Weekly Market Wrap :: HDFC Securities

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Outlook for Week Ahead January 24, 2015
Trend in global markets, Q3 results of India Inc., outcome of Federal Reserve's meeting, elections in
Greece, investment by foreign portfolio investors (FPIs), the movement of rupee against the dollar,
and crude oil price movement will dictate trend on the bourses in a truncated trading week. The
market may remain volatile next week as traders roll over positions in the futures & options (F&O)
segment from the near month January 2015 series to February 2015 series. The near month January
2015 derivatives contract expire on Thursday, 29 January 2015.
The stock markets remain closed on Monday, 26 January 2015, on account of Republic Day. The US
President Obama will be the chief guest for the main Republic Day celebrations— the first by any
American president. Obama will arrive in India on 25 January 2015, on a three-day visit to the
country. During his visit, investors will keenly watch for issue of any joint statements or inking of any
major deals between the two countries.
Quarterly results of prominent companies scheduled for next week include Maruti Suzuki, Sesa
Sterlite, HDFC, Dr Reddy's Laboratories, Asian Paints, IDFC, HCL Technologies, Tech Mahindra, NTPC,
Bank of Baroda, ICICI Bank and Grasim Industries.
With the Nifty continuing to surge higher, the underlying trend remains firmly up. Nifty could rise
towards 8950-9000 before correcting.
The Week Gone By January 24, 2015
A surprise rate cut by the RBI last week provided a big boost for the stock markets and sent the key
indices soaring to nearly one-and-a-half months high on the back of robust gains in realty, banking
and auto segments. The benchmark S&P BSE Sensex vaulted by over 663 points to end at 1-1/2-
month high of 28,122. Similarly, the wide-based CNX Nifty of the NSE crossed 8,500-mark for the
first time after a month and ended at 8,514, a gain of 229 points, or 2.8%. The BSE Mid-Cap index
rose 207 points or 2% to settle at 10,633. The BSE Small-Cap index advanced 112 points or 1% to
settle at 11,310. Both these indices underperformed the Sensex.
Key Highlights during the week:
 India Money supply (M3) rose by Rs.965.9 billion to Rs.103.46 trillion during the fortnight ended
9 January 2015. This was the fifth consecutive fortnight of an increase in money supply. On a y-oy
basis, growth in money supply accelerated to 11.5 per cent from 11 per cent a fortnight ago.
 The direct tax collection during the first nine months of the current fiscal increased by 12.93% to
Rs 5.46 lakh crore over the same period a year ago. The growth rate of direct tax collections,
however, is still short of annual target of 16%. During the April- December period of last fiscal,
the government had collected Rs 4.84 lakh crore.
 The International Monetary Fund (IMF) has slightly cut projections for India's economic growth
to 6.3% for 2015-16 against 6.4% made in October last year, while retaining the forecast for the
current financial year at 5.6%. In its World Economic Outlook Update, IMF pegged the country's
growth rate at 6.5% for 2016-17.
 India's foreign exchange reserves touched a record $322 billion, surpassing the previous high of
almost $321 billion in September 2011 on the back of Reserve Bank of India's conscious efforts
to build a war chest. Latest data released on Friday showed an accretion of $2.7 billion during
the week ended January 16, essentially due to a rise in foreign currency assets.
US Markets
A tumble of blue-chip stock shares on Friday failed to erase another week of gains for Wall Street. US
stocks managed to claw back most of the losses from the beginning of 2015 buoyed by a larger-thanexpected
stimulus from the European Central Bank, generally higher corporate earnings and a burst
of buying in big tech firms. For the week, the Dow is up 1.3%, the S&P 500 is up 1.8% and the Nasdaq
is up 2.6%. All three are coming off three straight negative weeks.

Key Highlights during the week:

 The number of Americans filing new claims for unemployment benefits fell last week from a

seven-month high, pointing to continued improvement in labor market conditions. Initial claims

for state unemployment benefits slipped 10,000 to a seasonally adjusted 307,000 for the week

ended Jan. 17.

 Continuing jobless claims in the week ended January 10 rose to 2.443 million from 2.428 million

in the preceding week. Analysts had expected continuing claims to decline to 2.410 million.

 U.S. house prices rose in November, up 0.8 percent on a seasonally adjusted basis from the

previous month, according to the Federal Housing Finance Agency (FHFA) monthly House Price

Index (HPI). The previously reported 0.6 percent change in October was revised downward to a

0.4 percent change.

 U.S. commercial crude inventories increased by a whopping 10.1 million barrels last week,

maintaining a total U.S. commercial crude inventory of 397.9 million barrels, the second

consecutive week at higher totals than at any time in at least 80 years.

 Applications for U.S. home mortgages rose last week as mortgage rates continued to slide,

bringing activity to a 17-month high for a second straight week. The Mortgage Bankers

Association said its seasonally adjusted index of mortgage application activity, which includes

both refinancing and home purchase demand, rose 14.2 percent in the week ended Jan. 16.

 The number of building permits issues in the U.S. fell unexpectedly in December, while housing

starts topped forecasts. In a report, the U.S. Commerce Department said that the number of

building permits issued last month decreased by 1.9% to a seasonally adjusted 1.032 million

units from November’s total of 1.052 million.

 The Johnson Redbook Sales Index also showed seasonally adjusted sales for the period improved

3.4% from a year earlier, compared with a target for an increase of 3.6%. In the second week of

January, sales rose 3% year-to-year. Redbook said January typically is a transitional month, with

business driven by price markdowns as merchants discount goods in order to clear holiday

inventories.

 The National Association of Home Builders/Wells Fargo housing market index declined

unexpectedly in January. In a report, NAHB said that its Housing Market Index decreased to 57.0

this month from 58.0 in December. Analysts expected the index to hold steady at 58.0 in

January.

 The flash reading of the Markit manufacturing purchasing managers index (US) edged lower in

January to a 53.7 from 53.9 in December, to mark the lowest reading in 12 months. While the

rate of output growth moved up slightly, new business growth fell to a one-year low.

 U.S. home resales rebounded in December, but continued low participation by first-time buyers

in the market suggested the housing recovery would remain gradual for now. The National

Association of Realtors said on Friday existing home sales increased 2.4 percent to an annual rate

of 5.04 million units last month.

Week Ahead

The week ahead also brings a new policy meeting of the Federal Reserve. The meeting will likely spur

more speculation on when it will hike interest rates. But Fed watchers do not expect any more

precision to repeated signals of a possible rate increase around mid-year. Next week also marks one

of the busiest weeks for fourth-quarter U.S. earnings, with 141 S&P 500 companies slated to report.

Among them are several top technology names including Apple and Microsoft. With fourth-quarter

earnings projected to grow 10.6 percent, tech is expected to be a bright spot in an earnings season

that has been lackluster thus far.

Other Markets

Hong Kong jumped 3.1% this week as investors followed a global rally in response to the European

Central Banks bigger-than-expected stimulus program aimed at kickstarting the eurozone economy.

The Nikkei stock index added 1.1% on Friday to end the week at a three-week closing high, as the

market rallied following the European Central Bank (ECB) announcing it would unleash a biggerthan-expected

stimulus program to help underpin the eurozone's economy and combat deflation.

The Shanghai Composite Index posted a 0.7% weekly decline, its first such slide in 11 weeks. A

preliminary gauge of China’s factory activity for January suggested stimulus measures have helped

stabilize the economy.

Key Highlights during the week:

 Brazil recorded its widest current account deficit ever in 2014 as it posted a trade deficit due to a

sharp fall in the price of key exports and a sluggish global economy. The country posted a current

account deficit of $10.317 billion in December, above market expectations for a $9.7 billion

deficit.

 China's economic growth slowed to 7.4 per cent in 2014, the weakest expansion in nearly a

quarter century, and is forecast to slip further over the next two years, adding to headwinds for

the global economy.

 Japanese consumer inflation will slow further due to slumping oil prices, with the hit on

household spending from a sales tax hike last April also acting as a drag. The BOJ refrained from

expanding stimulus on Wednesday even as it cut its inflation forecast to 1.0 percent for the year

beginning in April, well below its 2 percent target.

 The unemployment rate in Hong Kong remained unchanged last month. In a report, Census and

statistics department said that Hong Kong Unemployment Rate remained unchanged at a

seasonally adjusted 3.3%, from 3.3% in the preceding month.

 European Central Bank (ECB) President Mario Draghi announced the launch of an open-ended,

expanded monthly 60 billion euro ($70 billion) private and public bond-buying program. The

long-anticipated introduction of euro zone government bond purchases, which could amount to

as much as a trillion euros, will mean the ECB will join the U.S. Federal Reserve, Bank of England

and Bank of Japan in launching a quantitative easing (QE) scheme. The program will be openended,

lasting until at least 2016.

 Investors worldwide poured $3.3 billion into funds that invest in stocks of companies throughout

Europe ahead of the European Central Bank's announcement of a landmark bond-buying

scheme, data from EPFR Global showed on Friday. The inflows in the week ended Jan. 21, while

marking the third straight week of new demand for the funds, were the biggest since early

January 2014, according to data from the Boston-based fund-tracker. Investors pulled $4.9

billion out of stock funds overall in the week ended Jan. 21, marking the third straight week of

outflows since the start of the year, according to data from EPFR Global and Bank of America

Merrill Lynch. Bond funds attracted $5.6 billion, marking their third straight week of inflows in

the new year, the data showed.

Commodities:

International crude oil prices (WTI) fell by 6.37% for the week ended 23rd January 2015 to close at

USD 45.59 per barrel. Oil prices fell by almost 50% last year and extended the drop into 2015 as

OPEC reached a collective decision on November 27th in Vienna not to reduce its production quota,

resisting calls from smaller members to do so in a push to curb US shale production that boosted the

nation’s crude output to the highest in more than three decades. Oil fell to the lowest in almost six

years on speculation the death of King Abdullah of Saudi Arabia won’t signal any change in strategy

for the world’s largest crude exporter.

International gold prices rose by 1.23% for the week ended 23rd January 2015 to close at USD

1292.60 per troy ounce. Gold prices rose in five months as investors anticipated weaker currencies

on the back of the European Central Bank’s bigger-than-expected bond-buying program.

Base metals prices ended positive for the week ended 23rd January 2015. Some of the base metals

rose like Lead, Zinc, Aluminium, Lead, Tin and Nickel which rose by 3.62%, 2.15%, 1.49%, 0.91% and

0.17% respectively. Base metals after China reported its economy had not slowed as much as many

had feared, and as investors began to reassess whether this year's steep losses were justified. China

reported growth of 7.3 percent for 2014, just pipping forecasts of 7.2 percent growth. Its retail sales

and industrial production numbers also both ran ahead of predictions in December.

The Baltic dry index (BDI), which is a global index tracking the movement of cargo by the sea route

fell by 2.83% for the week ended 23rd January 2015 to close at 720. BDI is a number issued daily by

the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides "an

assessment of the price of moving the major raw materials by sea”. Taking in 23 shipping routes

measured on a time charter basis, the index covers Handysize, Supramax, Panamax, and Capesize

dry bulk carriers carrying a range of commodities including coal, iron ore and grain.

Currencies:

The USD appreciated against the Euro by 3.18% for week ended 23rd January 2015. The euro fell to

fresh 11-year lows against the dollar on Friday following the European Central Bank's announcement

on Thursday that it would pump a trillion euros into the euro zone economy to revive sagging

growth and ward off deflation. The euro also hit a 16-month trough against the yen. The euro was

down since the start of the year and on track for its biggest monthly fall since the depths of the

financial crisis in early 2009.

http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010915