The Nifty scaled record highs after India's ranking jumped 30 spots to number 100 in the World Bank’s Ease of Doing Business list. The extended rally was led by gains in realty and pharmaceuticals. Decent results for India Inc also boosted sentiment.
The Nifty ended at 10,452, up 1.25 percent during a week in which the mid-cap and small-cap index outperformed. The rupee appreciated by 0.7 percent against the dollar despite global strength in the dollar index.
The Nifty Pharma index was in action after a spate of earnings announced by pharma majors kept markets busy. The highlight was Divi’s Labs after it announced that the U.S. FDA is set to lift an import alert on the company's Visakhapatnam unit.
This aided market sentiment for pharma stocks. Another big news on Friday was Torrent Pharma buying Unichem Labs’ domestic branded formulations business for 36 billion rupees ($558 million) to become India’s eighth largest drugmaker.
The State Bank of India (SBI) announced a 5 bps cut in auto and home loan rates in an effort to boost its retail loan portfolio. The latest rate cut made SBI’s home loans the cheapest in the market.
The Cabinet may clear the proposal of six more PSUs for strategic divestment in a bid to achieve the ambitious target of 725 billion rupees during the current fiscal. Sugar stocks were in action after the Cabinet approved 2 rupees per litre revision in the price of ethanol for supply to oil marketing companies.
Axis Bank was in focus after reports it is in talks with Bain Capital to invest between $750 million to $1 billion, which will help the lender meet its capital adequacy ratio.
Punjab National Bank reported better-than-expected growth with its asset quality improving quarter over quarter. Other companies that reported robust numbers were Bharti Airtel, ICICI Bank, Maruti, Vedanta and Glenmark.
Automobile shares were in the limelight on weak October sales of four-wheelers reported by most manufacturers after the festival season. However, two-wheelers manufacturers reported robust numbers. Commercial vehicle sales took a breather in October after months of healthy growth.
Prime Minister Narendra Modi has set a target of doubling farm incomes in five years with the recently launched programme, the Pradhan Mantri Kisan Sampada Yojana.
Modi urged investors to set up business in India in food processing, contract farming, raw material sourcing and creating agri linkages. MOUs worth 680 billion rupees were signed on Friday with some big players such as Pepsi, Coca-Cola, ITC, Amazon, Britannia and Patanjali pledging fresh investments.
On the Goods and Services Tax (GST) front, the council is scheduled to meet next week in Guwahati and may consider further easing the GST burden on SMEs. It is also set to trim the list of items in the highest tax slab of 28 percent.
India's services sector PMI expanded to 51.7 for the second straight session in October on rise in activity and as GST implementation gathered momentum.
However, there was a slowdown in the rate of growth of Indian manufacturing production. The Nikkei India Manufacturing PMI eased to 50.3 in October from 51.2 in September on stagnated new orders along with a decline in export order books.
India's foreign exchange reserves stood at $398.76 billion in the week to Oct. 27, down $1.15 bn over the previous week. The fiscal deficit for the first half of the current fiscal year touched 4.99 trillion rupees or 91.3 percent of the budgeted target. This compares to a fiscal deficit of 83.9 percent of the full-year target during the same period a year ago.
On the global front, the U.S. Federal Reserve kept interest rates unchanged as widely expected while leaving the door open for a December rate hike. Expectations for a rate hike at the end of the year are nearly 100 percent, according to the CME Group's FedWatch tool.
U.S. President Donald Trump nominated Jerome Powell, replacing current Federal Reserve Chair Janet Yellen, to head the central bank. The U.S. House of Representatives Republicans unveiled long awaited legislation to deliver deep tax cuts.
The much-awaited U.S. non-farm payroll data showed that the economy added fewer jobs than expected. The U.S. trade deficit widened in September as the surge in imports was more than the gains in exports.
The coming week is expected to be dominated by the ongoing earnings season in the absence of any major triggers. Some of the important names expected to announce their numbers include Cipla, Tata Motors, Aurobindo Pharma, M&M, SBI, Coal India and L&T.
On the geopolitical front, North Korea continues to simmer as Trump embarks on an Asia tour covering Japan, South Korea, Philippines, China and Vietnam. Closer home, we should see heightened action in Gujarat ahead of elections in December.
I would continue to advocate capital protection in an overheated market in the light of geopolitical risks as well as economic macro factors not keeping pace.
(Ambareesh Baliga has about 25 years of experience in the stock market and has worked with Karvy and Kotak groups in the past. He is a regular market commentator on various business channels. He is a commerce graduate from Calcutta University and a qualified cost accountant.)