Jul 21, 2013

Market Update 21/7/2013

The markets ended up marginally last week from the previous one (0.3%). Despite RBI' efforts at shoring up the Rupee, the markets seem to have found some support at 5900. These appear good levels to enter the market.

The fall in the Rupee has suddenly made everything in India 20% cheaper for everyone abroad. This analogy also plays out in the equity markets. We are seeing a lot of FII interest in the equity segment of the markets. Large caps, especially index scrips should do well in the interim as these are preferred for FII money.

Going forward, most market participants are already talking about the elections. It is therefore expected that the market will be range-bound at least till the elections are over. The up-side seems to be capped at 6150-6200.

However, macro-economic factors are playing out that will cause some short term pain in the economy. Results of Infosys & TCS have been better than expected. IT as a sector itself should do well because of the fall in Rupee. Reliance has also come out with better than expected numbers. But, data like auto sales, credit growth and IIP suggest that all is not well within the country. The RBI move will increase short-term rates, causing more pain to borrowers and slowing down the economy further.

Debt markets have had an action packed week with the RBI's announcement on Monday. The announcement had caught the markets completely unaware. However, the move looks temporary, and therefore could be an opportunity to play the debt market. Short-term rates are already very attractive at around 9.5-10%. Investors looking at investing in long-term income funds might want to wait till there is a little bit more clarity before committing.

Gold seems to have stabilized both in the international markets and the domestic markets. The support seems to be around 26900 for 10 grams. Investors in gold will have to keep track of both the US Fed's moves and the Rupee rate. Short-term gold looks to be weak.

The Rupee seems to have found resistance at 59 to the dollar. However, the currency markets look highly volatile and are going to be difficult to predict in the short-term. The chances of the Rupee moving up to 50-55 levels appear remote in the present.


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