Stocks Erase Gains, Fall Lower,12th June, 2013

U.S. Market    
Stocks wavered during the morning hours but were down at midday. 

Economic news flow in the United States was slow Wednesday, while in the eurozone, industrial-production numbers came in better than expected. 

The Dow and the S&P 500 were each 0.4% lower at midday, while the Nasdaq had fallen by 0.6%. 

Stocks on the Move
Pfizer (PFE) and Takeda Pharmaceutical (TKPYY) will receive a total of $2.15 billion from Teva Pharmaceutical Industries (TEVA) and Sun Pharmaceutical in a patent settlement. Teva and Sun will pay Pfizer and Takeda for damages resulting from the former firms' launch of a generic version of Protonix before the expiry date of the patent for the active ingredient in the drug. Pfizer shares were 0.2% higher at midday, Takeda ADR shares were up by 1.5%, and Teva shares had lost 1.0%. 

Spectra Energy (SE) shares had jumped by 9.7% at midday after the firm said it will conduct a drop-down transaction, in which it will sell transmission and storage assets to Spectra Energy Partners (SEP). The move is expected to be complete by the end of the year, and it will allow both businesses to increase theirmdividends to shareholders. SEP shares were up by 4.4% on the news.  

Cooper Tire & Rubber (CTB) shares soared by more than 40% on news that India-based Apollo Tyres will acquire Cooper in a $2.5 billion deal. The buyout is expected to close in the second half of the year. 

Foreign Markets
Overseas markets were lower Wednesday, with the FTSE 100 losing 0.7%, the Paris CAC falling by 0.5%, and the DAX ending 1.0% lower. 

Markets in China were closed today, but the Nikkei 225 slipped by 0.2%. 

Flows in Equity Market,Date:12th June, 2013

The benchmark indices slumped to new lows on the backppreciation was the only good news ( recorded its strongest single-day performance since the end of April). Select Infra/ Construction names reached new lows and the key Infra lender Axis Bank was also down 3.3% today. The performance across the tech sector was mixed as leaders TCS and Infosys were down 2% . Pharma stocks continued to gain strength. The volumes were strong, in-line with yesterday.

Nifty June Futures - Important Levels for Wednesday, 12.06.2013.

TREND DECIDING LEVELS :  Today, the Important Trend Deciding Levels onLevels on Lower side is 5795-5780.  Below this, next important level is  5760-5740. (This levels, Either Acts as a support while Nifty is moving in downward direction orActs as a down side Break out/Break down Trigger level which fuels further downward movement from here).

Today, the Important Trend Deciding Levels on Levels on Higher Side is 5805-5825.  Above this, next important level is  5840-5865. (This levels, Either Acts as a hurdle while Nifty is moving in upward direction or Acts as a Upside Break out Trigger level which fuels further upward movement from here).Stock Tips For Wednesday, 12.06.2013.Tata Steel :   : Sell Sell This Stock Near 287-289. Stop Loss 291. Targets 286, 284, 282, 280, 278.  (Break-Out Levels: Buy Above 285. Sell Below 281 and 280.

Gold Review - June 12Th 2013

For the month of May, the spot gold closed at $1,410.30 per ounce, down $62.50 per ounce or 4.24 %. The U.S. Dollar Index gained 1.99% for the month. This fall in gold prices during the month, is the longest slump in 16 months, as U.S. filings showed that George Soros and BlackRock Inc. cut stakes in exchange-traded products backed by the metal. The strength in the US Dollar also made gold weak in the month of May.

The latest World Gold Council Gold report for the January-March 2013 period shows a market driven by diverse global demand, and an appetite for owning gold jewellery that continues to grow. Global demand for gold jewellery was up by 12% in Jan-Mar 2013; driven largely by significant increases in demand in India and China. Central Banks remained significant acquirers of gold, making purchases in excess of 100t (109t) for the seventh consecutive quarter. Overall the total global demand for gold in Q1 2013 was 928t, down 19% from Q4 2012. 

Flows in Equity Market,Date:11th June, 2013

The benchmark indices slumped to a 7 week low after the INR continued its slide (down to 58.98 intraday, the worst performance currency in Asia last month). Investors are growing increasingly worried that the weak rupee will prevent the RBI from cutting rates next week. News of the CBI filing 3 FIRs including one against the Chairman of Jindal Steel & Power, triggered selling in other metal names. Titan was sold as the RBI gave further clarification regarding the gold lease mechanism. Selling was prominent across all sectors baring Tech. The 52 week High/Low ratio worsened to 1:7. The volumes were up 36% over yesterday.

Nifty & Stock Tips which Deliver Result,June 12Th 2013

Now it is a time to get worried as stock market has fallen for the fourth consecutive day and has broken the key support of 5800 levels. The trend of Nifty is in downtrend as 257 shares were only up during the course of the day with balance trading in negative territory. To add fuel to fire, we have indications that RBI may not cut the CRR rate as inflation monster is agin rising.

It is worthwhile to mention here that index has broken the support at points 5800 and if Nifty remians below this point we are bound to see levels of 5760-5711 levels. Technical bounce back generally occurs near supports and thus wee may see Nifty bouncing back near 5750 levels. Nifty is in downtrend since 23 May 2013 and this trend remains down in the short time. On provisional basis, FII's sold Rs 1.14 bn worth of Indian equities, while DII's sold Rs 0.69 bn worth of equities.

Make use of the available opportunity and trade intraday with the tip of the day and make money like professionals as aim is to capture the opportunity at the right moment to get the juice out of it.

Midday Market Update,June 12Th 2013

Stocks Mostly Lower on Central-Bank Fears

U.S. Market    
Stocks began the day in the red but were paring losses at midday. 

Concerns spread globally following the Bank of Japan's announcement that it is maintaining its current stimulus policies while noting slight improvements in its economy. Despite the relatively positive news, many investors were looking for the BOJ to extend its asset-purchases further than previously stated, and this created renewed questions as to when other central banks, particularly the Fed, will pull back on their current bond-buying policies. 

U.S. economic news flow was otherwise slow Tuesday.  

The Dow was flat at midday, but the S&P 500 and the Nasdaq had each lost 0.3%. 

Stocks on the Move
Lululemon Athletica (LULU) shares had dived by nearly 17% at midday after the firm announced that CEO Christine Day is stepping down from her post at the firm.Analysts expect whoever fills Day's role will have a similar vision to the company's past leaders. Lululemon also reported, late Monday, a slight increase in first-quarter profit on top of a 21% gain in year-over-year sales, despite a large product recall in March. The firm said it is delisting from the Toronto Stock Exchange, as well, on account of low volume. 

Also after Monday's closing bell, Texas Instruments (TXN) announced a narrowed second-quarter forecast of earnings per share between $0.39 and $0.43 and revenue between $2.99 billion and $3.11 billion. Morningstar analysts say the revision was mildly disappointing. Shares were 2.7% lower at midday. 

Navistar International (NAV) posted a steeper-than-expected second-quarter loss late Monday of $374 million compared with a loss of $172 million the same time last year. Revenue also fell by 23%. Despite the Navistar's weak results, Morningstar analysts still think the firm is on the right road to recovery. Shares were down by 6.8% at midday. 

Dole Food (DOLE) shares had jumped by more than 21% by midday following a $1.5 billion buyout bid by Dole chairman and CEO David Murdock. The company's board will meet this week to discuss the proposal. 

Foreign Markets
Overseas stocks fell on central-bank concerns. The Nikkei 225 lost 1.5%, and the Hang Seng fell by 1.2%. Markets on China's mainland remained closed for a holiday. 

In Europe, the DAX fell by 1.0%, and the Paris CAC lost 1.4%. The FTSE 100 was 0.9% lower.

Recent market developments and investor takeaways,June 12Th 2013

The theme of emerging market currency depreciation on account of Fed possibly „tapering‟ QE had started last month. However, over the last few days it has reached almost panic proportions. While depreciation has been a story for most emerging markets, the rupee (along with some other high current account deficit countries) has borne a larger brunt than most. The rupee has been in a virtual free fall over the past couple of session, threatening to go towards 59 levels at the time of writing. The RBI has been largely absent in defending the currency, possibly because the sell off is part of a larger global phenomenon and the central bank is waiting for the currency to stabilize at some level. Alongside, FIIs have been pulling out from bonds. India has seen INR 15,000 crores odd of debt outflows over the past few days as exposures have been cut. As a result of these, domestic bond yields have risen 15 – 20 bps across the curve over the past few sessions. Apart from FII selling, market is fretting that the possibility of near term rate cuts from the RBI has turned quite low with this currency action.
We have been pointing out for some time that in its recent frenzy, the bond market has been under-estimating some macro-risks that first need to be clarified before an aggressive interest rate cycle can start. It is important to note that what is happening over the past few days is simply a manifestation of some of the risks that have anyway been lurking just below the surface. We had highlighted some of these in a recent note (refer “Can aggressive monetary easing create a funding problem in India?” dated 29th May). However, the tendency over the last 45 days has been to straight line extrapolate a near term confluence of benign data and expect substantially further monetary easing in the immediate few months ahead. Also very importantly, most such views have been based on traditional growth versus inflation constructs without focusing enough on the implications for the domestic funding environment if policy rates were to be cut aggressively without first addressing some of these macro-risks. This analysis is important since if RBI policy disregards these risks then there is a real possibility that market rates eventually disjoint from RBI policy rates; as has happened before in this cycle.
Given the above dilemma of balancing macro-risk factors with near term aggressive rate expectations of the market, our approach has been to focus on providing median participation while at the same time not over-extending duration; since the risks highlighted can actually hit anytime (as seems to be happening currently). Towards this end we have been increasing cash levels in our dynamic and income funds over the past few days and simultaneously moving towards more conservative average maturities. Alongside, we have also been advising clients to make 50% of new allocations to more conservative funds like MT and ST. The logic for this is as follows: Taking 10 year government bond as benchmark, yields have fallen from 9% in 2011 to 7.30% today. During this period (and especially over the last year) we have been aggressively asking investors to come to our income and dynamic funds so as to ensure maximum participation in the rate fall. These funds in turn have run aggressive maturities in order to maximize participation. Indeed, industry trends indicate that bulk of allocations since late last year have happened to this category of funds. At t his juncture, after a 170 bps fall in yields the market is debating the last 50 bps odd or so. As we have been pointing out, this 50 bps may come with substantial 2 way volatility and over a prolonged period of time (an important difference here is „one touch‟ fall in yields versus yields sustainably finding a lower level). Hence, the risk versus reward indicates that investors adopt a more medium duration strategy in this phase. This may cause them to lose some participation in periods of market frenzy (as happened in May). However, it will also plug downside risks in volatile times and help preserve returns already made over the last year. This thought will continue to define our approach.
Nothing changes in terms of market view going forward. Market is unwinding its aggressive near term rate cut expectations to some extent. However, near term inflation data will likely continue to look weak and forward interest rate cut expectations should prevent any significant sell off in yields (currency being the big question-mark, obviously). Hence, investors should not panic on this near term volatility. At the same time, investors need to decide the participation level they desire and accordingly make fund selection. To reiterate, our income and dynamic funds will aim for median participation so long as we judge macro-risks remain. If we see a clear window for participation, we may take participation levels higher as we have been doing historically. MT and ST will always be more conservative as per mandate (ST more than MT). Hence, investors who want even more conservative participation should increase allocations to these funds on new investments.

What Should Debt Mutual Fund Investors do in a Falling Interest Rate Regime?

Central Bank increased the benchmark interest rates thirteen times to 8.50% between March 2010 and October 2011. The Central Bank reversed its stance and cut the benchmark repo rate by 50 bps in April 2012. Since then the Central Bank reduced the interest rate thrice (cumulatively by 75 bps) to 7.25%. The Central Bank cut interest rates following sluggish domestic growth rate and fall in inflation numbers. The Wholesale Price Index-based inflation stood at 41-month low in April 2013 while industrial output grew 1.0% in 2012-13 compared to 2.9% in 2011-12. In such a situation, long-term debt funds emerge as an appropriate investment tool as they deliver superior returns in a falling interest rate environment.

Bond prices rise with the fall in interest rates and vice versa. Long-term bonds are more sensitive to interest rate movements than short-term bond funds. This is because the net asset value (NAV) of the fund replicates the prices of the underlying securities. If the interest rate falls, the NAV of debt funds rise. Moreover, long-term debt funds would benefit more than short-term debt funds due to the longer maturity of the underlying securities held by the former. Short-term funds, whose portfolio contains securities with a shorter maturity, would see a lower price change because they are less sensitive to interest rate changes. Long-term debt funds basically include (i) Income funds that invest a majority of its corpus in Government Securities and Corporate Bonds with longer tenure and (ii) Gilt funds that invest in bonds issued by the Central Government and State Governments.

Here, Graph-1 represents returns of Income and Gilt funds compared with 10-year benchmark bonds from January 2006 to May 2013 and Graph-2 shows the returns of Liquid funds in comparison with commercial papers (CP) rates. During the period January 2006 to July 2008, when the interest rate was moving up the liquid funds on an average generated higher returns in comparison with the Income and Gilt funds. While same was reversed during the period of August 2008 to December 2009, when Central Bank cut benchmark interest rates from 9.00% to 4.75%. The income and gilt funds during the same period has generated average return of 9.37% and 8.97% while liquid funds generated 5.56% average return. The same scenario was also seen during the 2010-2011 period, when the interest rate moved up again. In November 2012- May 2013 period, when Central Bank has started easing the interest rates, Income and Gilt funds gave double-digit returns of 11.46% and 12.05% respectively while Liquid funds generated 8.52% average return. 

Before investing in any long term debt fund, one should look into the various factors like:

 Average Maturity – The average maturity of a debt mutual fund portfolio is the average of all securities that the fund constitutes. Long-term bonds (10 years or more) tend to be very vulnerable to inflation and usually deliver poor returns during inflationary periods. Thus it makes sense to invest in funds of higher average maturity when at the peak of the interest rate curve to make the maximum out of the falling interest rate scenario.

 Modified Duration - Duration is a measure of a debt fund’s sensitivity to changes in interest rates scenario. The lower the duration, the less volatile the fund will be. A modified duration of 5 means that a particular fund’s NAV would be expected to drop 5% for every 1% rise in interest rates (and vice versa).

 Yield to Maturity - Yield to Maturity (YTM) is the current interest rate a debt fund is earning from the holding of its constituents. Assuming that interest rate remains steady, YTM is also the expected annual return of the portfolio. Yield from the fund is the weighted average of yields of different securities, weighted by the proportion of sum invested in the fund (as a fund invests in bonds of varying maturities and yields). The weighted average yield gives an indication of the attractiveness of the underlying bonds invested by the fund. However, interest rate risks, possible defaults and reinvestment risks might affect the returns of a debt fund.

 Credit Quality - A retail investor must look at the detailed portfolio to see the credit rating of the papers in which the fund is investing. A lower credit rating signifies higher chances of default. Higher-quality investment grade bonds tend to offer slightly lower interest rates than lower-rated bonds, but also tend to have a much lower default rate.

Global Equity Markets

United States 

 The U.S. markets moved up initially, as investors embraced the latest corporate earnings reports coupled with encouraging data on the economic front. Markets touched fresh highs as investors picked up shares of large companies on expectations that the Central Bank’s stimulus measures will help drive the rally further. Better-than expected report on homebuilder confidence also supported bourses.

Europe

 European bourses surged initially as Italy's new Prime Minister formed his Cabinet, ending the country’s two-month long political deadlock. The European Central Bank (ECB) lowered rates but markets remained mixed amid apprehensions that it may not be enough to boost the economy. The falling trend reversed after economic fundamentals of the U.S. improved. Contraction across the Euro zone in the first quarter of 2013 increased expectations of further monetary easing by the ECB.

Asia

 Asian markets witnessed a mixed trend during the month. Japanese bourses fell due to a rising yen coupled with weak industrial production and retail sales data. Bourses recovered soon as investors welcomed China's better-than-expected exports growth in April. Investors gained confidence in the Japanese economy after the Bank of Japan raised its assessment of the economy for the fifth consecutive month.

 The 10-year U.S. Treasury bond yields increased 46 bps to close at 2.13% compared to the previous month’s close of 1.67%, after moving in the wide range of 1.62% to 2.17%.

 U.S. bond yields surged during the month and touched 13-month highs on positive economic data. Better-than-expected jobs report, unexpected increase in U.S. retail sales and recovery in U.S. consumer sentiments impacted bond yields during the month of May.

 Yields were impacted further after the dollar rose to a 4-1/2-year high against the yen, breaking through the key 100-yen mark and spurring sales in longer-dated Government debt.

 Towards the end of the month, yields of U.S. Treasuries moved up further after minutes from the Federal Reserve's April 30-May 1 meeting showed that many Central Bank officials want to see more evidence that the economy is recovering before tapering their bond-purchase program.

Currency

Crude 

 Oil prices rose initially after the U.S. Federal Reserve decided to stick to its loose monetary policy and the European Central Bank (ECB) cut interest rates by 25 bps. Supply concerns from the Middle East and positive data on German industrial orders pushed up prices further during the first half of the month. However, higher Chinese inflation numbers, which limited the scope of further growth-spurring measures, hit oil prices later. Significant fall in demand from China and subdued Chinese PMI data also weighed on prices. Prices were further impacted after the U.S. Energy Information Administration trimmed its oil consumption forecasts for 2013 and 2014.

Gold

 Gold remained firm initially after the ECB cut interest rate to an all-time low of 0.5%, which raised the inflation-hedge appeal of the metal. Lower Chinese factory data, fall in new export orders and weak U.S. data also supported gold prices. However, as the month progressed, prices started falling following due to outflow from top gold Exchange Traded Fund, SPDR Gold Trust. Improvement in equity and jobs markets dented the metal’s appeal as an alternative investment avenue. Minutes from the Federal Open Market Committee meeting, this suggested that the Federal Reserve should start scaling down its bond-buying program, also triggered the fall.

INR

 The Central Bank’s hawkish statement at its annual monetary policy review and dollar demand from custodian banks, oil and gold importers weakened the rupee. However, the restrictions on gold imports helped check the downside. As the month progressed, losses in the rupee widened due to rally of the dollar globally. The rupee hit a 11-month low after the Central Bank Governor’s comments on high inflation and concerns over Current Account Deficit dented hopes of rate cut in the upcoming monetary policy. The rupee closed at 56.50 per dollar, down 5.01% on a month-on-month basis.

Euro

 The euro fell against the dollar during the month. Initially, the euro came under pressure after the European Central Bank reduced its main rate and kept open the scope for further rate cuts. The currency fell due to shrinking private sector activity, retail sales and contraction in Gross Domestic Product of the Euro zone. Fall in German retail sales and record high Euro zone unemployment rate further hit the currency. Better-than-expected improvement in the manufacturing and services sectors and positive confidence data of the Euro zone partially capped the losses.

Indian Fixed Income

Bond yields fell during the month amid high trading volumes before moving up in the last week. Weak Gross Domestic Product (GDP) numbers faded hopes of a rate cut in the upcoming monetary policy review by the Central Bank. Lower-than-anticipated headline inflation numbers and Central Bank Governor D Subbarao’s comments that he had taken note of falling inflation hinted at a potential shift in the Central Bank's hawkish stance. This supported bond yields earlier during the month. Moreover, foreign investors’ interest in debt also supported bonds as they continued to snap up Indian debt as part of a rally in riskier assets globally. The old 10-year benchmark 8.15% GS 2022 ended the month at 7.44%, which is 29 bps lower than the last month’s closing of 7.73%. The new 10-year benchmark (7.16% GS 2023) ended the month at YTM of 7.24%. 

 The Central Bank lowered the repo rate by 25 bps for the third time this calendar year, bringing it down to 7.25%, as inflation moved below 6% (for March 2013) and trade deficit also moderated in the January-February 2013 period. The Central Bank, however, is concerned over high Current Account Deficit (CAD), though it expected CAD for FY14 to be lower than FY13. While the Central Bank noted that space for further monetary easing was “very limited”, it said that if inflation eases further and the upside risk became more benign, space for monetary easing will open up. Moreover, the Central Bank lowered the amount of bonds that banks can hold till maturity (HTM) as part of their Government bond holding by 200 basis points (bps) to 23%. GDP data for 4QFY13 came in line with market expectations and the Central Bank Governor’s recent comment on high retail inflation and his view that lower international commodity prices will not be sustained in the long run dented hopes of rate cut in the upcoming monetary policy, scheduled on June 17.

 Interbank call money rates moved in the range of 7.17% to 7.55%, during the month. The 3-Month CD (Certificate of Deposit) traded in the range of 7.95% to 8.20% while 3-Month CP (Commercial Papers) traded in the range of 8.33% to 8.56%. Banks’ net average borrowings from the Central Bank’s Liquidity Adjustment Facility (LAF) stood higher at Rs. 97,280.00 crore, higher compared to the previous month’s figure of Rs. 83,086.39 crore. The Central Bank conducted the open market operation of Rs. 10,000 crore on May 7 to curb the liquidity deficit. Moreover, Central Bank’s Deputy Governor HR Khan said that the Central Bank will address the tight liquidity situation and is likely to take steps to curb the deficit. The Central Bank said that it will manage liquidity to reinforce monetary policy transmission.

· Yields on the Government Securities fell across the papers in the range of 11 bps to 49 bps. The decline in the medium and long-term securities was higher compared to short-term papers. Yields declined most on 11-year paper during the month. In line with Gilt securities, corporate bond yields were also lower on the entire segment by up to 38 bps. It dropped in the range of 6 to 38 bps with the highest change in 6 to 8-year papers. The spread between AAA Corporate bond and Government securities contracted up to 20 bps across the segment, barring 1 and 15-year papers where spreads expanded.

 The Central Bank conducted the auction of Government papers worth Rs. 75,000 crore during the month of May compared to Rs. 45,000 crore recorded in April. The new 10-year benchmark paper (7.16% GS 2023) was also introduced in this month and was auctioned at a yield of 7.16%. In addition, the Central Bank also auctioned Treasury Bills worth Rs. 42,000 crore and State Developmental Loans (SDL) worth Rs. 10,580 crore during the month.

 The Wholesale Price Index-based (WPI) inflation data stood at its lowest level in the last 41 months. It stood at 4.89% for the month of April against the last month’s reported figure of 5.96% (provisional) and the same period last year’s figure of 7.50%. The food index for both Consumer Price Index (CPI) and WPI moved fell to 10.61% and 6.08% against 12.42% and 8.73% recorded a month ago.

 The industrial output for March remained in the positive territory and stood at 2.51% on a Y-o-Y basis against the same period last year’s figure of (-) 2.80%. The cumulative growth for the period of April-March 2012-13 stood at 1.0% against 2.90% recorded in the corresponding period last year.

 The Central Bank also announced its first auction of Inflation- Indexed Bonds (IIBs), to be conducted on June 4. The bonds are being issued with an aim to protect savings of poor and middle classes from inflation and incentivize household sector to save in financial instruments rather than buying gold.

 The Government said that it would impose a 5% tax on interest payment for Foreign Institutional Investors and Qualified Foreign Investors for investment in Government and rupee-denominated corporate debt from June 1, 2013 to May 31, 2015 against the current level of 20%.

Regulatory Update

The Government has proposed to arm the regulator Securities and Exchange Board of India (SEBI) with direct powers to carry out search and seizure operations and for attachment of assets . This has been done with an aim to provide stronger powers to SEBI, for taking on perpetrators of Ponzi schemes and other fraudulent activities. 

 The Central Bank has tightened the asset restructuring rules for banks after the weakest economic growth in a decade pushed up bad loans. The new rules include raising capital requirements and forcing banks to seek personal guarantees from controlling shareholders of companies whose loan terms have been eased.

 The Central Bank said all loans recast after April 1, 2015, should be classified as non-performing asset (NPA). Also, from June 1, 2013, the provisioning requirement for fresh standard restructured advances would be increased to 5.00% from 2.75% for the interim period.

 The SEBI has extended the deadline to December 31, 2013 for companies to meet new norms that prohibit trusts administering Employee Stock Option Plans (ESOPs) from buying their own shares in the secondary market.

 The Central Bank asked lenders to stop differentiating between home branch and non-home branch and pricing of services thereof, saying such a system should not continue with Core Banking Solution in place.

Indian Economy (Economic Releases in May-2013)

Indian equity markets rose for the second consecutive month on hopes of further monetary easing amid positive global cues, significant rise in foreign fund inflows and better-than-expected macro-economic data. The benchmark indices, S&P BSE Sensex surpassed its crucial 20,000 mark and CNX Nifty breached 6,000 levels during the month under review. 

 Initially during the month, bourses witnessed robust performance on the back of hefty buying across the board ahead of the Central Bank’s monetary policy meet amid expectations that the Central Bank may cut rates. Sentiments also remained positive after the Supreme Court upheld the constitutional validity of the Government’s decision of allowing 51% Foreign Direct Investment in the multi-brand retail sector. Improving macro-economic conditions, better quarterly earnings reports from corporates and robust capital inflows from foreign investors also added to the gains.

 As the month progressed, strong selling pressure was witnessed after India’s Current Account Deficit widened in April compared to last year mainly due to surge in gold imports. However, bourses recovered after data showed Wholesale Price Index-based inflation slowed to a 41-month low of 4.89% in April , raising hopes of extended monetary easing measures by the Central Bank. The rally continued as strong buying interest was seen in rate-sensitive stocks after the Central Bank Governor said that it will take note of easing headline inflation numbers while formulating the monetary policy.

 Later, the possibility that the U.S. Federal Reserve might scale back its stimulus program dampened sentiments. Market participants became concerned that foreign investors might end their recent buying spree. Lower-than-anticipated fourth quarter results of India’s largest public sector bank also added to the fall.

 Towards the end of the month, bourses recovered as the May series Futures and Options contract settlement encouraged market participants. Investors showed buying interests in majority of the blue chip stocks. However, sentiments turned bearish after India’s fourth quarter Gross Domestic Product (GDP) numbers grew at the slowest pace in a decade. Selling pressure intensified further after the Central Bank Governor said that retail inflation still remained high, thereby reducing the possibility of a rate cut in the upcoming monetary policy review.

· On the sectoral front, the top p erformers were S&P BSE IT, TECk and Consumer Durables while the top laggards were S&P BSE Realty, Capital Goods and PSU. IT companies benefited on the back of a strong dollar.

 As per the data released by Securities and Exchange Board of India, Foreign Institutional Investors (FIIs) remained net buyers of equity in May to the tune of Rs. 21,119.3 crore. However, mutual fund houses remained net sellers of equity to the tune of Rs. 3,474.3 crore.

 Inflows from FIIs witnessed a declining trend from February 2013 to April 2013 due to monetary easing in developed economies. Though inflows improved significantly in May, it remains to be seen whether FIIs extend their buying momentum going forward.

 With the headline inflation numbers starting to come down within the Central Bank’s comfort zone for the first time in more than three years, any further rate cut will provide the much-needed impetus to the economy. The Central Bank is scheduled to announce its mid-quarter policy review for 2013- 14 on June 17.