Monthly Strategy Report - February 2015 :: HDFC Securities

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Month Gone By  The Benchmark indices ended on a positive note in the month of January 2015. BSE Sensex rose by 6.12% and Nifty closed up by 6.35% for the month. The S&P BSE Sensex surged led by major gains in Realty, Capital goods and Consumer durable stocks. Both Sensex and Nifty managed to hit fresh lifetime highs due to funds being pumped in by the foreign investors. Declining crude oil prices and the unexpected rate cut by the Reserve Bank of India (RBI) before it bimonthly monetary policy meet in February were the major triggers for the market. Key Positives during the month  Inflows of foreign direct investment into India rose by about 25% to $17.35 bn in the April- Oct period of the current fiscal.  The HSBC Emerging Markets Index (EMI) rose to a three month high of 51.7, from November’s six-month low of 51.2.  The Index of Industrial Production (IIP) of India for the month of November was reported at 3.8% versus (-) 4.2% in October. This is way above estimate of 2.7%.  Foreign direct investment inflows to India increased by about 26% to $35 billion in 2014.

 The Reserve Bank of India (RBI) surprised financial markets by announcing a cut in its main lending rate viz. the repo rate by 25 basis points in an unscheduled monetary policy review.  Finance Minister Arun Jaitley stated that India's economic growth is expected to pick up in the current fiscal and will be "much better" in 2015-16.  HSBC India Purchasing Managers' Index (PMI) climbed to a two-year high of 54.5 in December, up from 53.3 in November. Key Negatives during the month  The Consumer Price Index (CPI) inflation in India for the month of December rose to 5%.  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.  Government’s fiscal deficit has exceeded the budget estimate for full financial year in first 9 months (April-December) of the current fiscal. Global markets:  The performance of the sectoral Indices was broadly positive except for Metals & PSU, which were down by 5.2%, and 0.3% respectively. The top three major gainers were Realty, Capital Goods & Consumer Durable which rose by 16.48%, 10.71% and 10.15% respectively.

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