The Nifty failed to cross the psychological 9,000 mark despite upbeat Q3 GDP data as investors booked profits before assembly elections results are announced next weekend. The index ended the week lower by 0.5 percent at 8,897, its first weekly fall in six.
In stock-specific action, Reliance Industries remained the top Nifty gainer after Chairman Mukesh Ambani spelled out plans to restructure the promoter holdings in the company.
Meanwhile, his brother Anil Ambani in a briefing to analysts said he expects the defence segment to become the Reliance Group’s biggest business in the next few years and that the company is targeting opportunities worth 2.85 trillion rupees in the next three to five years.
Automobile stocks also remained in action as companies reported February sales numbers showing a marked improvement in volumes. Two-wheelers posted flat sales for the month as against an 8 percent decline on a yearly basis in January 2017. The commercial vehicle segment grew 6 percent after three consecutive months of decline.
On the macro front, India reported a surprising GDP growth of 7 percent for the October-December quarter despite hardships caused by the government’s cash crackdown in November.
This was against market expectation of 6.1 - 6.4 percent growth. The data suggested that the economy was largely unaffected by demonetisation.
The figures are in sharp contrast to the SME activity, which decelerated noticeably, and bank credit, which contracted. This has raised questions about the quality of the government’s data and has prompted economists to look at other measures to gauge the strength of the economy.
Not surprisingly, the February Services PMI came in at 50.3 vs 48.7 on a monthly basis, growing for first time in four months as demand slowly rises. The manufacturing PMI data also rose slightly to 50.7, up from January’s reading of 50.4.
Markets on Monday are initially expected to react to U.S. Fed Chair Janet Yellen’s speech on Friday where she signalled the likelihood of a rate hike in March.
Market watchers will also take note of the outcome of the GST Council meetings in New Delhi, which is taking place during the weekend. The council has approved the final drafts of two key bills (iGST and cGST).
Federal and state finance officials also agreed to keep the upper band of the GST rate at 20 percent from the existing 14 percent, which may lead to the peak rate moving to as high as 40 percent. However, the slabs remain intact for now. The slotting of commodities in each tax slab will also take place after the meet.
The results of five state assembly elections will be announced on March 11, with exit polls released on March 9. Markets will also keenly watch the second half of the budget session of parliament, which begins on March 9 and ends on April 12. On the macro front, IIP data for January 2017 is expected on Friday. It had fallen to 0.4 percent in December 2016.
Action in the primary markets will soar in the coming week with Avenue Supermarts Ltd. and Music Broadcast Ltd. hitting the Street. Avenue will mop up nearly 19 billion rupees whereas Music Broadcast’s IPO-cum-share sale will raise 5 billion rupees.
Markets have suddenly displayed an aversion to risk and may move sideways till the assembly election results are out. I still believe stocks are overvalued and various macro data points do not add up to the optimism the government is trying to display. Liquidity is the driving factor but it is always fickle. It is a traders’ market where investors need to be cautious.