The nervousness that gripped the global markets in general and the emerging markets in particular, following the fears of ‘a global recession made in China’, has given way to cautious optimism. It now appears that the fear of a Chinese slowdown were overdone. Also, the decision of the Fed to hold rates helped calm down the markets. The recent data from the US are rather weak and the majority view is that the Fed will start normalization only in 2016. This perception put a stop to further capital outflows from emerging markets. FIIs stopped selling and they even turned buyers in a reversal of market mood and sentiments.
The market, which seemed range bound during the early part of the week, appeared to be attempting to break out of the range by the end of the week. Smart gains in the indices on Thursday and Friday enabled the Sensex to close at 27214.6, up 0.5 % for the week and Nifty closed at 8238.15,up 0.6 % for the week. Bank Nifty gained 1.9%. Gains in Europe on Thursday and in early trade on Friday helped lift the sentiments. On Friday, the last day of the trading week, heavy weights like RIL, HDFC, ONGC, ITC, L & T and Tata Motors led the rally. Bank Nifty made impressive gains.
The global headwinds — fears of Chinese slowdown and Fed tightening — that impacted the markets in the last few weeks are now receding and domestic tailwinds are appearing lifting the economy and markets. The first half of the year has witnessed a 35.8 % increase in indirect tax collections. Since the government has embarked on massive public expenditure programs with this buoyant revenue, the economy is likely to get a kick-start in the second half of the year. The August IIP that came in at 6.4 % (4.1% in July) was another silver lining. The fact that this is a three-year high is, indeed, good news. Another shot in the arm for the market came from the E & Y survey that found India as the most attractive investment destination globally. Already, India is the largest recipient of FDI in the world this year. Powerful tailwinds, indeed!
The results season kicked off with Infosys beating market expectations with a 12.1% sequential growth in profits. But the poor dollar revenue guidance and the remark that H2 will be challenging negatively impacted the stock and the sentiments for the IT sector. TCS reported muted numbers but MindTree posted a stellar set of numbers. HUL reported flat bottom line negatively impacting the stock. Among the mid-caps, DCB posted very poor numbers while NIIT came out with good numbers and Zee Entertainment posted stellar set of numbers. The market is now looking forward to more results next week.
There is a clear shift in sentiments for the better. If the tailwinds sustain, the market is likely to breakout of the range next week and move higher.