Indian markets are poised to open with a positive uptick given the constructive global cues. U.S. stocks finished Monday with strong gains as investors shrugged off the narrow scope of EU and U.S. sanctions following the vote in Crimea in favor of leaving Ukraine. Investors instead focused on better-than-expected economic data, including industrial production and manufacturing activity in the New York region. However, stocks rose amid the lowest trading volumes this year. Asian equity markets rose on Tuesday, stabilizing after recent volatility, as the implementation of sanctions on Russia lifted global risk appetite. Focus now turns to the start of the Federal Open Market Committee's two-day meeting later on Tuesday, which is expected to see policy makers continuing to taper asset purchases. Back home, FIIs data on Friday was mixed. While they purchased a good Rs 982 crs in cash market, they were sellers of Rs 679 crs in index futures and Rs 568 crs in stock futures. On Friday, Nifty gained marginally by 11 points to close at 6504.20. Market bounced back last hour. Nifty recovered by 72 from the intra-day low of 6432. Traders covered short position on account of long holiday. Moreover WPI data for the month of February came in at 10- month low at 4.68%. However global markets witnessed sharp decline due to weak Chinese data and persisting tension between Ukraine and Russia. Capital Goods, Realty and Auto stocks recovered smartly. However Banking and Tech stocks were laggards. Indian Oil declined by 3% to close at Rs269. Government concluded sale of 10% stake in Indian Oil. ONGC, Oil India to buy 5% stake each offline at 220 rupees a share. Tech Mahindra gained marginally to close at Rs1785. RBI has allowed Tech Mahindra to increase the FII limit up to 48% from 45%. Capital Goods stocks witnessed smart rally on account of strong order book. L&T has gained 3% to close at Rs1255. Siemens, Voltas and BHEL gained 3% each. The Nifty has made a Spinning Top formation on the weekly chart closing at 6504 against the opening of the week of 6491. However, it has closed mildly weak in respect of the previous week. The Nifty is in the 6350 to 6650 band with major support at the gap around 6400 and the 50 and 100 days SMAs at 6200. For the day resistance lies at 6560 and 6600 and support exists at 6432 and 6400.
WPI INFLATION
Headline declines, core inches up
WPI inflation in February 2014 eased to ~4.7% YoY (Edel estimate: 4.8%) from 5.0% in January, led by continued decline in food inflation, especially vegetables. With this, the spike in vegetables seen since July last year is largely reversed. However, recent weather disruptions seen in several parts of India could lead to renewed upward trend in some food items. Meanwhile, core inflation has gradually inched higher in the last few months, perhaps reflecting impact of large currency depreciation, continued fuel price hikes and low base effect. This may continue for next two-three months, before reversing. Going ahead, therefore, we expect headline WPI to inch higher (possibly by 50-100bps) in next three months, depending on the extent of crop damage amidst disruptive weather conditions.
WPI inflation marginally lower than expected
WPI inflation for February fell to ~4.7% YoY from ~5% in January. The lower inflation print was predominantly led by decline in food inflation, especially vegetables. Similar trend was observed in CPI data too. Among broad components, while agri and fuel inflation eased, core inflation inched marginally higher.
Food spike largely reversed
The primary articles inflation has fallen very sharply in recent months, from ~15% YoY levels in November 2013 to ~6.3% in February. The dip was predominantly due to the crash in vegetables prices from unusually high levels. Some other categories such as egg, meat and fish have also eased in recent months (although in this category the level of inflation still remains elevated). Broadly, what one could say is that the food spike led by vegetables that started in July/August 2013 has largely reversed.
Going ahead, it is possible that inflation in some food items could start to rise once again. This is because, weather conditions have been poor in recent weeks in several parts of India including Maharashtra and Madhya Pradesh. These regions have seen unseasonal and untimely rains, which have raised concerns about potential damage to the Rabi crop. While it is still early to assess the extent of damage, initial indications are
that there would be some impact on horticulture crops especially fruits, wheat and few oilseeds. Further, if unfavourable weather continues, it could impact vegetable crops too, especially potato and onions.
DATA ALERT
GERMANY ZEW INDICATOR OF ECON SENTIMENT for Mar. 1530 IST
EU FOREIGN TRADE for Jan. 1530 IST
US ICSC-GOLDMAN SACHS CHAIN STORE SALES INDEX. 1715 IST
US REAL EARNINGS for Feb. 1800 IST
US CPI for Feb. 1800 IST
US NEW RESIDENTIAL CONSTRUCTION for Feb. 1800 IST
US JOHNSON REDBOOK RETAIL SALES INDEX. 1825 IST.
RBI COUNTER
DAILY LAF TENDERS: One set of 1-day reverse repo (at 7.00%) and 1-day repo (at 8.00%). Bids for repo tender may be submitted between 0930 IST and 1030 IST, and reverse repo between 1900 IST and 1930 IST.
BOND BUYBACK: Government to buy back up to 150 bln rupees worth of 6.07%,
2014 bond, 10.00%, 2014 bond, 7.32%, 2014 bond, 10.50%, 2014 bond, 7.56%,
2014 bond, 11.83%, 2014 bond, and 10.47%, 2015 bond.
MARKETS
Call : Seen opening firm above the RBI's repo rate as banks may borrow funds
to meet advance tax outflow. 1-day call: 8.50% vs 8.95% 3-day Sat.
Bonds : Seen tracking global cues. Trade may be subdued ahead of financial
year end. 10-yr yld: 8.77-8.83% vs 8.74% Fri.
Rupee : Global cues, local share indices to impact opening.
Range: 60.80-61.55/$1 Tue vs 61.19/$1 Fri.
Stocks: Seen up on positive cues from overseas markets
Nifty range 6450-6560; Friday-end 6504.20, up 11.10 points.
WEEK AHEAD
Mar 20: CPI for rural and farm labourers for February, by Labour Bureau.
Mar 20: RBI Governor Rajan to deliver an inaugural address at the CAFRAL event.
0900 IST, Mumbai.
Mar 20: RBI Deputy Governor Chakrabarty to speak at conference organised by
CIBIL. 0940 IST, Mumbai.
Mar 20: RBI Governor Rajan and Deputy Governor Patel to attend meeting with
economists and analysts. 1100 IST, Mumbai.
Mar 21: RBI Deputy Governor Chakrabarty to speak at Conference on inclusion,
growth and governance organised by SKOCH. 0900 IST, Delhi.
Mar 21: RBI Governor Rajan to attend convocation at IGIDR. 1100 IST, Mumbai.
Mar wk 3: Major port traffic in Apr-Feb, by Indian Ports Association.
Mar wk 3: Rail freight traffic for February, by rail ministry.
Mar wk 3: Crude, refinery output for February, from petroleum ministry.
Mar wk 3: GSM mobile subscribers data for February, by COAI.
Mar 26: Cabinet Committee on Investments Additional Secretary Swarup to be
chief guest at 6th Annual India Roads Conference. 1000 IST, New Delhi.
Mar 31: Government finances for Apr-Feb, by CGA.
Mar 31: CPI for industrial workers for February, by Labour Bureau.
Mar 31: Core sector growth for February, by commerce ministry.
Apr 1: Manufacturing PMI for March, by HSBC.
Apr 1: RBI to detail first bi-monthly monetary policy review for
2014-15 (Apr-Mar). 1100 IST, Mumbai.
Apr wk 1: Foreign tourist arrivals in March, by tourism ministry.
Apr wk 1: Power generation for March, by Central Electricity Authority.
Apr 3: Services PMI for March, by HSBC.
Apr wk 2: Automobile sales data for March, by SIAM.
Apr wk 2: FDI equity inflow in February, by RBI.
Apr wk 2: Trade data for March, by commerce and industry ministry.
Apr 7: Lok Sabha election starts with first phase of voting for six seats in
Assam and Tripura.
Apr 9: Second phase of Lok Sabha elections to cover seven parliamentary
constituencies in the north-eastern states of Arunachal Pradesh,
Manipur, Meghalaya, Mizoram, and Nagaland. By-election to one Assembly
constituency in Mizoram also to be held.
Apr 10: Third phase of Lok Sabha elections to cover 92 seats across 10 states
and four union territories. Voting for 70 Assembly seats in Odisha
and by-election in Maharashtra will also be held.
Apr 11: Index of Industrial Production for February, by CSO.
Apr 12: Fourth phase of Lok Sabha polls for five seats in Assam, Sikkim,
Tripura. Voting also for 32 Assembly seats in Sikkim.
Apr 14: CPI for Combined, Rural, and Urban for March, by CSO.
Apr 17: Phase five of Lok Sabha polling. To cover 122 seats across 13 states.
Voting also for 77 Assembly seats in Odisha and by-elections to two
Assembly constituencies in West Bengal.
Apr 24: Phase six of Lok Sabha election. To cover 117 parliamentary
constituencies in 11 states and one Union Territory. By-election for
one assembly seats each in Madhya Pradesh and Tamil Nadu.
Apr 30: Phase seven of Lok Sabha polls for 89 seats across seven states and two
Union Territories. Also polling for 119 assembly seats in Andhra
Pradesh and by-elections for seven assembly seats in Gujarat, two in
Uttar Pradesh and one each in Bihar and West Bengal.
May 7: Phase eight of Lok Sabha polls. To cover 64 seats in seven states.
Also, polling for 175 Assembly seats in Andhra Pradesh, two in Uttar
Pradesh, and one each in Bihar and West Bengal.
May 12: Phase nine of Lok Sabha polls. To cover 41 seats across three states.
Also, by-election for two Assembly seats in West Bengal.
May 16: Vote-count for the Lok Sabha, Assembly elections as well as by-poll.
May 30: GDP estimate for Jan-Mar and 2013-14, by CSO.
Jun 30: Balance of payments for Jan-Mar, 2012-13, by RBI.
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