Impact of the global markets on India - every Monday

#1
Hi

Every weekend I consolidate data on what has been happening around the world and see how it is likely to affect India and my personal holdings. Though I have not signed up for Traderji for a long time, I often get a lot of guidance from forum members here by reading the threads. Today I thought I should share my thoughts every week so that others can benefit from it too.

Best regards,
Rajiv Malhotra

In the week of 21 March 2011, stock markets across the globe recovered as the Japan situation eased a bit. The stellar performers were the emerging market pack and India, Chile and China did very well. On the commodity front, gold was flat but oil shot up as the Libyan crisis caused uncertainty. The dollar index was slightly higher than the week before.

The Indian markets for the first time in many months saw huge FII buying last week along with domestic buying. Market breadth was good and the sentiment turned a little positive after a long time.

There is good evidence that the fund flows from developed to emerging markets have resumed and India will be a key beneficiary as it is one the few economies with a strong domestic economy and with an interest rate cycle near its peak.
 
#2
It is Monday again and like I promised, I'd like to share my thoughts on the global markets with you.

Equity markets across the world had a robust run in spite of rising oil prices. Contrary to popular belief, markets and oil prices are considerably correlated and move in tandem most of the time. The only time that markets react to oil is when the run is very sharp and quick, such as the financial crisis of 2008. One should also note that there have been massive investments in solar, bio, nuclear, coal energy investments over the last few years, to the tune of hundreds of billions of dollars so that in the coming years we may infact see a reduction in the use of oil.

Another theme that is slowly emerging is that gold is now finding stiff resistance and any time it moves up by a couple points, it quickly retraces. As a result, some investments in gold many return to the equity markets.

The Indian markets had a robust last week with huge FII buying. There was some DII selling which may be due to year-end remdemption pressure from retail investors. Market breadth was very good and is, in fact, now slowly reaching the bull market norm. Option sentiment is firmly positive for the second week.

I am positive about our markets and see a good chance that the uptrend will continue this week as well.
 
#3
Good morning, everyone!

Here is my take on world economic and political events this last week that impact Indian markets and my portfolio (and yours too):

Last week was interesting for the global equity markets as most major markets were flat to down. Of course, a few markets such as China and Russia did perform well. Gold and oil both had a good run. Sliver shot up 8% in a week. Portugal debt issues and Libya crisis seem to be the usual suspects for this reaction.

Back in India, our markets were flat and retraced some gains on Friday. FII inflows are typically the key fuel and since the start of April, more than Rs. 2,800 crores have been pumped in. Even on Friday, when the markets were weak, FII's net buy was Rs. 380 crores. Market breadth was good for the week. The option data is now showing some signs of speculative build up though it is in initial stages.

The market is now looking forward to not just the Q4 earnings but also the outlook as seen by companies, which will be watched very closely as some soft earnings this quarter are already discounted. The government's agreement on the Lokpal Bill was helpful and prevented a potentially explosive situation. My option analysis suggests that the markets may experience a minor correction or consolidate around these levels after a spectacular rally but our positive bias remains as long as the FII flows are remain unaffected.
 
#4
197 reads! That makes me feel good. This reinforces my discipline to keep this going. :)

Last week, equity markets across the globe were flat to negative last week and despite a sharp correction on Friday, the Nifty outperformed many markets. Oil had a health correction of more than 4% and gold was slightly negative.

The Indian markets had a good run last week except for Friday when they got spooked by Infosys numbers and galloping inflation figures. What's very interesting is that despite these issues FIIs have not sold their investments even when the market corrected sharply on Friday. The FII net sell figures are not abnormal, market breadth also not out of the ordinary. The dollar index ended the week on a negative note.

As anticipated last week (see previous post on thred), the market did correct to some extent but we do believe that 5700 will be a strong support until expiry. Options data also suggests that during this expiry we may trade in the 5700-6000 zone. Right now, the market not only awaits more quarterly numbers but also the RBI action on interest rates scheduled for 3 May, which has now assumed more prominence after a nasty set of inflation numbers last week.
 
#5
My apologies for this delayed post. I was traveling. This write up is for the week starting 18 April 2011.

The equity markets globally had a good run last week as the earnings news have been pretty good. The week was not without anxiety as the S&P downgrade of US long term debt caused a sharp correction in the developed markets but recovered in a day. Gold and oil went up as well. In fact, last week was one of those rare weeks during which all asset classes equity, gold, oil moved upwards.

The Indian markets had a good run last week and the earnings of major companies so far have been pretty good. FIIs still are in the buy mode in the Indian markets just as they were the week before. DIIs provided support to the market as well. The breadth data was fine. Option data suggests neutral sentiment. US dollar index was negative for the week.

My view is that the market may trade in a range of 5700-6000 and this week the gains may be limited because of expiry. If the CBI chargesheets Kanimozhi this week, then the UPA government may face issues if the DMK chooses to pull out. As a result, the possibility of a sharp correction exits. The next directional trigger for the market depends on what the RBI does on 3 May.
 
#6
This week I am on time! Here is my analysis of the events of last week and my forecast of what is to come. Please refer back to some of my earlier posts. You will see much of my views have been accurate.

Last week was a good week for most equity markets with all major indices in the green. Robust earnings across the globe and the Fed decision to keep interest rates soft kept the equity markets buoyant too. Gold, silver and oil moved up in tandem.

India, however, was one of the worst performers. The markets reacted strongly and interest rate sensitive stocks like banks, auto and infrastructure took a hit ahead of the RBI meeting to take place on 3 May, Tuesday. FIIs were major sellers last week as they steadily net sold more than Rs. 2000 crores but DIIs lent some support. Market breadth was poor last week and option sentiment still in in the neutral zone.

My view is that the market has good support at 5600 and the direction of the market is clearly dependent upon the RBI policy. The markets have now already factored in a 25 basis point hike but the fear is that the RBI may provide a shock in the form of a 50 bps hike as the inflation is not cooling down. We are of the opinion that even if the RBI raises rates by 50 bps the message that growth momentum is seriously slowing has already been conveyed. The markets therefore, may react positively as this might be the peak of the interest rate cycle. However, any divergent statement would imply that the cost of capital for companies will increase and the toll on earnings in the future quarters is inevitable.
 
#7
What a difference a day can make in financial markets! Last Wednesday the US released an extremely weak job report that spooked financial markets across the globe. The carnage was evident in key commodities like gold , oil and silver which fell approximately -11%, -14% and a whopping -25% respectively in just a couple of days. Many of these commodities were overextended with high level of speculative activity and the bubble burst.

The fall in oil prices gave a much needed boost to Indian markets which were in a bear grip owing to the RBI's hawkish tone and the steep rate hike. The Nifty breached the key support zone of 5600-5700. FIIs were big sellers and DIIs were the net buyers for the week. Breadth recovered on Friday but was was poor over the preceding days. Option data suggests that pessimism has increased.

The dollar index for the first time in many months shot up more than 2.5% in two days and the DOW volatility index shot up by 30%.

My view is that global markets will face volatility akin to that of the January-March period this year. Many commodities may correct slightly from current levels. All this augurs well for India as our commodity import need is substantial. In the short term, I feel that that Nifty may trade in a range of 5400-5800.
 
#8
The global markets were stable last week and only commodity oriented markets such as Russia, Canada and Brazil showed weakness due to the sharp correction in commodities. Both gold and oil both recovered a bit after the recent mauling but silver was flat.

Indian markets had a smart relief rally on Friday after the election results were announced. Results were as expected with some positive surprises like the scam tainted DMK's major drubbing clearly signalling to all political parties that corruption will not be tolerated by the people.

The markets were very flat for the entire week except Friday and some evidence of consolidation was visible. DIIs were net buyers while FIIs remained net sellers but the quantum traded was limited. The IIP data was positive after many months with cap goods showing a clear uptick. The breadth data was satisfactory as many small caps and mid caps performed well despite the Nifty being flat. Option data showed that sentiment is neutral.

The dollar index had a good up-move for second consecutive week. The Dow Jones volatility came down after a massive spike the week before.

The dollar index suggests that there may be fund flows from commodity based economies to the US markets. I feel that fund flows will return to India in the coming quarters as we are one of the very few economies which are near the top of the interest rate cycle. I hold the view that the market may trade in the 5400-5800 range for this series. I feel there is a minuscule chance that the DMK may pull out of the alliance and that the UPA may have to cobble up new alliance partners. If that were to happen, we can expect a bout of volatility again in our markets.
 

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