Weak macros dent equity markets

Submitted by alvin on Sat, 2016-08-20 18:27 Mumbai: Unable to withstand the jitters of weak domestic macro-economic data and increased chances of a US rate hike, Indian equity markets traded with volatile sentiments to end on a flat-to-negative note in the just-concluded week. Although the curtailed trading week witnessed a substantial inflow of foreign funds and value buying at lower levels, the markets fell prey to profit booking and a weak rupee, following certain major domestic and global cues. The 30-scrip sensitive index (Sensex) of the BSE edged down 75.40 points or 0.27 per cent during the week to end at 28,077 points. Similarly, the wider 51-scrip Nifty of the National Stock Exchange (NSE) slipped by 5.25 points or 0.06 per cent to 8,666.90 points. "For last few weeks, we have seen that markets have been operating in a range and there is a fine balance between push and pull. This week, the range was even narrower and it continues to remain a tough fight between the bulls and bears," Pankaj Sharma, Head of Equities, Equirus Securities,said. "The big development locally was the announcement of merger ratios for State Bank of India (SBI) with its associates," Sharma said. "The market reaction to this was positive and it is expected that there are a lot of operational synergies which can be unleashed by cutting unnecessary infrastructure and expenditure." The benchmark indices started off the previous week on a negative note as investors were disappointed after key macro-economic data released by the government showed an acceleration in India's annual rate of inflation based on wholesale prices (Wholesale Price Index). Other key data -- Index of Industrial Production (IIP) for June and Consumer Price Index (CPI) for July -- which were released after market hours on Friday last week, also weighed heavy on investors' sentiments. According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, Indian equity markets traded with volatile sentiments during the week mainly due to profit booking at higher levels from traders. "Sentiments came under pressure after India's wholesale price index inflation rose at a faster-than-expected pace in July, gaining over three per cent from 1.62 per cent in June 2016," Desai said. "However, the Index of Industrial production (IIP) growth surged to 2.1 per cent in June as compared to 1.1 per cent in May, but remained much below the 4.2 per cent growth reported in June 2015, indicating a poor performance of manufacturing sector." However, the markets were able to regain momentum as the minutes from US FOMC's (Federal Open Market Committee) July meeting revealed differences of opinion over raising interest rates. "Expectations that the central banks would continue to support markets and the Federal Reserve would not hike interest rates anytime soon supported global markets at lower levels. Commodities, especially crude prices that entered bull market too supported the sentiments," said D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors. Another major factor that buoyed investors' confidence was the development on the proposed SBI merger ratio for taking over four banks -- three of its associate banks as well as the Bharatiya Mahila Bank (BMB). "Some support came with Moody's report on emerging markets highlighting that India is seeing gradual progress on reforms and the country's outlook will largely be determined by domestic factors," Desai added. The ratings agency, in its latest assessment of the global economy, retained India's growth forecast at 7.5 per cent for 2016 and said that the outlook for emerging market economies has stabilised. Sentiments also got some support from India Meteorological Department (IMD) reports that monsoon rains in India were 15 per cent above average in the week ended August 10. Nonetheless, a weak rupee subdued the equity markets, despite healthy foreign money inflow by foreign institutional investors (FIIs) in the domestic market during the week. The rupee depreciated on a weekly basis, weakening by 17 paise to 67.06 against a US dollar from its previous close of 66.89 on Aug 13. Provisional figures from the stock exchanges showed that the week witnessed a significant influx of foreign funds worth Rs 1,256.89 crore. Figures from the National Securities Depository (NSDL) disclosed that foreign portfolio investors (FPIs) were net buyers of equities worth Rs 2,874.23 crore, or $ 430.06 million, on August 16, 18 and 19. Among the individual Sensex stocks, SBI was the top gainer (up 13.90 per cent at Rs 258.50), followed by Adani Ports (up 7.65 per cent at Rs 273), Tata Steel (up 6.46 per cent at Rs 392.30), Cipla (up 6.17 per cent at Rs 555.55) and ICICI Bank (up 4.81 per cent at Rs 254). The losers were led by Infosys (down 5.20 per cent at Rs 1,021.10), Wipro (down 4.25 per cent at Rs 520.60), Tata Consultancy Services (down 3.71 per cent at Rs 2,603.95), Sun Pharmaceuticals (down 3.24 per cent at Rs 782.70) and Asian Paints (down 2.92 per cent at Rs 1,111).(IANS)