Monday, October 25, 2010 17:12 Hrs IST
Global Macro Data, Institutional Flows and Corporate Results for the Jun-Sep Quarter Should Provide Further Direction to the Stock-Market
Equity Market Outlook, DSP BlackRock Mutual Fund, 22 October 2010
The Sensex and the Nifty indices have seen sharp movement on either side during October. However, on a mtd basis, the markets remain marginally negative. As of October 20, 2010, the Nifty index closed at 5,982.1, down 0.8% and the Sensex Index closed at 19,872.2, down 1.0%.
The Industrial Production (IP) growth for August decelerated to 5.6% y-o-y compared to 15.2% y-o-y growth in July (revised upwards from 13.8% y-o-y earlier) and 5.8% y-o-y growth in June. On a seasonally adjusted basis the IP index was down 6.7% m-o-m (compared to (+) 7.5% m-o-m) in July. The key reason for this deceleration is the volatile capital goods component (-2.6% y-o-y in August against 72% y-o-y in the previous month). IP ex Capital Goods decelerated to 6.8% y-o-y in August compared to 7.4% y-o-y in July on account of base effect. Inspite of this, the other key variables such as passenger car sales, two wheeler sales and tax revenue collections did not show any major deceleration.
The WPI headline inflation came in slightly higher than expected in September, accelerating to 8.6% y-o-y compared to 8.5% y-o-y in August. Food inflation accelerated to 10.8% in September compared to 10.6% in the previous month while non-food inflation continued to remain high at 7.8% in September compared to 7.7% in August.
On an overall country level, the rainfall for the season (June-September) was 102% of its long period average.
Month to date, the economy has seen FII inflows of approx. USD 4.3bn into equities. On an YTD basis, there have been inflows of approx. USD 23.6bn.
As global macro economic data continues to disappoint, concerns regarding further quantitative easing by developed nations and currency wars remain at large. Indian macro economic data, however, seems to present a mixed picture. While on ground macro variables such as tax collections, non-oil imports, passenger car sales and industrial production remain steady, inflation continues to remain high as does the current account deficit. A deluge of inbound flows have, however, ensured continued buoyancy in Indian equities. Factors such as global macro data, institutional flows and corporate results for the Jun-Sep quarter should provide further direction to the stock-market.