Global macro backdrop was mixed, with divergent economic data from the US, Japan and Euro area. US GDP showed strength with a 4.2% annualized growth rate for Quarter ending June 2014, giving the most promising outlook for the US. Euro area, however, continues to show poor PMI data and the economy remains in deflation mode. This prompted the ECB to cut refinance rates and deposit rates further and even planned to introduce a version of QE by October. Japan also experienced a severe contraction with a 7.1% drop in GDP yoy in the June quarter. At home, the global liquidity and lower crude oil prices aided equity market performance.
Nifty rose by 3% over the month. Industrial Production number came in at 3.4% y/y (June) and the GDP jumped to 5.7% y/y in 1QFY15. However inflation print came in higher than expected at 8% y/y(July) and much of this was contributed by a surge in vegetable prices. Sectoral performance was mixed. Pharma, IT and Auto outperformed, while Real Estate, Metals under-performed. Foreign institutional investors (FIIs) were buyers of US$ 1.1 bn over the month. DIIs also turned buyers over the month led by mutual funds.
The Wholesale Price Index moderated to 5.19% for July 2014 as compared with 5.43% for the previous month. The headline CPI inflation rose to 7.96% for July’14 from 7.46% in June'14. CPI Food Beverages and Tobacco contributed to the increase, which rose to 9.14% from 7.89 the month before mainly on account of increase in prices of Vegetables, Fruits & Milk and Milk products. On the market movement, yields rose slightly during the month due to the slightly hawkish statement of the RBI in the monetary policy. However, with good buying by domestic MFs and FIIs yields remained range bound.