Goldman Sachs, NIFTY retreats 1.6% wow ahead of the EU summit and the RBI’s monetary policy meet

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NIFTY retreats 1.6% wow ahead of the EU summit and the RBI’s monetary policy meet
 CNX Pharma (+0.7%) and CNX Banks (+0.4%) outperformed broader indices wow.
 Ytd foreign outflows of US$ 273 mn and domestic inflows of US$ 5.3 bn as of close of Oct 19, 2011.
 Our India economists expect the RBI to hike by 25bp on Oct 25, due to recent hawkish commentary from the central bank.
 2QFY12 earnings season so far has seen 42% of CNX500 cos. reporting below expectations; tech has reported stronger results.
Overview
NIFTY fell 1.6% this week amid uncertainty around
EU leaders reaching a comprehensive solution to
the European crisis at this weekend’s summit.
Another key catalyst for markets next week is the
RBI’s monetary policy meeting. Consensus
expects a 25bp hike as does our India economics
team. 2QFY12 reporting in India has been mixed
so far with 42% of CNX500 cos. reporting earnings
below expectations. Software services firms
posted stronger results compared to industrials
and materials.
NIFTY price performance
Source: NSE, DataStream, GS Global ECS Research.
Foreign and domestic flows
Foreign investors bought US$ 153mn wow (as of
Oct 19, 2011).
Earnings sentiment
MSCI India Info. Tech. saw the strongest EPS
sentiment again (17% wow). MSCI India is trading
at 12.9x forward earnings, at a premium of 28% to
MXAPJ.
Commodities
MCX Commodity Index ended flat wow. Copper
(-4.1%) underperformed wow.
Focus
Twin Tower deficits
2QFY12 earnings results
Dr. Reddy’s (Oct 25); Wipro, ICICI Bank(Oct 31)