January saw some cautious trading, particularly from the FII’s, who decided to hedge some of their positions by selling into index futures as well as some selling in cash, which was more pronounced towards the end-Jan. Tech results were greeted with a muted response and some profit-taking was visible at higher levels.
The current month has begun on an ominous note and global sell off in equities has taken its toll on the Indian markets as well. Even as we move into the first week of this month, the Nifty has slipped below 6000, indicating nervous market sentiments. However, irrespective of the direction of the market, we feel any sharp corrections should be used to add into quality stocks. Thus, keeping this in mind, we have introduced SIP baskets and expect whole-hearted participation from investors at large.
The macro picture
The major event of January was the surprise rate increase by the RBI by 25 bps to 8%. In the background of softening inflation, this came as a surprise for market participants, and the banks and interest sensitives did see some selling pressure emerging. However, in hindsight, some nervous global sentiments resulting in dollar strengthening might have triggered the rate increase.
As already indicated earlier, the US Fed kept its word and decided to go ahead with tapering in bond purchases, which was reduced by $10 bn to $ 65 bn monthly. This impacted the global markets, which saw sharp profit-taking that brought the markets down.
The European nations continue to show a mixed picture and indications are that the recovery would be slow. However, the development in China is more worrying where the factory growth touched a 6-month low in Jan owing to weak local and foreign demand. This had an impact on metal stocks, which saw sharp sell-offs in the beginning of Feb.
However, the outlook for the US economy as a whole has brightened after the government stated that growth reached 3.2% annual rate last quarter on the strength of the strongest consumer spending in three years.
Overall, 2014 promises to be better than 2013, as there are some green shoots visible. One could look forward to a lucrative scenario for investing with optimism. Investors would do well to focus on quality stocks and buy them at dips.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.