Trading in Indian equities was lackluster for most part of the last week after the RBI kept the policy rate unchanged and increased its inflation expectations for the December quarter. However, buoyed by healthy monthly sales numbers from automakers and strong September quarter numbers of IT major Wipro, the benchmark indices ended the week with a gain of 0.7%, its highest in last four weeks.
On Friday, the BSE’s 30-share Sensex rose 1%, or 193.75 points, to 18,755.45, while the broader Nifty gained 0.93%, or 52.65 points, to end the session at 5,697.7. The benchmark indices fared better than the BSE mid-cap and small-cap indices, which gained 0.4% and 0.3% to close at 6,645.45 and 7,064.38, respectively.
Market sentiment was lifted after Wipro extended its Thursday’s gains following a healthy set of September quarter numbers that beat Street estimates. It rose 1%, or 3.55 points, to R364.95. Earlier on Thursday, the stock had clocked in 3% after the company announced de-merging of its non-IT businesses.
Auto stocks also supported the market this week. Both Bajaj Auto and Maruti Suzuki hit 52-week highs of R1,905 and R1,476.4 on Friday’s trade before ending the session up 3% and 0.8%, respectively. Mahindra & Mahindra rose 2% to R917.60. While Bajaj Auto reported a 4.1% growth in October volumes, Maruti and M&M grew at a robust 86.6% and 30.4% compared to last year.
During the week, Maruti advanced 7% after releasing its September quarter earnings, as a 5.4% y-o-y decline in net profits was better than Street estimates.
In the recent past, the stock has been upgraded by many brokerage houses, including Jefferies, HSBC and Deutshce Bank. In a recent research note, Macquarie advised investors to switch to carmakers Maruti and Mahindra & Mahindra as two-wheeler makers are expected to see ?multiple de-rating?.
The sectoral index on auto companies was one of the biggest gainers this week. During the week, the BSE auto index gained nearly 4%, while both healthcare and IT indices added 3% and 2.5%.
Meanwhile, traders expect the benchmark indices to move past key levels ? 19,000 for the Sensex and 5,800 for the Nifty ? if the market momentum is supported by FII flows. According to provisional data available with exchanges, FIIs bought R382 crore worth of stocks on Friday. In October, they acquired $1.96 billion of Indian equities, taking their year-to-date purchases to $18.3 billion.
?After the RBI stood its ground on the interest rates, the market focus has again shifted to the earnings season and FII activity,? said a trader. According to him, since the markets are now pricing in an absence of rate cut, any positive surprise in the corporate earnings will drive them to new highs.
According to Citi, the slight upside bias in aggregate results so far and the upside/downside surprise ratio have raised market expectations. However, the brokerage does not see earnings delivery or expectation revisions driving the market in the near term. ?We expect earnings to remain range-bound, and maintain our market June 2013 Sensex target of 19,900,? it said in a note.
The RBI, in its latest policy move, kept the benchmark repo rate unchanged at 8% and reduced the cash reserve ratio (CRR) ? the quantum of deposits bank must keep with the central bank ? by 25 basis points to 4.25%. It raised its outlook for headline inflation for FY13 to 7.5% from 7%, while cutting the outlook on GDP growth to 5.8% from 6.5%.
