Markets consolidate
The week gone by saw the Nifty continuing to trade in a narrow range between the 5041-5190 levels. W-o-W, the Nifty gained 0.14%.
Market breadth was positive in three out of the five trading sessions of the week, implying a positive bias.
Key events
Global Markets
Merchandise Trade balance for Japanese goods fell short of expectations by roughly 363 billion Yen with imports exceeding exports by 907.3 billion Yen. The economy has been steadily oscillating towards trade deficits since December 2010. A negative balance may lead to future currency depreciation as the net flow of goods entering the economy requires that Yen is sold and converted to purchase goods.
Japan's all industry activity grew slightly as expected in April after declining for three straight months, data from the Ministry of Economy, Trade and Industry revealed Wednesday. The all industry activity index rose 0.1 percent month-on-month in April, following a 0.3 percent fall a month ago.
Annual German PPI increased 2.1% in May, following a 2.4% rise the previous month, according to data released on Wednesday by Destatis. Analysts expected 2.3% growth. On a monthly basis German PPI decreased 0.3% in May, in comparison with the 0.2% rise in April and slightly below forecasts of a 0.2% decrease.
German investor confidence plummeted in June, sustaining its steepest fall in nearly 14 years, amid increased concerns over the health of Spain's banking system. The ZEW think tank's economic expectations index plunged 27.7 points to minus 16.9 points, "the steepest fall since October 1998". The escalation of the situation in the Spanish banking sector contributed to the sharp drop in the indicator.
The Bank of England is close to launching a new round of monetary stimulus because of the worsening euro zone crisis, according minutes of its last policy meeting, which showed officials split 5-4 on the move, with Governor Mervyn King in favour. The minutes show far stronger explicit support for more asset-buying quantitative easing than many economists had expected, and is the first 5-4 split on the MPC since June 2007. The minutes of the June meeting show that governor Sir Mervyn King, David Miles and Adam Posen voted for a ?50bn boost to QE, which aims to help the economy by stimulating lending.Paul Fischer favoured a 25bn pound rise.
U.K. unemployment claims unexpectedly rose in May, suggesting the labor market may be starting to succumb to Europes intensifying debt crisis. Jobless-benefit claims climbed 8,100 from April to 1.6 million. The unemployment rate as measured by International Labour Organization methods was unchanged at 8.2 percent in the three months though April.
The UK rate of inflation fell last month to a two-and-a-half year low owing to slowing fuel and food prices. The Consumer Prices Index (CPI) measure fell to 2.8% in May from 3% in April. The Retail Prices Index (RPI) measure fell to 3.1% from 3.5% in April. Inflation has fallen from 5.2% last September due to the waning impact of the VAT rise in 2011 and falling energy, food and commodity prices.
After Australia showed impressive fundamentals in recent weeks, The Reserve Bank of Australia (RBA), has just released its minutes for the June 5th meeting that saw a 25bps rate cut to current 3.50%. As a reminder, the report comes only a month after the Central Bank lowered rates by 50bps.
The Federal Reserve will expand its Operation Twist program to extend the maturities of assets on its balance sheet and said it stands ready to take further action to put unemployed Americans back to work. The central bank will prolong the program through the end of the year, selling $267 billion of shorter-term securities and buying the same amount of longer-term debt in a bid to reduce borrowing costs and spur the economy.
The International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index for the week ended Saturday was flat with the week before on a seasonally adjusted, comparable-store basis, reflecting a mixture of influences. ICSC expects June industry sales will increase about 2%. On a year-on-year basis, the reading rose 3.6%.
In May, US home builders filed for building permits at the fastest pace since September 2008. Permits came in at a seasonally adjusted annual rate of 780,000.
National chain store sales edged up 0.5% in the first three weeks of June from May, according to Redbook Research's latest indicator, released Tuesday. The index's rise compared with a targeted 0.9% gain. Redbook said business recovered, but not as much as expected, as Father's Day promotions helped to drive store traffic.
Sales of men's apparel, tools and other typical gift categories were brisk, while warmer weather across much of the country contributed to improved sales of seasonal merchandise such as swimwear, fans, air conditioners and patio furniture.
Homebuilder confidence in the U.S. has seen a modest improvement in the month of June, according to a report released by the National Association of Home Builders on Monday, although the increase came after a downward revision to the reading for May. The report showed that the NAHB/Wells Fargo Housing Market Index crept up to 29 in June from a downwardly revised 28 in May.
Indian Markets
The Reserve Bank of India on Monday kept interest rates unchanged giving priority to checking inflation over growth, disappointing India Inc and retail borrowers who were expecting at least 0.25 percent rate cut. RBI also rejected the widespread demand for reduction in Cash Reserve Ratio (CRR) to pump in more money into the banking system. Unveiling the mid-quarter monetary policy review, RBI said, "reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressure".
Advance tax collection from top 100 companies grew to Rs 33,089 crore for April-June period, a rise of mere 5% against the annual targeted growth rate of 15%.
Fitch Ratings has revised India's outlook to negative from stable on account of limited progress on fiscal consolidation and heightened risks to growth due to tardy pace of structural reforms.
India may not be called upon to inject $10 billion (Rs 55,000 crore) it has committed to the IMF for bailing out debt-wrecked Euro zone if the global economic situation improves.
Indias export growth was below the world average in January-March, but imports rose faster than the increase seen globally. The World Trade Organisation (WTO) has estimated that the countrys exports rose by 2.1 per cent to $78.64 billion in the first quarter of 2012. In contrast the countrys imports shot up at a faster pace of 21.8 per cent to $122.47 billion during the period, according to the global trade bodys `Quarterly World Trade Estimates.
Global rating agency Standard & Poors today warned that 56 Indian companies, which have to pay back $5 billion worth of foreign debt this calendar year, could see their interest burden going up by $700 million if they choose to reschedule these obligations. In a report titled `Pile-up of Indian foreign currency convertible bond maturities will test issuers and investors, S&P said the likely additional interest payout of $700 million arises from the steep fall in their stock valuations since the time of debt issuance and the fall in rupee.
Key Sectoral Movement
All the sectoral indices ended in the positive except IT, Metals and Bankex, which fell by 1.8%, 0.5% and 0.2% respectively. The top gainers were Capital Goods, Healthcare, Power and Auto, which rose by 2.2%, 2%, 1.6% and 1.4% respectively.
Outlook
While the Nifty has remained within a narrow range this week, the underlying bias remains positive. A breakout would be confirmed once the Nifty moves out of the 5190 levels. Weakness could emerge once the 5090 levels are broken.