Receding inflationary pressure boosted investor confidence - Eastern Financiers

Receding inflationary pressure boosted investor confidence as they bought equities on hopes of a status-quo policy announcement from RBI later this month, taking indices higher for the week. Nifty ended the week at 6261.65, up 90.20 points or 1.46 percent and Sensex climbed 305.13 points or 1.47 percent to conclude trade at 21063.62. Sectoral indices were mixed in nature with more gainers than losers. Along-with lower than expected inflation reading, corporate earnings flow has also not disappointed the investors with IT-majors reporting good set of numbers along with improved guidance for FY15. Apart from a few misses, most of the corporates that reported their results have shown decent performance in Q3FY14. Foreign flows also improved from last week as overseas investors remained net buyers of Rs.1420.81 Cr in Indian markets.

The twin inflation data at the wholesale and the retail level instilled confidence amongst investors that the price levels have finally started to come down and the central Bank would most likely hold key policy rates when it comes out with its monetary policy announcement on January-28. The Wholesale inflation declined to a five-month low of 6.16 percent in the month of December 2013 , slower than November's 7.52% increase, on account of decline in food prices. The softer December reading mirrors a similar easing in consumer inflation, which slipped to a three-month low of 9.87% during the month from an all-time high of 11.16% in November. Food prices rose 13.68 per cent year-on-year last month, much slower than an annual rise of 19.93 per cent in November. The index for the Rs. primary articles' group, which has a weight of 20.12 per cent in the WPI, declined by 5.0 per cent. The Central Statistical Office (CSO) also revised the final WPI index for October to 7.27 per cent from 7.0 per cent reported earlier based on the final WPI rates.

The World Bank lowered India's growth forecast for FY15 to 6.2 percent from its earlier estimate of 6.5 percent, even as it revised upwards its global GDP growth forecast to 3.2 percent from 2.4 percent. It, however, said that India's economy will grow 7.1% by 2016-17 as global demand recovers and domestic investment increases.

Mean-while, Finance Minister, Mr. P. Chidambaram, said that India's fiscal deficit will be contained at 4.8% of the GDP in the current fiscal year ending March, hinting at possible cuts in government spending. Supporting his observations, Global ratings agency Fitch issued statements that the government is maintaining fiscal discipline before the general elections, which is supporting the country's credit ratings. It also added that the next Government's policies would be important to determine the country's future sovereign ratings and should the good work on fiscal prudence continue there are possibilities of India's rating improving from the current "BBB-minus" with a "stable" outlook.

Source : Equity Bulls

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