Markets remained firm during the week despite trade and geo-political tensions. The Nifty gained in all five trading sessions – the first time since November 2017 - and ended the week 150 points higher at 10,480.
The rupee ended the week at 65.20 against the dollar, compared to 64.96 the previous week. The Indian currency may depreciate further if the ongoing U.S.-China trade conflict results in a currency war between the world’s two biggest economies.
Oil prices extended gains with Brent crude nearing $72, its highest weekly gain since July. Meanwhile, Saudi Arabia, the world’s biggest crude exporter, is said to be aiming for oil near $80, driven by domestic policy imperatives as the country sets out to implement an ambitious and expensive economic and social reform programme. The country is also said to be timing Saudi Aramco’s IPO with higher crude prices.
Back home, analysts are worried about the impact of rising oil prices on inflation, fiscal deficit and current account deficit. An analysis shows that for every $10 increase in crude oil prices, there is a 10 bps increase in CPI.
IIP growth remained strong in February at 7.1 percent, higher than the estimate of 6.2 percent. Growth came on the back of manufacturing, which grew at 8.7 percent.
Recovery in factory growth, which has been in the 7-8 percent range for the past four months, has also been broad-based and is further accentuated by a lower base.
March retail inflation moderated to 4.3 percent from 4.4 percent in February - in line with expectations. This is on the back of a continued fall in vegetable prices and a fall in pulse prices.
With rising oil prices, oil marketing companies (OMCs) and producers remained in focus during the week. OMC stocks fell after reports that the government had asked them to absorb under-recovery of at least one rupees a litre on retail sales of petrol and diesel to protect consumers from potential price shocks. The companies refuted the reports.
The government has raised excise duty on petrol and diesel nine times between November 2014 and January 2016 to shore up finances. So far, it has cut the tax just once in October last year by 2 rupees per litre. The excise duty on petrol and diesel is presently 21.48 rupees and 17.33 rupees a litre respectively, which is quite high by any standard.
The sale of debt-ridden Air India may be in jeopardy as three potential suitors - Indigo, Jet Airways and the Tata Group - have opted out of the race.
On the other hand, Fortis Healthcare is seeing competing bids from multiple players. Just a day after TPG-backed Manipal Health Enterprises increased its offer for a takeover, IHH Healthcare proposed a potential bid of $1.3 billion.
And on Thursday, Fortis said it had received an investment offer worth 12.5 billion rupees ($191.5 million) from Hero Enterprise Investment Office and the Burman Family Office.
Axis Bank shares rose after it said CEO & MD Shikha Sharma will step down by the end of 2018. Rising non-performing assets, leaks of financial results, non-compliance with its asset classification norms and falling profit are some of the issues faced by the bank under her leadership.
Both Sharma and ICICI CEO Chanda Kochhar have fallen from being icons of the banking sector to targets of serious allegations and criticism.
Infosys reported a 1.8 percent sequential rise in dollar revenue to $2.8 billion for Q4FY18. It ended FY18 with $10.94 billion in revenue, a 7.2 percent growth with a 24.3 percent operating margin - mostly in line with expectation. However, its decision to lower its operating margin band to 22-24 percent for FY19 and a relatively soft revenue guidance of 6-8 percent in constant currency terms may disappoint investors.
In the coming week, ACC will report its results on Wednesday and IndusInd Bank & TCS will come out with their numbers Thursday.
On the macro front, the government will announce WPI for March on Monday. Wholesale inflation rose by 2.48 percent in February.
On the global front, China will announce its first quarter GDP on Tuesday. Japan’s IIP data for February and US IIP data for March will also be declared on Tuesday.
The U.S.-China trade conflict and the missile strikes on Syria by Western powers are expected to keep markets volatile. However, a sharp correction at home would be an opportunity to buy.
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.