India’s benchmark indices clocked their longest weekly gains in nearly three months even as trade tensions and geopolitical concerns remained in the background.
Global investors turned optimistic on growth following news that the United States was in direct talks with North Korea and Russian leader Vladimir Putin was seeking to bring down tensions with America.
Domestic sentiment was boosted by an upbeat monsoon forecast and a strong performance by TCS in the fourth quarter. However, hawkish RBI minutes effected bond yields and the rupee, ensuring that markets remained mostly in a range. The Nifty ended the week at 10,564, up 0.8 percent.
The rupee ended at a 13-month low at 66.12 against the dollar on oil importers’ dollar demand and overseas fund outflow from local bonds after the release of the RBI meeting minutes.
Going forward, oil importers’ dollar bids are likely to keep the Indian currency under pressure. The RBI is not expected to intervene actively as the U.S. Treasury Department has added the rupee to its currency watchlist.
Oil prices rose to a four-year high after reports that Saudi Arabia was keen on pushing oil prices to $80 or even $100 a barrel. Expectation that the U.S. will re-introduce sanctions against Iran, which could result in further supply reductions from the Middle East, also supported crude prices.
Globally, investors focused on the Federal Reserve’s “Beige Book”, which sees economic activity continuing to expand at a modest to moderate pace across the 12 Fed districts in March and early April.
Outlooks remained positive, but contacts in various sectors including manufacturing, agriculture, and transportation expressed concern about newly imposed and/or proposed tariffs.
Another focus area for markets was the U.S. Treasury Department’s decision to add India to its currency monitoring list for not meeting standards of currency practices and macroeconomic policies.
Back home, markets were taken aback by minutes of the monetary policy committee’s meeting earlier this month that showed the RBI could take a more hawkish tone starting as early as June despite easing inflation. The MPC members flagged several concerns, including an increase in minimum support prices for farmers and high and volatile crude oil prices.
Automobile makers and consumer stocks were in focus after the weather department predicted a normal monsoon for the third straight year, which is likely to boost demand for tractors as well as other agriculture equipment.
On the stock specific front, the results season has so far been a pleasant surprise, with TCS and ACC beating expectations.
TCS stocks rose almost 8 percent and the software services exporter is close to becoming India’s first company with a market cap of $100 billion. Sentiments around the stock also remained upbeat after it announced a 1:1 bonus issue.
HDFC Bank also declared good numbers with net profit in the fourth quarter rising by 20.3 percent from a year earlier.
Infosys, on the other hand, delivered a disappointing outlook for FY19 that led to the stock being hammered. It lowered EBIT margin guidance for FY19, and its board approved the sale of subsidiaries Panaya and Skava by March 2019.
This is a big U-turn in strategy as it had been articulating the positives of these businesses in terms of their role in front-loading new engagement wins in the past.
Chinese conglomerate Fosun International became the fourth suitor for Fortis Healthcare, offering an initial funding of 1 billion rupees in 45 days and an investment of up to 23 billion rupees against an equity holding that will not extend 25 percent. The primary infusion of capital would be made at 156 rupee per share.
For the coming week, markets will focus on macro-economic aspects, including oil prices, and movement of the rupee against the dollar.
The earnings season will be in full flow with LIC Housing Finance, Reliance Infrastructure, Bharti Airtel, IDFC Bank, Ultratech Cement, Wipro, Axis Bank, Biocon, Yes Bank, IDFC and Maruti Suzuki among the key companies that will announce their numbers.
On the global front, the European Central Bank (ECB) and Bank of Japan (BoJ) will come out with their policy decisions on Thursday and Friday respectively. Both central banks are expected to keep their interest rates unchanged. Markets will look for guidance from the ECB on the potential timing of an end to its QE stimulus and possible future interest rate increases.
After four weeks of gains, Indian markets could take a breather due to profit booking, followed by a period of consolidation. Investors should utilise this moment to get fully invested.
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.