BSE / NSE Weekly Review 18 Nov 2011

Bear Attack
The week gone by saw the markets witnessing heavy selling pressure. All the five trading sessions saw the Sensex/Nifty ending in the red. An intra day recovery on Friday from the lows of the day helped to curb the losses. W-o-W, while the Sensex lost 4.64%, the Nifty lost 5.09% over the same period.

Reflecting the weak sentiments seen during the week, market breadth was negative in all the five trading sessions of the week.

Key Events
Global Markets
Initial jobless claims in the USA came in lower than expected at 388,000 for the week ending Nov. 12. The latest week's numbers eased from 390,000 from the week prior and were the lowest since April.

The number of housing building permits in USA jumped to a seasonally adjusted annual rate of 653,000 in October, up 10.9% from the revised rate of 589,000 in September, the Commerce Department said Thursday. That was much higher than expected, with economists surveyed by Briefing.com looking for a 603,000 annual rate.

In the United States, retail sales rose 0.5% in October, boosted by strength in electronics and home improvement, the government said on Tuesday. The increase beat expectations of a 0.4% rise, but was lower than the 1.1% gain in the previous month.

Meanwhile, the Empire State manufacturing index returned to positive territory after five months in the red, indicating that manufacturing activity has been expanding in November in New York. The index edged up to 0.6, from negative 8.5 last month.

Over the weekend, embattled Italian Prime Minister Silvio Berlusconi stepped down, after the government passed a package of austerity measures. Former European Union commissioner Mario Monti was nominated to lead Italy.

Investors kept a close eye on Italian bond yields, after a ?3 billion auction of 5-year bonds generated decent demand. Yields on both the 5-year and 10-year bonds still remain above 6.5%. Last week, the 10-year Italian yield spiked to a record high above 7% - a level that eventually led to bailouts for Greece, Portugal and Ireland.

That government is expected to pass the controversial bailout package European leaders agreed to late last month, which had been a condition former Prime Minister George Papandreou set as part of his resignation.

Meanwhile, Italy's senate passed a series of austerity measures demanded by Europe, paving the way for Prime Minister Silvio Berlusconi to resign over the weekend.

A better-than-expected reading on consumer sentiment also boosted stocks. The University of Michigan consumer sentiment index for November to 64.2, up from 60.9 in October and above a consensus forecast for 61.3. The reading was the highest in five months.

Indian Markets

The infrastructure development in the country is being hit hard by a slow pace of reforms and limited long-term funding options and this trend can deter the economic growth, rating agency Standard and Poor's has warned. India's inadequate infrastructure is a major roadblock to the country's target of achieving a 9-9.5% annual growth in 2012-2017.

Amid ban on iron ore mining in Karnataka, exports of the mineral have dipped by over 25% to 35.38 million tonne in April-October period of this financial year.

Non-food credit offtake from banks grew by 18.5% to over Rs 43.11 lakh crore in the 12 months to November 4, in spite of high interest rate regime in the economy.

The cabinet has approved foreign direct investment of up to 26% in the pension sector, moving forward on a key reform initiative in the financial sector after years of dithering.

Exports from special economic zones (SEZs) grew 26.2% year-on-year to Rs 1.76 lakh crore during April-September this fiscal, according to the Export Promotion Council for EOUs and SEZs (EPCES).

Indian consumers' spending on FMCG items at modern retail stores is set to nearly triple to $5 billion by 2015 from $1.8 billion at present.

Growth in domestic steel demand dipped to 2.8% in the first half this fiscal from 8.8% in the first four years of the 11th Five-Year Plan.

Continuing its dismal performance, industrial growth fell further to 1.9% in September, mainly due to poor output from the manufacturing sector. Growth in factory output, as measured in terms of the Index of Industrial Production (IIP), stood at 6.1% in September last year.

During the April-September period this fiscal, IIP growth stood at 5%, as against 8.2% in the same period last year. Meanwhile, the IIP growth figure for August this year has been revised downward to 3.59% from the provisional estimate of 4.1%.

Key Sectoral Movement
All the sectoral indices ended in the negative. The top losers were Oil & Gas, IT, Metals and Auto, which fell by 4.8%, 4.5%, 2.9% and 2% respectively.

Outlook
While the underlying trend remains down, we remain open to pullback rallies early next week driven by short covering. These upsides could find resistance at 5037. In terms of strategy, we recommend a go slow approach on fresh longs till we see signs of sustainable strength.

Source - HDFC Securities

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