Market Outlook for May ’14
The month of May began on a cautious note with derivative rolls into the month indicated some caution which is a welcome sign as the mood had become highly upbeat in the past 2 months.The result season has also begun on a mixed note .On the IT front while Infy and Wipro disappointed ,TCS and HCL Tech managed to give some positive boost to sentiments.On the banking front while Axis numbers were greeted with cheer,ICICI Bank results were viewed with circumspection.
The Indian economy during the year (FY14) has persisted through challenging times due to low GDP growth as per advance estimate of 4.8%, marginally higher than 4.5% of FY13. The subdued is mainly due to declining industrial output, high inflation; drop in investment, low demand, lack of policy action, high current account deficit, (which has been brought down drastically through affirmative policy action) and depreciation in the domestic exchange rate. The current trend on inflation are showing reversal signal as both WPI and CPI has accelerated in the month of March vs February led by low base effect and higher food prices. WPI inflation accelerated to 5.7% in March from 4.7% in February, while headline CPI inflation rose slightly to 8.3% in March vs. 8% in February. Industrial production declined in February-14 (-1.9%YoY) and remains lackluster with IIP declining since Oct-13 barring the slight up tick in January. Trends in both consumption and investment have remained weak. We believe the new government post the general election in May 2014 will need to accelerate the pace of structural policy reform to improve the productivity dynamic and the growth mix.
The overall performance of the global markets has been mixed in the month of April. Concerns still persist on the China front and geo-political risks in Ukraine are far from over and could potentially damage sentiments as US adopts a hostile stand on the issue by threatening sanctions.
Domestic political events will hog the limelight in May and the election results on May 16 will give a decisive move to the market .We at ACMIIL are adopting a cautious stand at current levels and advised part booking of profits after the sharp run up seen in the last 3 months. Fresh buying opportunities should emerge and depending upon the market mood the same will be released.
Investors are advised to fasten their belts as May 16 approach as irrespective of direction, caution is advised!!!!
Equity Research Desk
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