Value purchasing at lower levels on a decent week for markets
Stock markets in India closed a fairly buoyant week on a lacklustre note. The week saw some positive action with investors resorting to value buying at lower levels. A slight slump in crude oil prices, positive Asia stocks and rising copper prices in global commodity markets contributed to the change in investor sentiment and lifted bourses. Benchmark indices traded with strength through the week with the benchmark Sensex firmly trading above the psychologically important 36000 levels and the Nifty reclaiming 11000 levels. The Sensex reached a new record high towards the end of the week, propelled by strong buying in index heavy stocks. However, “not so encouraging” macro-economic data at home somewhat disrupted the party.
On the macro front, data released by the government revealed that India's factory output growth slowed to a seven-month low in May, 2018 while retail inflation quickened to a five-month high in June, 2018. India's industrial production (base year 2011-12=100) grew at 3.2% in May 2018 over May 2017, while showing moderation in growth from a revised 4.8% increase in the previous month. The manufacturing sector's production growth decelerated to 2.8%, causing a dip in overall industrial production growth in May 2018. On the other hand, the mining output improved at a higher pace of 5.7% and electricity generation output growth also accelerated 4.2% in May 2018. Additionally, the all-India general CPI inflation increased 5% in June, 2018 (new base 2012=100), compared with 4.87% in May, 2018. The corresponding provisional inflation rate for rural area was 5% and urban area 4.85% in June, 2018 as against 4.88% and 4.72% in May, 2018. The core CPI inflation increased to 6.35% in June 2018, compared with 6.12% in May 2018.
On the bright side, a report released by the World Bank concluded that India has surpassed France in becoming the world’s sixth-largest economy. The country’s GDP was valued at USD 2.59 trillion. However, in terms of per capita GDP, the country still lags behind France, which is almost 20 times bigger. The report further reveals that the Indian economy has been able to post this sharp growth mainly due to the advances in the manufacturing sector, on the back of increased consumer spending.
However, despite robust markets, foreign institutional investor (FII) activity during the week has been divergent. FIIs continue to be net sellers of Indian equities having net sold equities worth INR 697 crore, since July 09, 2018. Domestic institutional investors (DII) continue to lend support to Indian markets and have net bought Indian equities worth INR 1416.08 crore, in the same time period. So far this month, FIIs have net sold Indian equities worth INR 3152.44 crore and DIIs have net bought Indian equities worth INR 3489.78 crore.
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