Budget May Trigger The Markets

In the last fortnight, the markets witnessed an almost dull movement. The Sensex closed flat in green for the fortnight ending February 20, 2013, while Nifty ended in red declining by 0.27 per cent. This move can be attributed to the lacklustre performance of the results announced at the end of the earning season.

There has been some disappointment in the earnings of India Inc. The street was expecting it to beat the street estimates like it did in the previous quarter. However, the results have been quite subdued for this quarter. The topline witnessed a growth of 7.79 per cent and the bottomline witnessed a growth of 6.09 per cent on a YoY basis in Q3FY13. This is after excluding the results of PSU oil marketing companies (OMCs). However, if we are to sum up the earnings season, it can be said that the earnings failed to provide any stimulus for the markets.

Also, the last fortnight saw the announcement of certain economic data. The IIP numbers for the month of December 2012 contracted by 0.6% on a YoY basis. The cumulative growth for the period of April to December 2012-13 came in at 0.7% over the corresponding period last year. The main draggers for the IIP were the Manufacturing and Mining sectors which declined by 0.7 per cent and four per cent respectively and have a weightage of 75.52 per cent and 14.15 per cent respectively in the overall index. They witnessed a mixed growth rate for the month of December 2012.

On the other hand, the CPI numbers for the month of January 2013 came in at 10.79 per cent as against 10.76 per cent of December 2012, witnessing an increase of 23 basis points. The CPI inflation is considered more relevant as it captures the ground level prices which directly impact the consumers' purchasing activity.

However, there is some positive news too. The WPI numbers for the month of January 2013 came in surprisingly lower at 6.62 per cent, well below the street’s expectations of 7 per cent. WPI for the month of December 2012 stood at 7.18 per cent. The index is showing signs of cooling since the past four months. From 7.32 per cent in the month of October 2012 to 6.62 per cent in January 2013, it has reduced almost by 70 basis points in the past four months.

Considering the Indian front, almost all of the indices have closed on a negative note in the broader market. The BSE Mid-Cap and Small-Cap closed in red, declining by 2.15 per cent and 4.01 per cent respectively. On the sectoral basis, 10 out of the 13 indices have closed in a negative zone.

The BSE IT index has secured the top spot with a gain of more than three per cent. The BSE Teck index (+1 per cent) and BSE Auto index (+0.16 per cent) were the other two gainers. The main draggers in the last fortnight were the BSE Consumer Durables index (-5.51 per cent) and the BSE Metal index (-4.13 per cent).

The money inflows remained strong in the fortnight, with the FIIs pumping in Rs 20386 crore in equities for the month of February 2013, taking the total to Rs 42631 crore for CY13. The DIIs ended in red, selling off equities worth Rs 1336 crore for the month.

Going forward, the only trigger for the markets is the forthcoming budget. There are high expectations that the government will move ahead with its reforms process and at the same time, will have something for the common man too. However, we keep our fingers crossed and hope to see the much needed boost for the markets.