Nifty ends the week up 208.60 points, Sensex climbs 650.34 points - Eastern Financiers

Aided by renewed optimism over the recent set of reforms announced by the RBI and the Government and a recovery in the Indian rupee, markets staged a recovery as investors continued to buy under-valued equities. Nifty ended the week at 5680.40, up 208.60 points or 3.81 percent and Sensex climbed 650.34 points or 3.49 percent to conclude trade at 19270.06. Sectoral indices remained mixed in nature with more gainers than losers. The INR also ended with moderate gains on a weekly basis. The data points that came in during the week had little to cheer. Both the manufacturing and the services PMI came in below the 50-mark, signaling contraction in both the sectors of the economy. Auto sales also continued to slump echoing poor demand scenario. However, markets took heart from the induction of Ragjhuram Rajan as the new RBI governor as he joined office and announced a few important reforms, boosting investor sentiment. The monsoon session that was extended till the end of this week saw finally some business being transacted and the passing of the Pension bill in the Lok sabha & Rajya Sabha was clearly a positive from the market's point of view as it paves the way to attract longterm FDI in the sector.

On the macro front, the week started on a pessimistic note as the manufacturing PMI for the month of August painted a sorry state of affairs in the manufacturing sector of the economy. Indian factory activity shrank for the first time in more than four years last month, adding to the country's deepening economic malaise even as the central bank struggles to defend the battered rupee. The HSBC Manufacturing PMI, compiled by Markit, sank to 48.5 in August from 50.1 in July. The survey also showed that new export orders shrank for the first time in a year.

Also, following suit, Indian services activity shrank in August at its quickest pace since the depths of the global financial crisis as new business dried up. The HSBC Services Purchasing Managers' Index (PMI) compiled by Markit, slipped to 47.6 in August, the weakest since April 2009, from 47.9 in July. The new business sub-index fell to 46.6 in August from 47.8 in July, the lowest in over four years and the second month running demand has declined. This resulted in the decline of the composite PMI, which takes into account manufacturing and services, to 47.6 points in August from 48.4 points in the previous month.

Following the weak PMI numbers and the sluggish GDP numbers announced previously, all the major foreign brokerages cut their FY14 growth forecasts and ratings agency S& P issued a statement saying that chances of downgrade for India remained higher than most emerging market peers, including Indonesia. However, the government termed S&P's statement as "crystal gazing" and asserted that there was no prospect of downgrade for the economy.

Source : Equity Bulls

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