ELECTION RESULTS GET A THUMBS UP FROM MARKETS

The week started on a cautious note and proceeded to progress with gains as the results of the 5 key state elections were announced. The Congress party is set to form governments in Chhattisgarh, Rajasthan and Madhya Pradesh. However, in Mizoram, Congress gave way to the MNF while in Telangana, the TRS retained power. A clear mandate in key states assuaged investor concerns and had a positive impact on volatility. During the week, Reserve Bank of India Governor Urijit Patel resigned from his post citing personal reasons. While this did temporarily have a negative impact, the swift appointment of the former economic affairs secretary Mr. Shaktikanta Das as the new Reserve Bank of India governor boosted sentiment. Domestic stocks further extended gains amid positive global cues and strong domestic economic data.

Macro-Economic Update

India's industrial production (base year 2011-12=100) surged to a 11-month high of 8.1% in October 2018, compared with 4.5% growth recorded in September 2018. The industrial production growth for September 2018 has been retained unchanged from 4.5% increase reported provisionally. Additionally, the all-India general CPI in�ation dipped to 17-month low of 2.33% in November 2018 (new base 2012=100), compared with 3.38% in October 2018. The core CPI in�ation eased to 5.71% in Novem-ber 2018 compared with 6.20% in October 2018. Additionally, the annual rate of in�ation, based on monthly Wholesale Price Index (WPI), stood at 4.64% (provisional) for the month of November 2018 (over November 2017) as compared to 5.28% (pro-visional) in the previous month and 4.02% during the corresponding month of the previous year. These positive numbers gave a further �llip to positive investor sentiment. Easing in�ation has renewed calls for a rate cut by the Reserve Bank of India as many investors are of the opinion that lower rates will help spur economic growth in the country.

Global Updates

Global shares turned positive towards the end of the week after British Prime Minister Theresa May survived a no-con�dence vote, and as China appeared to be taking more steps to meet US demands to open its markets. According to media reports, Beijing is working to increase access to foreign companies, a move aimed at smoothing US-China trade relations. The plan would replace the country's Made in China 2025 initiative, reports said. Made in China 2025 is a framework aimed at making China a leader in industries like clean-energy cars and robotics. In Europe, the European Central Bank (ECB) said that it is bringing to an end a crisis-era bond-buying program this month. Bond purchases by the ECB will fall from 15 billion euros ($17.04 billion) a month to zero by the end of December. However, the central bank does plan to spend cash from maturing bonds to purchase additional debt. The ECB also left benchmark interest rates unchanged in a meeting during the week. In the commodities market, Brent spiked up on news reports that Libyan oil production is being cut out after being taken over by local rebels. The Libyan central bank said that the daily production loss amounted to 300k barrels. Brent is currently trad-ing at ~$61.0 a barrel against 60.04 at previous Indian market close.

Institutional Activity

Heavy selling by foreign institutional investors (FIIs) during the week has been balanced by robust buying by domestic institu-tional investors (DIIs). Since 10th December 2018, FIIs have net sold Indian equities worth INR 2929 crore. On the other hand, DIIs have net bought Indian equities to the tune of INR 3179 crore, in the same time period.

Source:www.nseindia.comBloomberg.com

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WEEKLY MARKET OVERVIEW

FOR THE WEEK ENDING ON DECEMBER 14, 2018