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April 2014

Positive domestic and global developments in March gave the Indian equity market the much-needed boost. The CNX Nifty rose 6.81% and the S&P BSE Sensex gained 5.99%, both at a five-month high. Major positive domestic developments came in the form of improvement in domestic economic indicators (Current account deficit (CAD), inflation and industrial output). Encouraging CAD helped the rupee appreciate, which improved stock market sentiments. Strong buying by FIIs which was largely driven by the expectation of a stable and more business friendly government in India post the general elections in April-May 2014 also aided the gains. The robust demand for the Central Public Sector Enterprise (CPSE) exchange traded fund (ETF) added to the positivity. The government launched the CPSE ETF to divest its stake in public undertakings and meet its divestment target for the 2013-14 fiscal. The new fund offer (NFO) saw demand of Rs 4,000 cr compared with the government target of Rs 3,000 cr. Positive global cues came in the form of easing tensions in Ukraine after Russian President Vladimir Putin ordered military troops in western Russia near the Ukraine border to return to base. 

Gains for the domestic indices were, however, capped after the US Fed Reserve Chief Janet Yellen hinted at raising interest rates in the country earlier than expected (early 2015) even as the central bank continued with its stimulus pullback. Weak economic data from China also arrested gains for Indian equities.

All the S&P BSE sectoral indices, except S&P BSE Healthcare and S&P BSE IT, ended higher in March. The S&P BSE Realty index rose 22.01% due to a strong market buzz that the government is likely to allow foreign direct investment in the sector. The S&P BSE BANKEX index was the top gainer in March, surging 18.63% helped by brokerage upgrades, the Reserve Bank of India (RBI) extending the deadline for banks to implement Basel III capital rules by a year and hopes of some easing by the central bank in its policy review. However, in its first bi-monthly monetary policy statement on April 1, 2014 the RBI kept its key rates unchanged. The S&P BSE Metal index rose 16.14% as interest in metal shares picked up after reports of Arcelor Mittal hiking product prices raised hopes that other companies would follow suit. Among the laggards, the S&P BSE IT index was the top loser. It fell 10.24% due to a stronger rupee and sector bellwether TCS softening its earnings forecast. The S&P BSE Healthcare index fell 6.98% as investors exited defensive stocks on improvement in risk appetite.

The markets in April are expected to be guided by FII investments and domestic macro-economic data. Global cues will continue to impact the market too; further tapering of the quantitative easing by the US Fed and volatility in global equity markets are key monitorables. Expectations of the outcome of the upcoming general election can also impact the markets.