27th June, 2013 : Comments by Amar Ambani, Head of Research, India Infoline
In the June series, the Nifty plunged 7.3% while the Sensex declined 6.7%.
The Indian equity market ended the June series today on a bright note with investors perhaps relieved that the series has ended. The June series had it all, a high of 6,133.75 on May 30 to the June 24 lows of 5,566.25, a fall of almost 570 points or 10%.
Beyond the market, this series witnessed nature unleash its destruction in Uttarakhand, unemployment at record highs on government inaction, and the rupee hitting a record all-time low of 61.71 per dollar. Federal Reserve Chairman Bernanke put to rest the debate on whether India is deleveraged from the global economy when he hit sentiment across global markets with his early stimulus roll-back juggernaut.
The only silver lining to the June series was some signs of a pick up on the reforms process. Monsoon too has been above average at most places in the country.
Investors remain undecided and this is evident from the fact that the July Nifty rollover stands at around 45%, which is way below the previous rollover.
In the June series, the Nifty plunged 7.3% while the Sensex declined 6.7%. The pain was mostly felt in the broader markets with the midcap and small-cap indices declining 10% and 7.8%, respectively.
On Thursday, the benchmark indices ended near the day’s high amid across the board short-covering. In addition, better than anticipated Q1 CY13 current account deficit data aided sentiment.
India’s current account deficit came in a day earlier than schedule. It moderated sharply to 3.6% of GDP as compared to the historic highs of 6.7% seen last quarter. Trade deficit narrowed to $45.6bn in Q4 from $51.6bn year-on-year. The data was precisely timed to come in before the currency market could open. The move, reports state was aimed to rein in a weakening rupee, which hit a record low of 60.71 per dollar on Wednesday.
According to Amar Ambani, Head of Research at IIFL, the current account deficit figure has come in above street expectations. “The street was expecting the deficit to worsen to $21.59 billion, or 4.4% of GDP, given the global picture.”
For the next quarter, he forecasts a higher deficit on the back of spiralling gold imports. Gold and silver imports have risen 109% year-on-year in April-May period.
In the short-term, Ambani sees the rupee appreciating to 59 per dollar on RBI intervention.
Oil and gas, IT, telecom, pharma, realty and banking stocks led from the front. Even mid- and small-cap stocks participated in the upswing. Only consumer durables and select capital goods stocks ended in the red.