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Benchmark indices rebounded this week to end three per cent higher, as progress of the Greek bailout deal bolstered sentiment for riskier assets and the positive impact for India after the historic Iran nuclear deal.
For the week ended July 17, the BSE Sensex ended up 802 points to end at 28,463 and the 50-share NSE’s Nifty ended up 249 points to end at 8,610. Interestingly, the broader markets outperformed the benchmarks with the BSE Mid-cap Index rising 3.2 per cent to record a fresh life-time high of 11,252 during the week.
"The ongoing developments on the Greece bailout process and signing of the historic Iran nuclear deal have boosted market sentiment. India will benefit from lower crude oil prices, as Iran will now export more, while lower import bill will also reduce the current account deficit,” said Alex Mathew, head of research at Geojit BNP Paribas Financial Services.
Foreign institutional investors (FIIs) have been the forerunners of this rally, with net equity purchases to the tune of about Rs 5,500 crore after being net sellers in the previous two months.
The historic Iran nuclear deal will hugely benefit an oil importing nation like India with resumption of crude oil imports as Iran begins to pump more oil. Most importantly, lower crude oil prices will not only lower India's current account deficit but forex reserves could get a boost if Iran accepts higher portion of the payments in Indian rupees. According to Economic Survey (2015) estimate, a $1 per barrel drop in international crude oil prices is likely to reduce India’s net import bill by $0.9 billion a year.
Financials which had rallied in the earlier part of the week on rate cut hopes fizzled out amid uncertainty whether the new composite investment caps for foreign entities would include the bankking sector. Information technology shares were the top gainers post the upbeat results from TCS while pharma stocks provided the booster dose and autos zipped past in top gear.
Cement major ACC registered 45% drop in its consolidated net profit at Rs 134 crore for the second quarter ended June 30 on account of ''challenging" market conditions and subdued demand.
However, With valuations seen stretched in most of the blue-chip counters the broader markets stole the limelight with investors seen accumulating fundamentally sound shares.
ECONOMY
Merchandise exports contracted for the seventh straight month in June to 15.82% to $22.28 billion compared to $26.47 billion in the same month last year. The contraction was mainly on account of weaker demand largely due to crisis in China and Greece.
There was a great divergence seen in Wholesale Price Index and Consumer Price Index numbers. Wholesale Price Index (WPI) declined at a faster rate of 2.40% in June year-on-year compared with 2.36% in May. WPI inflation stood at 5.66% in June, 2014. Consumer Price Index (CPI)-based inflation rose to a nine-month high of 5.40% in June, on the back of spike in food prices.
WEEK AHEAD
Investors will keenly await first quarter earnings from major corporates in addition to the developments, especially on the land Bill and Goods and Services Tax Bill in the coming session of Parliament and the progress of the monsoon.
UltraTech Cement, HDFC Bank, Infosys, Hindustan Unilever, Idea Cellular, Asian Paints, Bajaj Auto, Lupin, Wipro, Axis Bank and index heavyweight Reliance Industries will announce their earnings for the April-June quarter.
