Watch out for global liquidity, quarterly results

The Indian equity markets ended on a happy note on the second day of 2015 as broader index-Bombay Stock Exchange (BSE) Sensex-moved up 380 points, or 1.38%, on Friday to close at 27,888. The index made a weekly gain of 2.45 per cent over last Friday's close of 27,242. The Nifty closed week at 8,395, up from 8,200 a week ago.

During the first four trading sessions of the week, markets were largely range bound with the Sensex and the Nifty moving by less than one percent. The surge on Friday made up for a rather mute previous trading sessions.

The buoyancy on Friday was largely due to the government and public sector banks meet, which raised expectations of reform in the banking space. Besides, HSBC Manufacturing PMI showed that manufacturing activity in the country has finally picked up pace.

Vinod Nair, head, fundamental research, Geojit BNP Paribas Financial Services, said, "Equity markets carried today (Friday) a hope for action from the government and public sector bank meet. It is expected that measures like reforms and consolidation of PSU banks would be taken up in two-day meeting that ends tomorrow."

In the meantime, global markets continue to consolidate with further volatility in crude oil prices, while domestic banks, industrials and midcaps rallied on Friday with improved volumes compared to low volumes seen in the last few trading sessions.

Jayant Manglik, President-retail distribution, Religare Securities, said that the activities were low for past one week in the absence of any major cue and markets were waiting for some trigger.

"The significant improvement in HSBC Manufacturing Purchasing Managers' Index (PMI), which rose to 54.5 in December, highest since end-2012, provided the initial push," says Manglik.

On the stocks' front, the gainers were HDFC and Jindal Steel which ended up around 4.19 per cent and 3.70 per cent whereas the losers were seen BPCL and M&M which ended down around 1.14 per cent and 1.10 per cent, respectively.

Among the group A companies, the top gainers during the week were Gujarat Pipavav Port (+27.47 per cent), Aban Offshore (+ 23.80 per cent), BayerCropscience (+ 20.80 per cent),  Religare Enterprises (+ 18.21 per cent), and Jaiprakash Associates (+ 17.70 per cent). Meanwhile, the top losers were PMC Fincorp (-29.95 per cent); Rasoya Proteins (-28.66 per cent); Kailash Auto Finance (-12.87 per cent), and Torrent Power (-4.55 per cent)

Out of the total number of companies eligible for trading-4,214-on the BSE on January 02, 2015, prices of 1,772 stocks went up, 1,164 declined and prices of 106 remained unchanged during the week.

The foreign institutional investors (FIIs) were net buyers in the capital market segment, as they bought shares worth Rs 18.2 crore on Thursday (01 January 2015). The domestic institutional investors (DIIs) were also net buyers on 1 January 2014, as they bought shares worth Rs 19.56 crore as per the provisional data from the stock exchanges.

Dipen Shah, head of private client, group research, Kotak Securities, said, "Indian markets were one of the best-performing markets globally in 2014 with returns of 30 per cent. Currently, valuations of benchmarks at 15.5x one-year forward consensus earnings (FY16) are near the long term average. The Government's action on getting reforms on track (within or outside the Budget), as well as potential decline in interest rates are the likely triggers for a further re-rating in the medium-to-long term."

Shah believes that sustained low crude prices will be a cushion, though adding a word of caution he says, "We need to watch out for increased competition from imports. In the near term, quarterly numbers and global volatility are likely to drive markets"

According to Vivek Gupta, CMT - Director Research, CapitalVia Global Research, movement of index in near term would depend on further reform initiatives to be taken by the government.

"In near term, Nifty is likely to continue its uptrend as overall breadth of the market was positive having resistance around the levels of 8,540 on the upside while having immediate support around the level of 8,350," Vivek Gupta of CapitalVia said.