Indian Markets To Remain Weak 23-7-12

Indian markets declined for the second week running, as investors digested a spate of corporate earnings even as they wait for the Government to introduce important reforms. The results were pretty mixed. Except for Infosys, there hasn’t been any major negative surprise so far. The persistent deficit in the southwest monsoon rainfall is the biggest overhang for the Indian market apart from lack of progress on reforms.

Sticky inflation and widening twin deficits are among the other negatives for the Indian economy. FII flows have stayed positive this month on hope that the UPA will initiate a few key reforms before the start of the monsoon session of parliament on August 8. Markets will be disappointed if the expected reforms do not come through.

Benchmark Indices
Index	13-Jul-12	20-Jul-12	% Change
Sensex	17,214	17,158.44	-0.32
Nifty	5,227	5,205.1	-0.42

Also, the crude oil prices have again inched back to USD 100 levels and the government is thinking of a diesel price hike. Both these prices play a major role in the inflation index. This is a cause for worry and the RBI would not like to change its current stance of keeping the rate high.  On Thursday the market awaited the presidential election event with highest probability of Pranab Mukherjee becoming the next president of the country and the prime minister taking the responsibility of the finance ministry. The markets are hoping for some major reforms from the finance ministry to be announced in the coming days so that the economy will be back on the growth track.

Global equities have held up quite well lately as central banks have swung into action to boost economic growth. Expectations of further monetary stimulus from the US and Chinese central banks also remain in place amid mixed economic statistics. One problematic area is the resurgence in commodity prices, especially that of crude oil.

Among the individual stocks, Cadila Healthcare was the biggest index gainer, up by 12.31 per cent to Rs 880 post the news that the company had received a clean bill of health from the US Food and Drug Administration. The stock exchanges were informed that the USFDA had found its facilities at Moraiya to be “acceptable”. TTK Prestige this week was the second-highest gainer in the BSE ‘A’ group category, up by 8 per cent to Rs 3,563. This was mainly on account of good results for the June quarter.

On the other hand, there were losers too, among which Adani Enterprise and Adani Power closed the week lower by 12.03 per cent and 9 per cent respectively while companies like Union Bank of India, United Breweries, Jaypee Infra, etc closed down with losses in the range of 7.11 per cent to 8.92 per cent.

Key Global Indicators
Index	13-Jul-12	20-Jul-12
Gold	29,246	29,232
Silver	53,033	53
Crude Oil (Brent)	101.99	106.89
Crude Oil (Nymex)	86.71	91.92

Currency Rate
Index	13-Jul-12	20-Jul-12
USD	55.38	55.15
EURO	67.58	67.60
GBP	85.48	86.57
JYP (per 100)	69.39	70.22

For the next week one may watch out for stocks like Colgate, Dabur India, Geometric, HUL, L&T, Tata Global, Jindal Steel, Sesa Goa, Ashok Leyland, etc which are going to announce their June quarter results. One may see volatility in the share prices of the above stocks on the back of their performances.

In conclusion, we expect the markets to remain volatile for the next week as there are no major triggers in the offing. The June quarter earnings so far have remained muted while the global markets are trading nervously on the back of slowdown in growth. On the Indian front, a ray of hope is that of the prime minister announcing some reforms.