Markets continue their upward trend

Wed, 15 Jan Closing

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Maintaining the day-long buoyancy, Indian equity markets continued to gather momentum even in the last hour of trade and closed the day on a positive note. With a slight moderation in the inflation data and the expectation that the Central bank would take measures to tame the rupee and the current account deficit, the broader indices witnessed an upsurge. The BSE Mid Cap and BSE Small Cap stocks were also seen in favor today and the respective indices stood higher by 0.13% and 0.41% respectively. The BSE Sensex closed higher by 257 points and the NSE-Nifty was seen up by 78 points.

On the global front, most of the Asian indices closed the day on a firm note and the European indices too have opened the day in green. The rupee was trading at Rs 61.64 to the dollar at the time of writing.

As per leading financial news daily, the wholesale price inflation or WPI has declined to a five-month low of 6.16% during the month of December as against 7.52% in the previous month. This was primarily due to a fall in inflation in food articles. The food articles inflation was down to 13.7% in December from 19.9% in the preceding month. While the overall vegetable prices have gone up, the pace of increase has been on the lower side.

Moreover, with steep fall contraction in industrial output by 2.1% in November, the worst performance in past six months, the industry expects policy arte reduction to help boost growth. With the moderation in inflation dynamics, the Reserve Bank of India (RBI) definitely has a room to ease interest rates and prop up growth. In the previous Monetary Policy last month, the RBI had left the key policy rates unchanged on expectations that wholesale and retail inflation would ease. As per a ratings agency, the WPI and CPI (consumer price index) inflation is expected to remain in the range of 6.5-7% and 9-10% respectively in the next two months in the absence of any eternal shock. Therefore, it would be interesting to check the Central Bank's stance in the next quarterly monetary policy review scheduled 28th January 2014.

Barring few such as City Union bank, Karur Vysya bank, ING Vysya Bank and J&K Bank, all the remaining stocks from the Private banking space were seen in favor today with Kotak Mahindra Bank and Federal bank leading the pack of gainers.

As per leading financial news daily, YES bank, the private sector lender has declared its third quarter earnings review today. While the bank's net profit jumped 21.4% YoY, the asset quality weakened. The higher earnings growth came on the back of strong other income performance during the quarter. The other income grew 23.9% YoY to Rs 3.9 bn owing to consistent growth across all fee-income streams. The Net interest income or NII rose 14% YoY and the bank continues to maintain steady and cautious growth in advances. The loans, therefore, grew by 14.7% YoY and the deposits reported 20.7% YoY growth during the third quarter. The net interest margins (NIMs) remained unchanged at 2.9% during the third quarter vis-a-vis previous quarter but was seen down by 10 bps YoY. However, the gross NPAs have more than doubled to 0.4% as against 0.17% a year ago. Therefore, while the earnings performance during 3QFY14 stood fairly satisfactory for Yes bank, the deterioration in asset quality came as a disappointment.

By the way, we have now started accepting registrations for The Equitymaster Conference 2014. With Mr Ajit Dayal being the keynote speaker and the theme being 'Beyond Uncertainty' we are looking forward to an engaging session on 1st February 2014.