EXPECT SOME CONSOLIDATION!

In the preceding fortnight we had expected the markets to remain uncertain and hence it was expected to be a stock specific market. We had conviction in our view as a lot of macro data was yet to be announced and what everyone on the street was looking for was the Independence Day speech by Prime Minister. It was quite obvious that the investors would have remained cautious ahead of announcement of the very important macro-economic data points. However, contrary to our expectations and yes even the street estimates, the Indian equity markets in the preceding fortnight seem to have defied all the laws of gravity and consistently moved northwards. The momentum was so strong that the Sensex actually propelled to an all time high level of 26530.67 on August 19, 2014. Even the Nifty touched an intraday high of 7918.55 on the similar day.

So what exactly helped the indices to witness such traction while many on the street had expected the indices to remain range bound? There is a combination of factors that actually resulted in such a sudden spurt in the indices and even broader markets. Just to quantify, even the mid-cap and small-cap companies that witnessed a good amount of selling on account of so called valuation concerns, also started getting renewed interest. Rather in the past few trading sessions, the mid-cap and small-cap indices have outperformed the benchmark indices.

As regards the factors, first and the foremost is the renewed interest of FIIs in the Indian equities. FIIs have been consistent net buyers throughout the month of August. What we need to focus on is, though the FIIS were buying, in the last week of July and first week of August the buying was considerably lower. In addition, on YTD basis even the MFs turned net buyers to the tune of `621 crore.

Apart from this, the better than expected data on macro front in US markets, also provided a much needed boost to market sentiments. While the macro-economic data on housing front and employment front was better than expected, the biggest relief came in the form of receding worries on geo-political issues. It was no wonder that the crude prices declined resulting in benefits for oil importers like India.

While the global macro data was good, the IIP figures for India were below expectations. IIP numbers for June 2014 stood at just 3.40 per cent against the expectations in the range of 5.4-5.6 per cent. Even the inflation figures at 7.96 per cent for July 2014 remained above the tolerance levels RBI. In coming week, India GDP figures for Q2 would be announced on August 29, 2014 and HSBC Manufacturing PMI would be announced on September 1, 2014.

As regards the markets, we feel the corporate results for June 2014 quarter are in-line with street estimates. However it did not provide any scope of increasing EPS estimates for FY15. We opine, aft er a constant up-move the markets are likely witness some consolidation.