REUTERS - The Nifty gained nearly 2 percent on earnings-led optimism to close the week at 9,304 with heightened action in mid-cap and small-cap stocks.
Cement stocks such as ACC and UltraTech gained after upbeat results. Bank of Baroda, Yes Bank and Axis Bank also featured among the top gainers.
In the auto space, M&M gained 6 percent, followed by Maruti and Tata Motors. The rupee hit a 20-month high on Wednesday at 64.11 per dollar on the back of firmness in equity markets.
U.S. President Donald Trump unveiled an ambitious tax overhaul plan in one of the biggest tax reforms in history. If the plan goes through Congress, U.S. companies will become the lowest taxed among the Group of 20 countries.
Emerging markets may see a setback as investments abroad would have a higher incentive to be repatriated. However, the plan lacked details and there are concerns as to how the government would tackle a surge in federal deficit.
The ‘caution’ of the week was an indication by Trump that a “major conflict” is possible with North Korea.
Real Estate companies were in the limelight as the Real Estate (Regulation & Development) Act is set to be implemented from May 1. The implementation of RERA is likely to bring in transparency in the sector, protect the interest of the homebuyer and ensure timely delivery of projects. The realty index has gained 52 percent year-till-date and 22 percent in the last month.
The Nifty Bank index was among the top performers in the sectoral indices during the week - up 3.7 percent led by sharp gains in public sector banking stocks. Finance Minister Arun Jaitley has assured a solution for the NPA issue in the next few days.
Infrastructure Investment Trust (InvIT) Funds were in the news after IRB InvIT Fund, sponsored by IRB Infrastructure Developers, launched an IPO - the first one in this space.
The 46.54 billion rupees issue opens for subscription in the coming week. Reliance Infra is likely to file InvIT IPO papers with SEBI shortly and is looking to raise around 25 billion rupees. InvIT funds are popular among infrastructure companies as it helps them in debt reduction and cleaning up the balance sheet.
Fears of a below-average monsoon lingers. According to the U.S-based International Research Institute for Climate and Society, El Nino probability is up at 70 percent and can occur in July which is peak monsoon season. This is not in sync with the near-normal monsoon forecast by the IMD.
Globally, the Bank of Japan kept policy rates unchanged and raised its economic forecasts. The European Central Bank also left monetary policy unchanged.
In the coming week, major geopolitical risks including a potential stand-off between the United States and North Korea over the latter's nuclear provocations will continue to dominate headlines. Another important event will be the final round of the French presidential election on May 7.
Economic events include the Federal Open Market Committee (FOMC) meeting on Wednesday and Friday's U.S. jobs report for April. Markets are not expecting any major policy change from the U.S. Fed especially after its recent March rate hike.
The focus is expected to be on indications on the potential rate hike trajectory. Also, any comments from the Fed on intentions to shrink its massive balance sheet will be closely watched.
Back home, prominent corporate results expected this week include Marico, ICICI Bank, MRF, HDFC, Wockhardt and DMart. Automobile and cement counters will be in focus as they unveil sales volume data for April.
On the macro front, manufacturing PMI data for April will be announced on Tuesday while services PMI data comes out on Thursday.
I would continue to advise caution as this rally seems relentless. We are in a virtuous cycle as liquidity pours into equities since there is no alternative asset class. And we already seem to have formed a bubble. It’s better to be safe than sorry.
Ambareesh Baliga has about 25 years of experience in the stock market and has worked with Karvy and Kotak groups in the past. He is a regular market commentator on various business channels. He is a commerce graduate from Calcutta University and a qualified cost accountant.