Trading volumes rose sharply, votality traded down

Global equity markets were largely positive in the past week as Russia signed a myriad of deals with China, Europe was focused on elections and civil wars, actual or evolving bubbled along in the Ukraine, sub-Saharan Africa and Thailand. In a mood of post-electoral euphoria, as the voters celebrated their wildest dreams being realized, the Nifty added 164 points, to close 2.3% up at 7367, after trading in a range of 2.6%. Average daily trading volumes rose sharply again, to $5.3bn, as FIIs continued their cash equity buying with a net $117mil; domestic investors continued to be suppliers of stock, selling a net $211mil. Volatility again traded down, the India VIX falling sharply from 24 to 14 before recovering a bit to close at 18 for net fall of six points on the week. Breadth was good, with advances three to two ahead of declines but concentration was again evident in the points’ contributions. Four stocks representing just 16% of Nifty market cap generated 63% of the upward movement in the index; two stocks, 9% of market cap, held the index back by 39 points: 24% of the net movement. Index futures closed at a premium of just over 1% to cash.

We had just one quarterly result of interest: ITC surprising slightly on the upside with sales ahead by 11.8% and profits up by 18.2%. The company still faces damp consumer demand and though cigarette volumes declined, earnings benefitted from stronger margins, which delivered the surprise. Overall, 35 out of 56 CNX100 companies to have reported so far have delivered earnings above expectations; the best performing sectors being Financials, IT and Materials.

16 May 2014

Market action sustained strength of earlier sessions

Finally the big week arrived and while other equity markets marked time, India moved from election mode into the results phase. Market action sustained the strength of earlier sessions without getting overexcited, as the Nifty added 344 points on the week, to close 5% ahead at 7244 after trading in a range of 10.2%. The strongest move came early in the week with the last day of voting on Monday and the emergence of exit polling results on Tuesday which tended to confirm the prevailing sense that the Modi-led BJP would win a resounding victory. In the event, Friday brought confirmation of the Modi “wave” and the market advanced strongly at first but then met some sustained “selling on the news” when European markets opened. Average daily trading volumes jumped to almost double the twelve month trailing average, at $4.6bn as foreign portfolio investors continued to drive the markets: FIIs bought a net $955mil of cash equity as domestic sellers sold $277mil. Volatility started out in keeping with the previous week’s pattern before the India VIX fell back sharply to close at 22, for a fall of 16 points on the week. Market breadth was strong with advances ahead of declines by nearly three to one, though the index points’ contributions showed notable concentration. On the upside, seven stocks, representing 33% of Nifty market cap, contributed 52% of the week’s points’ advance.  Closing on a positive note, the index futures finished at a premium of 1.2% to cash.

9 May 2014

Developed markets red, emerging markets green

The last fortnight has been punctuated by public holidays again but a rough summary of market action would be: developed markets red, emerging markets green. Ukraine is to all intents and purposes being ignored as a market effect; substantial debate is concentrated on the policy intent in the two major economic blocs: EU and US. India meanwhile is getting to the end of its marathon election cycle, with Monday’s last day of voting to be followed by release of exit polls on Tuesday and results on Friday. At the moment, SEBI is looking askance at the suggestion of extending trading hours on Friday to deal with the post-results action. So far this month, the Nifty has advanced by 76 points, to close 1.1% ahead at 6859, after trading in a range of 3.4%. In fact, it would have been down overall if not for a substantial jump of nearly 3% on Friday. Average daily trading volumes stayed ahead of the trailing average, at $2.7bn as FIIs sustained their interest, buying a net $270mil from domestic institutions (-$261mil). Market breadth was flat over the two weeks, with advances equalling declines. The were some concentrated contributions, however, with the banks especially strong as ICICI Bank added 42 points to the Nifty movement and HDFC Bank 22. Reliance Industries was also a good mover, adding 36 points to the Nifty while Infosys took away 15. Not surprisingly as the climax of the political event approaches, the India VIX has been trading steadily upwards: opening the month at 31, it softened slightly at first but climbed steadily to close at 38, having traded a point higher. Nifty futures closed at a premium of 1.1% to cash as predictions for a decisive outcome to the election show the benchmark hitting 7000 in short order.