Double whammy of demonetisation, global cues spook investors (Market Review)
Mumbai, Dec 3 (IANS) Volatility marked the Indian equity markets during the just concluded weekly trade as gains made on the back of value buying and positive domestic macro-economic data were ceded due to concerns over upcoming global events and profit booking.
Although the key Indian indices made some gains on the back of the rupee appreciating and short covering, the initial thrust was lost midway during the week ended December 2.
Investors chose not to chase prices any higher, as caution prevailed over negative global and domestic cues.
While the heightened chances of a US rate hike kept foreign investors away from the markets, the question mark over the future of further reforms due to the opposition faced by the government in parliament over its demonetisation move further hampered investors’ sentiments on the domestic front.
The barometer 30-scrip sensitive index (Sensex) of the BSE slipped by 85.68 points or 0.33 per cent to close the week’s trade at 26,230.66 points.
In contrast, the wider 51-scrip Nifty of the National Stock Exchange (NSE) closed at 8,086.80 points — up 11.15 points or 0.14 per cent.
In the previous week ended November 25, value buying, coupled with expectation of a lending rate cut and macro-data showing strong economic recovery in the US, had buoyed the Indian equity markets.
The BSE Sensex had closed the week’s trade with a gain of 166.1 points or 0.64 per cent, while the Nifty had inched up by 1.55 points or 0.02 per cent.
“Volatility was witnessed in the domestic market in the week gone by. The twin shocks on November 8 of Donald Trump’s US election victory and currency crackdown in India have unleashed a wave of profit booking,” D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, told IANS.
“A concern that the recent demonetisation would depress economic growth and corporate earnings over the next two quarters spooked the confidence of the investors.”
In addition, caution prevailed globally ahead of Italy’s constitutional referendum on December 4, which will decide if the country will remain in the Eurozone or not.
“While in the Europe, investors remained vigilant ahead of Italy’s constitutional referendum on Sunday, on the brighter side, the Eurozone manufacturing purchasing manager’s index hit the highest level in November since January 2014,” Aggarwal said.
“With a revised 3.2 per cent GDP growth rate for the US economy in the third quarter and an ADP report showing 216,000 net jobs added during November, US is in fairly robust shape, making a December interest rate rise even more likely.”
According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, sentiments were buoyant after OPEC (Organisation of Petroleum Exporting Countries) ministers gathering in Vienna expressed renewed optimism about salvaging a deal to cut oil production and prop up global prices.
Besides, some posivity was infused into the equity markets by mostly positive domestic macro-data released during the week.
The eight core industrial data showed a healthy 6.6 per cent growth in October and the gross domestic product (GDP) rose 7.3 per cent in the second quarter ended September 2016.
“On the domestic front, investors’ confidence remained upbeat with a private report indicating that government is expected to meet its fiscal deficit target of 3 per cent for the next financial year on account of additional revenue from penalty on black money and deposits under the income disclosure,” Desai said.
However, prolonged foreign fund outflows throughout the week weighed on investors’ morale.
In terms of investments, provisional figures from the stock exchanges showed a huge outflow of Rs 3,179.26 crore during the just-concluded week.
Figures from the National Securities Depository (NSDL) disclosed that foreign portfolio investors (FPIs) were net sellers of equities worth Rs 3,242.33 crore, or $472.59 million from November 28-30 and on December 2-3.
During the week, the rupee appreciated by 27 paise to 68.20 against a US dollar from last week’s close of 68.47.
The top weekly Sensex gainers were: Bharti Airtel, up 5.95 per cent at Rs 318.75, followed by Hero MotoCorp (up 4.76 per cent at Rs 3,183.70), ONGC (up 4.67 per cent at Rs 291.25), Maruti Suzuki (up 4.00 per cent at Rs 5,068.45) and Gail (up 3.54 per cent at Rs 431.85).
The losers were: Tata Motors (down 4.46 per cent at Rs 433.05), Asian Paints (down 4.19 per cent at Rs 905.55), Tata Consultancy Services (TCS) (down 3.34 per cent at Rs 2,223.90), Mahindra and Mahindra (M&M) (down 2.66 per cent at Rs 1,143.85) and State Bank of India (SBI) (down 2.51 per cent at Rs 254.40).
(Porisma P. Gogoi can be contacted at email@example.com)