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May 2014

After delivering a superior performance in March, the Indian equity markets started off April on a positive note but could not hold on to their gains; as a result, domestic equity indices ended flat in April. The CNX Nifty fell 0.12% while the BSE Sensex rose 0.14%. 

 In the beginning of the month, markets gained on buying by foreign institutional investors (FII) and in anticipation of a positive election outcome. Encouraging quarterly earnings posted by a few IT firms and private sector banks also boosted sentiments. The US Fed Chief Janet Yellen's remarks that full employment and price stability were possible by 2016 and upbeat industrial production numbers from the US coupled with slightly better-than-expected growth figures from China augured well for the markets. 

  

*MF Data available on SEBI website till April 28

 However, release of disappointing domestic economic indicators including higher inflation numbers [combined consumer price index (CPI) and whole price index (WPI)], widening trade deficit and an unexpected contraction in IIP capped the gains.  As the month progressed, the markets were dragged down by profit booking and concerns resulting from the India Meteorological Department’s expectations of below-normal rain this monsoon. Poor global cues in the form of sell-off in the US technology and biotechnology stocks, and rising tensions between Ukraine and Russia also limited the gains for equities.  The markets chose to remain cautious ahead of the US Federal Reserve meeting and publication of US monthly jobs data.

 As per the latest development, the US Federal Reserve reiterated its confidence in the nation’s economic prospects and further reduced its monthly bond buying program to $45 bn from $55 bn. The US Fed left its interest rates unchanged at 0-0.25%. The latest reading showed that the US economy added 288,000 jobs in April, following an upwardly revised 203,000 jobs in March; the unemployment rate fell to 6.3% in April, from 6.7% in the previous month.

The S&P BSE Sectoral indices ended mixed in April. The S&P BSE Healthcare index was the top performer, rising 6.68% as pharma shares retained their upward trend on expectations of good earnings for the January-March quarter and hopes of receding regulatory overhangs. The S&P BSE Capital Goods and S&P BSE BANKEX indices posted moderate gains of 0.89% and 0.92%, respectively, due to long rollovers to the May futures and options contracts in the sectors shares. The S&P BSE Realty was among the worst hit, down 4.88%, following profit taking in realty shares.

The markets in May are expected to be guided by FII investments, domestic macro-economic data and the outcome of the general elections. Short-term volatility is highly likely on the poll results.

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