On the onset let me wish you a very Happy Ganpati Festival. May the Lord fulfill all your cherished dreams. Coming to the Markets, Markets saw a very volatile week, finally settling up around 3%. Majority of this upward movement may be attributed to 3-4 factors which are discussed in details below.
1. IIP : The IIP figures were out this week and were a surprise for the street. IIP grew by 4.2% against an expectation of 3.8%. The increase in the industrial production activity augurs well for the markets and the economy as a whole.
2. CPI & WPI : The CPI & WPI numbers were also out and the continue to be under RBI's comfort level. In fact we are no more an inflationary economy and have become a deflationary economy. The reduction in CPI & WPI make a case for the RBI to reduce interest rates and give a boost to the industry.
3. FOMC : FOMC decided to hold the increase in rates for the time being but continued to say that it will increase the rates by 40 basis points up to the calendar year end.
Commentry on the events:
IIP figures show a robust growth potential in the Indian Industry even at very high interest rates. CPI & WPI falling makes the RBI Governor's job even easier as far as cutting rates is concerned as the target of keeping inflation under 5% is achieved and shows no signs of rising in the near future. RBI had increased the rates when FOMC had decreased their rates and introduced the QEs. Now the tide is turning and RBI is likely to reduce the rates in the coming policy meet on 29th September.
The increase in interest rate in the US will most probably pull some money out of the emerging markets, mostly from the debt market. Though Equity markets will also see some pressure as and when it happens, the impact is likely to be marginal.
What should we do:
Fundamentally there is nothing wrong with our markets. The approach should be buy on dips. Accumulation of stocks is the way to go. We like to accumulate the ABC of the market
A: Automobiles
B: Select private Banking
C: Cement
Many a stocks from the ABC have been hammered out of shape during the last few months. They are attractively priced and should give decent returns in days to come.
Move in the next week:
Nifty is unlikely to break 8200 in a hurry. We may witness range bound action for some more time. However if Nifty manages to sustain above 8250 we should see 8600+ levels. In the meanwhile keep accumulating good quality stocks.
Happy Investing!!!!!!!
