April started with low expectation. However, expectation increased when RBI took a bolder step by cutting repo rate by 50bps. But it failed to maintain the momentum and overall market activity remained muted during the month. Participants remained nervous and uncertain about the government’s move on retrospective tax – GAAR - and policy implementation. With this Indian benchmark indices - Nifty and Sensex - lost 0.90% and 0.49% respectively during the month. Going forward, we believe the course of the monsoon and government’s efforts to regain investors confidence will be the key determinants to sentiments.
Global uncertainty remained high throughout the month. Concerns regarding US slowdown and double dip recession in the UK dragged the markets. Spain and Portugal were in news as rising borrowing cost necessitate next bail out fund for the debt-ridden Euro zone countries. Among the European markets, CAC 40 slipped 4.60% followed by DAX 2.90%. While US market did better than the European market as optimism gained after Fed’s Chairman Mr. Bernanke said he is ready to do more to stimulate the economy if needed. US markets gained; Dow closing with modest gain of 0.12% during the month.
In Emerging markets, China and Japan were in focus due to slowing growth. The annual rate of China's GDP expansion eased to 8.1% in the first quarter, growing at the weakest pace in nearly three years, compared to 8.9% recorded in the previous quarter and below the forecast of 8.3%. Although China’s GDP shrank, it remained top performing market gaining 5.90% during the month. While, Japan’s Nikkei 225 was the biggest loser declining 5.58% this month.
In India, earnings season started with mixed response. Indian IT major, Infosys and Wipro, disappointed the street. While, TCS and HCL Tech’s results brought cheers to disappointed faces. Among the banking stocks, ICICI, BOI, Axis and others reported good numbers. However, assets quality remained a challenge for them. Index heavyweight RIL’s result met market expectations. It’s gas volume from KG-D6 block declined as expected but improvement in GRM was a positive sign. Results from sectors like Cement and Metals met the market expectations but were unable to surprise street on the positive side. Going ahead, we expect Auto, Pharma and FMCG to report healthy numbers.
Further, RBI’s move to reduce repo rate by 50bps surprised the market. The rate sensitives did well after the announcement but fail to gain further. We believe it is clear post RBI’s announcement that interest rate will not rise further but aggressive rate cut is also hard to come by. So, it is difficult to bet on rate sensitives but one can take the view that it is going to come down over the period.
As expected, trading activity remained sluggish during the month of April 2012. FIIs turned net sellers of Indian Equities first time in this CY12. They sold `2074.94Cr of Indian equities. DIIs followed suit and they too remained net sellers to the extent of `675.90Cr of equities.
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