Global markets gyrated to trade war concerns as China announced that it would be implementing new tariffs on American products in response to levies announced by U.S. President Donald Trump. However, investors later resorted to buying on news of possible trade negotiations between the world’s two biggest economies.
Back home, markets took heart from the RBI’s decision to cut its inflation forecasts for Q4 FY18 and FY19, thus reducing the probability of a rate hike in FY19.
Sentiment was also boosted by the central bank’s prediction of higher GDP growth for the fiscal year and forecast of a normal monsoon by private forecaster Skymet.
The Nifty ended the week higher by 210 points or 2.1 percent. Buying was seen in the broader counters with the Nifty Midcap 50 and Smallcap indexes gaining 5 percent each. The rupee ended the week at 65.17 against the dollar.
The RBI’s Monetary Policy Committee (MPC) left repo rates unchanged at 6 percent at its first meeting of the new financial year, in line with expectations, while maintaining a “neutral” stance.
For 2018-19, the MPC has reduced its inflation forecast marginally. Upside risk to inflation emerges from uncertainty around MSP hikes, fiscal slippage and crude oil prices, it said.
Real GDP growth is projected to strengthen from 6.6 percent in 2017-18 to 7.4 percent in 2018-19 due to revival in investment activity, improving global demand and better exports. The RBI also deferred the implementation of the Indian Accounting Standards (Ind-AS) by one year for banks.
Automobile numbers for March saw strong growth across segments, boosted by robust domestic and export growth in two-wheelers and three-wheelers along with continued momentum in the commercial vehicles space.
In fact, it was the fifth consecutive month of double digit growth for the auto industry. A pick-up in road construction and mining activity led to good sales in the commercial segment. This, along with buying ahead of the April 1 rollout of AIS140 standards (intelligent transport systems) in the passenger segment led to strong growth.
In stock specific action, ICICI Bank hogged the limelight throughout the week after it faced multi-agency probes in the Videocon loan case. The bank has seen its market cap fall by nearly 270 billion rupees since mid-March.
PSU banks were also in focus after the RBI allowed them to spread out provisioning to cover losses on their government bond portfolio across four quarters. This came as a relief for bankers who would have otherwise faced an immediate hit to their bond portfolio due to rising yields.
On the primary market front, it seems that the trend of dismal listing is set to continue for some more time, barring a few such as Bandhan Bank which saw a stellar debut.
The recently listed ICICI Securities saw its stock plunging by 15 percent after receiving a tepid response to its IPO. Mishra Dhatu Nigam ended flat on its listing day after opening at a 3 percent discount to its issue price. Some of the earlier dull listings include Sandhar Technologies, Karda Constructions, HAL and Bharat Dynamics.
The coming week will see the onset of Q4 results season, with tech bellwether Infosys reporting its numbers on Friday. The company is expected to post quarterly growth of 1.5 percent in constant currency, and 2.5 percent growth in dollar terms.
With CEO Salil Parekh completing his first quarter at Infosys, markets will look forward to his strategy and vision for the company. Considering the downward revision of guidance in FY18, the company is expected to be conservative in issuing FY19 guidance.
On the macro economic data front, IIP data for February and CPI data for March will be announced on Thursday. Globally, the U.S. FOMC meeting minutes will be released on Wednesday.
This year will be difficult compared to 2017 - volatility will be high and we may not witness a trending market. But it will also provide a lot of opportunities for intrepid investors.
The corporate earnings momentum seen in December should continue and the e-way bill, which has been implemented successfully, may help shore up GST collections due to better compliance.
The focus on infrastructure in the last 18 months should also have a trickle-down effect this year, as we have already seen in commercial vehicle sales and cement production.
Normal monsoon rains will provide a further push to the economy and markets. The only joker in the pack seems to be politics, which we will need to watch closely, including the possibility of an early general election.
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.