29 Jul 2014

Summer doldrums?

Into the summer doldrums and journalists have latched onto the fact that the bosses have hit the beaches and the trainees are manning the desks. Reactions are bound to be exaggerated. US equities remain near record highs and foreign interest is keeping Indian equities near peak levels. The next burst of speculation will come out of reading between the lines of the proceedings from Jackson Hole next month. Meanwhile, the Nifty has advanced since our last commentary by 241 points, closing up 3.2% this week at 7790 after trading in a range of 5.7%. Average daily trading volumes are steady at around $3.2bn compared to a twelve-month moving average of $2.3bn.

Rain is a good thing

The monsoon rains picked up broadly across India, with the deficit against the long-period average narrowing to 24% and more persistent rains forecast for next week. The threat of drought has been lifted, though there is still the possibility of an El Nino effect later in the season. Reservoir capacity is average. Karif crop planting is proceeding, though behind last year’s record levels.

6 Jul 2014

Yes, unbridled optimism

In India, unbridled optimism about economic prospects under the new government was sustained in spite of a rising likelihood of drought conditions for the agriculture sector. The Nifty added 243 points to close 3.2% higher at 7752 after trading in a range of 3.3%. In the run-in to the new government’s first budget, quickly to be followed by the first quarter results season, newsflow in the corporate sector has substantially dried up. The flow of economic data continues, largely mixed as we wait to see the colour of the BJP’s economic plan. The fiscal deficit for April-May hit 46% of the old annual budget because of high non-plan expenditure and reduced tax receipts. The fiscal deficit for FY2014 was 4.5%. Core sector growth for May was a four-month low of 2.3%, compared to 4.2% in April. Steel production fell by 2% compared to a rise of 3.1% in April, while energy, power and extractive industries all grew more slowly than in the previous month. HSBC’s Manufacturing PMI eked out a small gain in June, rising to 51.5, an advance of ten basis points since May but indicating continued expansion in the sector, driven largely by export demand. The Services PMI rose to a seventeen month high on the strength of robust order inflow, rising to 54.4 points from 50.2 in May