Despite the uncertainty and caution prevailing in both domestic and global markets, equity indices made a positive start to the calendar year 2013. While the first half of January saw the markets weaken, it was in the second half when they witnessed maximum upside leading to a positive close for the month. It was mainly issues like US fiscal cliff coupled with RBI’s monetary policy review and earnings season which dictated the trend for market during the month. Strong buying by foreign investors too contributed significantly to the overall monthly gains.
Equity markets commenced January higher as the concerns surrounding the US “fiscal cliff” were resolved just in time. Back home, indices received a boost after Infosys posted the quarter’s first major quarterly results, kick-starting the earnings season, on a firm note. However, volatility soon crept in with the outcome of disappointing industrial output data. IIP contracted by 0.1% for November 2012, way below the robust 8.2% growth figure in the previous month.
The second half saw the markets rising supported mainly by various domestic factors. To begin with, easing inflation data helped markets surge as it raised hopes of central bank cutting interest rates. India's WPI inflation unexpectedly cooled down to 7.18% for December 2012 as compared to 7.24% for November and 7.74% during the corresponding month of the previous year. What also boosted markets was government’s decision for partial deregulation of diesel prices. Markets also rose after Moody's retained its Baa3 sovereign rating on India, with a stable outlook.
It was towards the end of the month that markets witnessed some easing. Globally sentiments turned bearish after comments from the US Fed Chairman did nothing to soothe fears about the economic outlook for the US. On the domestic front too, markets erased some gains despite the much awaited rate cut by central bank as the undertone of the central bank still remained cautious going forward. The RBI, in its monetary policy review, cut the Cash Reserve Ratio (CRR) by 25 bps to 4% and Repo Rate by 25 bps to 7.75%. Contraction in the manufacturing index too weakened markets. The HSBC Purchasing Managers’ Index (PMI) for manufacturing stood at 53.2 in January, down from 54.7 in December. At the same time, mixed earnings season too added to the woes of the market.
During the month, the Sensex gained its 20,000 level as it touched a high of 20,103 and a low of 19,580 before it ended 2.4% higher to close at 19,895 points. The S&P CNX Nifty too grew by 2.2% to close above 6,000 level at 6,034 points. On the other hand, the mid and small cap stocks took a beating during the month thereby severely underperforming the large cap stocks. Both the BSE Mid-cap and BSE Small-cap indices lost 2% and 4% respectively.
It was a mixed bag on the BSE sectoral front. The BSE IT index emerged as the top gainer which rose close to 13% during the month. The surge was mainly on account of index heavyweight Infosys which grew 20% during the month on the back of strong earnings reported by the firm. Among the other gainers within the space were HCL Technologies and Mahindra Satyam.
This was closely followed by the BSE Teck index which soared by 11%. Among the other key gainers were the BSE Oil & Gas index and the BSE Realty index which too inched higher by 9.9% and 6.1% respectively.
On the other hand, the BSE Metal index was the top loser which fell 4.2%. This was followed by the BSE Auto index which dropped by 3.8%.