NiftyforAll: Weekly Review

Sunday, December 13, 2015

Weekly Review - 14.12.2015

Dear All,

Investors will keenly watch the decision of US Federal Reserve’s two-day monetary policy meeting scheduled on starting on Tuesday.

The market will also react to the industrial production (IIP) data for October, which was announced post-market hours on Friday.

The government will unveil the data on Wholesale Price Index for November on Monday. Post market hours, Consumer Price Index for November will also be announced on Monday. Stock market trend will also largely depend on developments over the GST Bill, movement of the rupee, crude oil price movement and investment by foreign portfolio investors.

Investors’ sentiments were dampened over a possible delay in the passage of the key GST Bill. Further, oil prices tumbled to their lowest since 2009 after the Organization of the Petroleum Exporting Countries (OPEC) decided to keep production high despite depressed demand.

Further, foreign portfolio investors sold approximately Rs 1,000 crore worth shares during the week. On Friday, the rupee ended with a 17 paise loss at 66.88 against the US dollar, the lowest level in more than two years in the face of a strong demand for greenback.

On Friday, Reserve Bank of India governor Raghuram Rajan said there was a high probability of the Fed increasing the benchmark interest rate by 0.25 per cent next week. "Looking at the market probabilities, our sense is there is 70-75 per cent probability of a Fed increase. I also think Fed has prepared the way carefully for rate increase so it is likely at this point they will go ahead and raise rates," he told reporters after a meeting of Central Board of the RBI.

The recent fall in these stocks to relentless selling by foreign institutional investors with high levels of holdings. FIIs continued their selling spree and pulled out more than Rs 2,300 crore from the domestic stock market in the first week of December after Fed chair Janet Yellen hinted at a rate hike.The Fed did play a major role in the current market fall, and there is worldwide weakness in equities. To be honest, a lot of FII money is going out of India and other emerging market.

It looks like markets have already factored in a rate hike. This is evident from the constant selling witnessed in equity markets not just in India, but across the globe. While financial markets globally look more prepared for a rate hike in the US, the main worry is about how things pan out beyond the first rate hike. Some experts think the pace of rate increase will be shallow and the quantum of hike would not be more than 60 bps in next 12 months.

The US Fed will do the first round of rate increase this December, which is already known and presumably digested in stock prices. The bigger issue is after that what? What kind of commentary will the Fed give along with the first rate increase? "If the commentary is dovish, it should be looked at as time-bound increase in rates. So far the indications and consensus are factoring in a gradual increase in rates over a period, and that too based on data"

Apart from above, lets move on to technical's.

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