The US markets started the month on a negative note on weaker than expected manufacturing data, slowdown in the pace of service sector growth, disappointing US jobs data and concerns on rising tension between the US and North Korea. However, a slew of positive news from overseas such as: 1) Japan’s new monetary policy which included doubling monthly Japanese government bond
purchases, 2) positive inflation data from China and 3) 25 basis points (bps) rate cut by European Central Bank (ECB) infused buoyancy in the sentiments. Upbeat quarterly numbers from big name companies like Coca Cola and Johnson & Johnson also added to the positive sentiment. Back Home, markets started on a positive note after The Reserve Bank of India (RBI) rationalized investment limits for foreign investors in bonds. Strengthened expectations of a rate cut after Wholesale Price Index (WPI) inflation coming down to its lowest level in three years, a slump in crude and gold prices and the manufacturing output growing at its slowest pace in four years kept the markets on a positive note throughout the month. In early May, the RBI did cut the repo rate by 25 bps while keeping the cash reserve ratio (CRR) unchanged.
Crude (Nymex) rose by 4.1% in April.
Global markets
In April 2013, markets around the world were largely positive. The Dow Jones, S&P 500 and the Nasdaq Rose 1.8%, 1.8% and 1.9%, respectively. Growth across the European markets was varied with the UK FTSE, German Dax and French CAC rising by 0.3%, 1.5% and 3.4%, respectively. In Asia the Nikkei shot up by 12.4%. Elsewhere in Asia, while Hang Seng rose by 2.0%, Shanghai SSEC ended in red by falling 2.6%.
Domestic markets
While Foreign Institutional Investors (FIIs) were net buyers to the tune of
` 1,000 crore, Mutual Funds (MFs) were net sellers of ` 1,423 crore.
The Sensex and the Nifty rose sharply by 3.5% and 4.4% respectively, in April. The trend was seen across BSE Midcap and BSE Small-cap as well, with both rising 3.3% and 3.7%, respectively. BSE IT and BSE Teck were the major losers falling 17.1% and 10.9% respectively. Among the top gainers were BSE
FMCG, BSE Bankex & BSE Auto rising 11.1%, 10.2% and 9.6% respectively in April.
Outlook
Shrugging off a poor earnings season, Indian shares soared in the month of April joining the global bandwagon of market rally, thanks to accommodative stances taken by Central banks across the globe. Fall in commodity prices added to the positive sentiments. The rally was purely liquidity driven with economic data and corporate numbers giving confusing signals. With central banks across the globe in no mood to alter the dovish policy, the markets are likely to maintain uptrend with few corrections. In India the earning season so far has been the mixed bag with poor bias. So is the macro data with some positive news on the inflation front and one more rate cut by RBI (with hawkish stance however). The liquidity gush has already taken the Indian markets to new highs. In this scenario, we believe the residual results outcome is unlikely to deter the sentiments and hence markets are expected to likely to remain at the elevated level in May as well.
