Markets which were looking tired and thus corrected quite sharply. They lost 2.47% on the SENSEX and 2.41% on the NIFTY. The momentum took a hit on global cues with world markets reacting as well. The Dow Jones which has also been trading around its lifetime highs took a severe beating and lost 2.75% for the week and in the process turned negative for the year to date so far. The closing value of the Dow Jones was 16,493 points.
July futures expired at 7,721 again of 228 points or 3.04% for the month. While expiry day saw some amount of selling pressure, the bulls were always in command and held sway through the month. August series began on a weak note and saw the markets fall on the very first day of the series.
FII’s have turned sellers last week and sold shares worth Rs 2,750 crs. They were net buyers in the month of July of Rs 9,350 crs and in the first seven months of the calendar year have bought shares worth Rs 71,960 crs. Domestic institutions which had been sellers have turned buyers of equity in the week of Rs 3,700 crs while in the month of July they were buyers of Rs 5,050 crs. In the first seven months they were net sellers of Rs 1,800 crs.
The insurance bill which was talked about in the budget presented to Parliament on the 10th of July has been introduced in the Rajya Sabha. This bill was first introduced in 2008-2009 by the Congress and has been hanging fire since then. How the Congress reacts to this will be interesting considering that elections to state assemblies are to be held in the next few months including Maharashtra which has Mumbai as the financial capital. The Congress sure is in a catch 22 situation and will have to come up with some brilliant strategy to even score brownie points. The final trump card that the NDA government can always play is a joint session of both houses where they have a majority and the bill would sail through.
An interesting duel is being played on the WTO front where the world wants duties to be lowered so that the rich and middle class of India can import hundreds of thousands of products. India has protested and said that both issues of customs duties and food security be discussed and finalised simultaneously. India needs to provide food security to a large population and the cap of 10% of food grain production is just not enough to meet its requirements and would thus cross or violate the WTO norms. By taking a strong stand on this issue we saw a worried US secretary of state making an unscheduled or unplanned visit to India to discuss various issues (primarily WTO). We as Indians should be proud of the stand taken and politicians should rise above petty politics to applaud the stand taken.
RBI meets on Tuesday to review the credit policy. As things stand the consensus is that things would remain unchanged but the slant would be dovish and probably hint towards softening of rates going forward. The monsoon seems to be playing out quite well and July rains have considerably allayed the fears of El-Nino. While the monsoon may remain below normal, the drought like situation feared earlier is certainly not there. This coupled with the fact that core industry growth at 7.3% is the highest in nine months augurs well for IIP numbers when they are released later in the day.
All in all consolidation to continue in the earlier part of the week before the markets resume their upward journey towards the latter half of the week. The process can be accentuated and preponed if Raghuram Rajan the RBI governor so decides.
Use dips to enter the market.