Jul 14, 2014

Market Update- 14/7/2014

Last week was an action packed week for the financial markets with the Union Budget being presented in parliament. The markets started correcting a few days prior to the budget due to profit booking. We continue to see some correction even post the budget. The major indices are down nearly 4% for the week with the Sensex nearing 25,000 and the Nifty nearing 7450. Despite the correction both the indices are up nearly 18% from Jan 1st.

News that one of Portugal's largest banks (Banco Espirito Santo) is under trouble has weighed in on investor risk appetite and globally markets have seen a correction.

The technical indicators (Bollinger and RSI) have moved in to the neutral zone after last week's correction. The market is currently trading below it's short term moving averages (5,10 & 20). Investors should look at the correction as an opportunity to buy in to equities as per their risk-profiles.

Bond prices have come down and yields have moved up on expectations that India will not meet it's fiscal deficit target of 4.1% for the current year. Inflation no's are likely to come down. However, the monsoons are still weak and that could pressure the RBI in to keeping elevated rates. Some long-term debt exposure for the slightly more aggressive debt investor can be looked at.

Crude oil prices have come down on worries that Europe's financial sector is still not out of the woods and that could therefore affect the global economic recovery.

Gold is trading at $1331/oz. This is not much different from last week's prices in spite of worries in Europe. Prices have remained in this range largely because India did not announce any change to rules around gold imports in it's annual budget.

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