india monthly markets update october 2010
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DESCRIPTIONMonthly review of key market segments within India including Equity (Domestic and International), Fixed Income, Currency, Economic Indicators, Mutual Funds & Recommended Portfolios (India).
- 1. Monthly Markets Update - IndiaOctober 2010 Prepared by: iFAST Research Team
2. Monthly Markets Update - India October 2010Key Points Globally, September was one of the best months for equity markets in the year 2010, with S&P 500 rising 8.76%, the best September rally since 1939. Among Emerging markets, Indonesia continues to be one of the best performing markets for the month as well as Year to date (YTD) with a return of 13.61% and 38.15% respectively. During the month of September, Sensex has surpassed 20,000 levels and delivered a return of 11.67% as compared to 0.58% during the previous month. On the other hand, BSE Midcap and BSE Small cap have delivered a return of 6.41% and 7.38% during the same tenure. Domestically, all the sectoral indices ended the month in green. BSE Bankex was the best performing index and ended the month with a gain of 15.05%. Foreign Institutional Investors (FIIs) continued to pump in money into Indian stocks making a net investment of about US$ 5.43 billion into Indian equities. Domestic Mutual Funds continued to be net sellers in the month of September 2010 to the tune of INR 7,979.2 Crore. The Dollar depreciated against most currencies during the month of September and the dollar index was down by about 5.4% during the month. The Australian Dollar gained the most against the greenback in September rising by 8.59%. The Rupee closed the month strongly and appreciated against the Dollar by 4.47%. In Fixed Income market, Yields rose on the shorter end of the curve but registered a fall on longer end of the curve. Industrial production growth jumped back into double digit territory to 13.8% in July 2010, Indias Wholesale Price Index (WPI) has a new base year of 2004-05 from the earlier 1993-94. The WPI increased by 8.51% y-o-y in August, following 9.78% rise in July. The RBI in its first ever mid quarter monetary policy review hiked both the Repo rate by 25 Basis Points from 5.75% to 6.0% and the Reverse Repo rate by 50 Basis Points from 4.50% to 5.0%. Indian fund industrys assets (average assets under management) increased by 4.06 % in the month of September after registering a marginal rise of 3.30% in August. Banking funds have topped the list for the equity segment and for debt segment; MIP was the best performer in the month of September. 3. Monthly Markets Update - India October 2010 Equity Markets UpdateInternational Markets (As of September 2010 end):Earnings Earnings201020102009P/E P/E P/EGrowth Growth MTD YTD Return (%) Yr 2010 Yr 2011 Yr 20122010 (%) 2011 (%) Asia ex Japan (MSCI Asia ex Japan) 11.06%9.83% 68.30%14.713.2 11.729.4 11.6Emerging Markets (MSCI EM)10.87%8.70% 74.50%13.311.4 10.137.0 16.8 Europe (DJ Stoxx 600)3.35% 2.30% 28.00%11.710.29.134.9 15.6 Japan (Nikkei 225) 6.18%-11.16%19.00%16.114.4 11.866.0 12.3USA (S&P 500) 8.76% 2.34% 23.50%13.712.0 10.535.8 14.5Australia (S&P/ASX 200) 4.06%-5.91% 30.80%15.813.1 11.514.9 20.3Brazil (IBOV) 6.58% 1.23% 82.70%13.410.89.128.2 24.3China (HS Mainland 100) 7.88% 1.06% 61.30%13.711.9 10.520.7 14.7Hong Kong (HSI) 8.87% 2.22% 52.00%14.112.2 10.620.1 15.5India (SENSEX)11.67% 14.91% 81.00%20.316.9 14.415.6 20.5 Indonesia (JCI)13.61% 38.15% 87.00%17.014.5 12.626.0 17.4Malaysia (KLCI) 2.88%14.98% 45.20%16.014.2 13.025.4 12.6 Russia (RTSI$) 6.08% 4.36%128.60% 6.24.9 4.087.3 25.4Singapore (STI) 4.99% 6.90% 64.50%15.213.9 12.619.79.8South Korea (KOSPI) 7.46%11.29% 49.70%10.49.6 8.854.58.6Taiwan (Taiwan Weighted)8.16% 0.61% 78.30%13.812.3 11.499.7 11.9NASDAQ 100 (Technology Heavy) 13.05%7.40% 53.50%16.314.2 12.458.1 14.9Thailand (SET Index)6.80%32.78% 63.20%13.811.8 10.314.5 16.5Source: Bloomberg, iFAST Compilations All returns are in respective local currency terms and MSCI Index returns are in USD Globally, September was one of the best months for equity markets in 2010, with S&P 500 rising 8.76%, the best September rally since 1939. Technology shares were among the best performers during the month with NASDAQ rising 13.05%. The Malaysian market was one of the worst performing market due to slow growth in Industrial Production number and higher than expected Consumer Price Index. Among Emerging markets, Indonesia continues to be one of the best performing market for the month as well as Year to date (YTD) with a return of 13.61% and 38.15% respectively. This is on account of better-than-expected GDP numbers, political stability and huge FII inflows. September was the best month for Indian Market in the calendar year 2010 with Sensex surpassing 20,000 levels and is currently trading at 33 month high. This was on the back of positive outlook on the macro economy front and net FII inflow into equity to the tune of INR 24,978 Crore during the month. 4. Monthly Markets Update - IndiaOctober 2010 Domestic Markets (as at September 2010 end): During the month of September, Sensex has delivered a return of 11.67% as compared to just0.58% during the previous month. On the other hand, BSE Midcap and BSE Small cap delivered areturn of 6.41% and 7.38% during the same tenure. After being flat for the last few months,large cap stocks outperformed their midcap counterparts by a huge margin during September. Domestically, all the sectoral indices ended the month in green. BSE Bankex continues to rallyand ended the month with a gain of 15.05% on the back of strong numbers expected in thecoming quarter and most of the banking stocks are currently trading at all time high levels withheavy weights like SBI and HDFC giving a return of more than 16% for the month of September. Rally during the month was also strongly supported by Metals, Realty, Consumer Durables andIT. Consumer Durables is the best performing sector on a yearly basis, which can be attributedto strong consumption demand in both Rural and Urban India. Oil and Gas Index continued to be a laggard for the month due to weak performance by oilmarketing companies. Although crude oil rose by 11.19% during the month, the oil marketingcompanies were not able to pass on the complete price rise in the domestic market. However,the index heavy weight, Reliance Industries, has delivered a return of 7.34% and as a result, BSEOil and Gas Index were able to give a return of 5.31% in September. 5. Monthly Markets Update - India October 2010Institutional Flows Into Indian Equity Markets Foreign Institutional Investors (FIIs) continued to pump in money into Indian stocks making a net investment of about US$ 5.43 billion INR (24,978.5 Crore) into Indian equities following a US$ 2.51 billion net investment made in the previous month. Over the past one year, FII net inflows have been positive every month, except in the months of January 2010 and May 2010. During this calendar year, FIIs have pumped in close to US$ 18.37 billion till the end of September 2010. In calendar year 2009, FIIs made a net investment of US$ 17.5 billion in Indian equities. Domestic mutual funds continued to be net sellers in the month of September 2010 to the tune of INR 7979.2 Crore. In last 12 months, mutual funds have been net sellers during all the months except for the month of May 2010. In the calendar year 2010, domestic funds have been net sellers to the tune of INR 23,609.4 Crore till the end of September 2010. 6. Monthly Markets Update - IndiaOctober 2010 Currency Update The Dollar depreciated against most currencies during the month of September and the dollar index was down by about 5.4% during the month. The Australian Dollar has gained the most against the greenback in September rising by 8.59% whereas, HK Dollar was the one of the weakest and rose only by 0.25%. Australian Dollar is about to hit a record high against the US Dollar on the back of strong export demand from China , South Korea, India and ASEAN. These regions together constitute almost 50% of the total exports from Australia. In addition to this, severe rate hikes done by Reserve Bank of Australia have also led to the appreciation of Australian Dollar. Yen continues to appreciate against the Dollar and traded at a record level during the month of September, the highest in almost 15 years. The Japanese Government is trying its best to control appreciation of Yen and the risk of economic recession by announcing new economic stimulus of worth 920 billion yen. The Rupee closed the month strongly and appreciated against the Dollar by 4.47%. During the month, there was an inflow of $7.10 billion foreign capital into the country on account of rate hikes done by the RBI, additional limit allowed by the Government for investment in the bond market and positive outlook on the macroeconomic front . 7. Monthly Markets Update - India October 2010Fixed Income Markets Update Yields rose on the shorter-end of the curve as RBI increased the Repo and Reverse Repo rate by 25 Basis Points (bps) and 50 bps which are more than consensus estimates. But yields on the longer end of the curve registered a fall on account of the reduction in the borrowing programme of the Government for the second half of the year. The yield on the Benchmark 3 month and 6 month paper rose by 9 and 11 bps respectively, while the yield of the benchmark 10 year and 30 year paper softened by 11 bps and 7 bps respectively during the month. Government has increased the FII limit in Government Bonds and Corporate bonds by US$5 billion each raising the cap to US$10 billion and US$20 billion respectively. The incremental limit for corporate bonds can be invested in bonds issued by companies in infrastructure sector only and the residual maturity of both G-sec bonds and corporate bonds has to be 5 years. This action also bought some relief to yields of long-term papers. Reverse Repo volumes continued to be negative for most part of the month, on account of the liquidity squeeze due to advance tax outflows. Banks continues to borrow money from RBI making repo rate as operational rate. M3 (broad money) growth rose marginally to 15.2% on 10 Septe