Indian markets had a dream run during the week thanks to a confluence of positive factors including a rising rupee, falling crude oil prices, a U.S. waiver from Iran sanctions and decent corporate results. Benchmark indices gained about 5 percent during the week with the Nifty marching past the 10,550-mark.
This relief comes after an 8 percent plunge in October and a 3 percent fall the previous week.
Domestic liquidity issues seem to have been proactively managed by the RBI, which carried out open market operations (OMOs) of 360 billion rupees in October and announced OMOs worth 400 billion rupees in November.
On the institutional activity front, FIIs were net sellers to the tune of 38.63 billion rupees while DIIs were net buyers to the tune of 53.56 billion rupees in equities.
The rupee ended at a one-month high at 72.42 a dollar. Oil prices posted their biggest weekly loss since February, down almost 6 percent to $73. Reports indicated that the U.S. has agreed on giving waivers to eight nations including India to continue importing Iranian crude after it reimposes sanctions on the OPEC producer on November 5. India is also exploring way to pay for this crude in rupees.
The public spat between the government and the RBI eased somewhat after the latter said autonomy of the central bank was “essential”.
On the policy front, Prime Minister Narendra Modi unveiled measures to address MSME credit and liquidity concerns and the government announced the launch of a new portal that will help micro, small and medium enterprises avail quick credit.
India’s total gross revenue collection through GST crossed one trillion rupees in October due to increased festival sales and higher compliance. This compares with 944.42 billion rupees in September.
The government’s target was a monthly GST collection of around one trillion rupees for the current fiscal year, but the actual mop-up has fallen short of the target month after month. The sole exception earlier was April, in which the collections exceeded the target, but it was discounted as a blip due to year-end adjustments.
In stock specific action, Power companies such as Adani Power and Tata Power were in focus after the Supreme Court allowed the Central Electricity Regulatory Commission (CERC) to amend Power Purchase Agreements (PPAs) of three power plants in Gujarat. The ruling paves the way for CERC to amend the PPAs, thereby allowing these companies to pass on the increase in fuel cost.
ICICI Bank rose after it announced better-than-estimated Q2 numbers. Brokerages were upbeat, and the bank remained one of the preferred stocks on D-Street.
Automobile stocks gained after the release of strong October sales numbers. Hero MotoCorp reported a 16.4 percent rise in total sales at 7,34,668 units. Bajaj Auto reported its highest-ever monthly sales for motorcycles during the month. Motorcycle sales were up 33 percent at 4.32 lakh units, and three-wheeler sales were up 30 percent. M&M reported a 17 percent growth in total tractor sales at 47,376 units, while total exports rose 2 percent to 1,064 units.
On the macro front, eight core industrial output grew at a slower pace in September at 4.3 percent compared to 4.7 percent in August due to fall in output of cement, steel, refinery products, and natural gas.
Growth in the manufacturing sector gathered momentum in October as firms responded to stronger order inflows by scaling up production, input purchasing and employment. The Nikkei India manufacturing PMI rose from 52.2 in September to 53.1 in October.
Meanwhile, India climbed 23 places to 77th in the World Bank’s ease of doing business index, becoming the top ranked country in South Asia for the first time and third among the BRICS.
For the coming week, markets are expected to continue their gains due to positive news flows on key variables like the rupee, oil, and Iran sanctions. However, investors will start focusing on state elections in the next few weeks, during which we should witness volatility. The gains made last week seem to suggest that the Nifty has reached an intermediate bottom and should consolidate at current levels, albeit with minor corrections. One should start nibbling in.
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.