The Nifty ended up 1.2 percent to 10,681. The mid-cap index underperformed (up 0.4 percent), while the small cap index moved up 1.5 percent. During the week, FIIs were net sellers to the tune of 4.96 billion rupees in equities.
Oil prices touched 2015 levels of $70 a barrel due to ongoing production cuts led by OPEC, as well as healthy demand. The rupee ended at 63.63 per dollar vs 63.36 the previous Friday.
Tensions eased between North and South Korea after both countries held talks on Tuesday.
The Cabinet easing FDI norms in several sectors helped maintain the positive trend. So did the World Bank’s Global Economic Prospects report that showed India is likely to reclaim its position from China as the fastest growing major economy in 2018.
On the stock-specific front, technology stocks were in focus after leaders Infosys and TCS came out with their quarterly numbers. Both companies managed to meet market expectations.
In a seasonally weak quarter, Infosys profits grew 38 percent quarter-over-quarter on a one-time tax refund in the U.S and increased adoption of digital services. TCS also reported strong revenue growth of 2.4 percent (barring BFSI) quarter-over-quarter. The management expects stronger growth in 2018 and sees customer sentiment improving gradually. The other frontline company that announced results was IndusInd Bank.
Coal India was the top index gainer after its board approved a revision in non-coking coal prices that would allow it to earn incremental revenue of 19.56 billion rupees for the current fiscal year. The Telecom Commission approved recommendations for relaxation of spectrum-holding caps for mobile companies.
Realty stocks were in focus as the Maharashtra government approved an additional 0.5 floor space index, allowing taller buildings in suburbs and the redevelopment of the Dharavi slums. There is also optimism that Budget 2018 will boost affordable housing.
In a major development on the FDI front, the Cabinet eased norms in several sectors, including single-brand retail and real-estate broking services with 100 percent FDI under the automatic route. The move is intended to liberalise and simplify FDI policy in a bid to provide a case for ease of doing business in the country.
In a bid to attract FDI in Air India, the government decided to allow foreign airlines to invest up to 49 percent under the approval route. On the macro front, India’s net direct tax collection grew 18.2 percent year-on-year to 6.56 trillion rupees. The net direct tax collections represent 67 percent of the total budget estimates of direct taxes for FY18 (9.8 trillion rupees).
CPI inflation in December increased to a 17-month high of 5.21 percent, compared to 4.88 percent in November. This is primarily due to base effect. Inflation for the first half of 2018 is likely to be on the higher side owing to this reason.
Meanwhile, IIP grew by 8.4 percent in November, compared to 2.2 percent in October. This sharp growth was mainly due to steep growth in manufacturing (10.2 percent) compared with meagre growth in mining (1.1 percent) and electricity (3.9 percent).
For the coming week, stock-specific action is expected to continue as quarterly earnings pour in. ITC, HUL, Wipro, Kotak Bank, HDFC Bank, HCL Tech, IDFC Bank and Bharti Airtel are some of the key names announcing results.
Capital First and IDFC Bank announced a merger with a swap ratio of 139 shares of IDFC Bank for 10 shares of Capital First. The combined entity would have a diversified portfolio of large as well as SME loans along with a substantial retail book.
On the global front, the U.S. market will remain shut on Monday for Martin Luther King Jr. Day. UK CPI data for December and China’s GDP data will be declared on Tuesday. U.S. crude oil inventories data will be unveiled on Thursday, while UK retail sales data for December will be out the next day.
Friday’s press conference by four senior judges criticizing India’s Supreme Court created a scare resulting in an intraday dip on Friday, but market confidence that “nothing can go wrong” led to a decent recovery.
In the countdown to Budget 2018, the markets have factored in most of the expectations. Complacency levels are high, which indicates that fund flows will continue a while longer.
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.