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| Markets remained volatile in the week. Market opened strong earlier in the week, but giving up all its gains on last day of the week. Sensex was down 5.25% and S&P CNX Nifty also closed 6.27% lower. The fall was led by capital goods and metals sector, while IT sector outperformed the overall market. In fact banking sector has delivered positive returns during the week, outperforming the Nifty by more then 10.5%. |
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Key Equity Indices |
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Week at
Glance |
10/13/2008
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10/14/2008
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10/15/2008
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10/16/2008
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10/17/2008
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Last Week |
Week on Week Change %
|
| Sensex |
11,309.1
|
11,483.4
|
10,809.1
|
10,581.5
|
9,975.4
|
10,527.9
|
-5.25%
|
| S&P CNX Nifty |
3,490.7
|
3,518.7
|
3,338.4
|
3,269.3
|
3,074.4
|
3,280.0
|
-6.27%
|
| BSE IT |
2,790.4
|
2,939.9
|
2,780.2
|
2,669.2
|
2,537.3
|
2,584.3
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-1.82%
|
| BSE PSU |
5,815.5
|
5,758.9
|
5,555.5
|
5,494.3
|
5,235.5
|
5,536.0
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-5.43%
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| BANKEX |
5,973.8
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6,038.1
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5,841.6
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5,866.8
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5,546.7
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5,319.5
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4.27%
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Source : Bloomberg |
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Facts & Figures (Rs in Millions) |
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Date
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FII Flows in cash mkt
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MF Flows in cash mkt
|
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10-Oct-08
|
-8477
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3152
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13-Oct-08
|
-23232
|
5205
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14-Oct-08
|
-8422
|
-2631
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15-Oct-08
|
-1891
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-3829
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16-Oct-08
|
-8407
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4316
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Source : SEBI, provisional data |
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| US and Global financial turmoil has had its collateral damage on all equity markets including India. Although fundamentally India continues not to be impacted by this, we have seen heightened volatility in India led by loss of confidence in western financial system, poor sentiment & impact of FII outflows. Deleveraging has started happening and has led to poor credit availability in the international markets despite global coordinated efforts by few key central banks in terms of supply of liquidity and rate cuts. Increasingly the world seems to be moving away from inflation scare to growth scare and heading towards a global slowdown.
While a global slowdown will lower our growth as well, we feel that our ‘growth gap’ will remain intact or infact improve over the rest of the world, mainly because of lower input cost for the economy due to lower commodity prices and predominantly domestic nature of our economic growth. While currently we are witnessing FII outflows from India due to so called ‘Risk aversion’, over a longer term we see renewed interest in the structural stories of Asia and India in particular as the concept of ‘Risk aversion’ gets redefined. We expect continued volatility in the Indian market in the short term, though, led by the global financial crisis. We expect more divergence in sector and stock performances, in a broadly volatile market. |
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| __________________________________________________________________________________________ |
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| International
Central Bank actions
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Bank
|
Action
|
Benchmark interest rate
|
| Reserve Bank of India |
Cash Reserve Ratio decreased
|
7.50%
|
6.50%
|
| Chile Central Bank |
Rate unchanged
|
8.25%
|
8.25%
|
| Peru Central Bank |
Rate unchanged
|
6.50%
|
6.50%
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| Bank of Japan |
Rate unchanged
|
0.50%
|
0.50%
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Source: Bloomberg |
| Economic Indicators |
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Previous Week
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Current Week
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| US 10 year benchmark treasury |
3.81%
|
3.91%
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| Crude oil WTI ($/barrel) |
82.23
|
70.52
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Source: Bloomberg
Currency
|
|
Previous Week
|
Current Week
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| INR |
48.43
|
48.88
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| EUR |
1.36
|
1.34
|
| JPY |
98.94
|
100.85
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Source: Bloomberg
Domestic
Liquidity
| Call rates range |
Previous Week
|
Current Week
|
| MIBOR range |
10.51-16.48
|
7.00-10.13
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| LAF amount average (Rs crore) |
-51088
|
-46580
|
Source: Bloomberg
Domestic interest rates
|
Previous Week
|
Current Week
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| 3 month CP |
15.00%
|
12.50%
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| 91 day T-bill |
8.48%
|
7.75%
|
| 5 year OIS |
7.23%
|
6.90%
|
| 10 year benchmark gilt |
7.83%
|
7.71%
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Source: Bloomberg
RBI action
CRR cut by 100 bps to 6.5% effective from 11th October 2008.
Outlook of the Week
The RBI as well as the Finance Ministry have taken timely steps in order to improve the liquidity situations. The Finance Ministry, in consultation with the RBI, arranged for immediate transfer of Funds in relation to the agricultural debt waiver aggregating Rs 25,000 crore to the Term Lending Institutions. RBI also cut the CRR further by 100 bps with retrospective effect thus releasing a further Rs 40,000 crore into the system. It also increased the interest rates on foreign currency deposits and allowed banks to access capital through their overseas branches. In a related step, the RBI also allowed Mutual Funds to access funds from Banks by placing Certificates of Deposits as collateral. All these steps have resulted in call rates coming down to around 7% levels from around 20% earlier. Money market rates have also eased a bit though the selling pressure still continues as Mutual Funds continue to face redemptions. We believe that easy overnight rates would result in flows becoming normal once again over the next few days. However, one has to watch out for the risk of heavy RBI forex intervention which could once again pressure domestic liquidity. |
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