Passage of key bills to determine equity markets’ movements (Market Outlook)

Mumbai, Dec 21 (IANS) The government’s efforts to pass key bills during the remaining three days of parliament’s winter session, coupled with foreign investors’ interest, are expected to set the trajectory of the Indian equity markets in the upcoming week.

According to market watchers, after the US Fed’s 25 basis points rate hike, investors will now return their focus back to domestic triggers like the concluding part of the winter session.

“Developments in winter session, interest of foreign portfolio investors (FPIs) and trends in commodity prices globally will dictate trend on bellwether indices,” Gaurav Jain, director with Hem Securities told IANS.

Parliament’s winter session is scheduled to conclude on December 23 and the GST (Goods and Services Tax) has been delayed. This will negatively impact sentiments during the short-medium term, analysts cited.

“With the US Fed’s uncertainty out of the way, markets will now focus more on domestic issues and the earnings for third quarter of the current fiscal,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

“The executive reforms momentum will also be tracked closely.”

Nevertheless, investors will now hedge their hopes on government getting three other critical bills passed through the parliament.

“After the US Fed we can also expect the participation to improve and this should lead to more stability,” James said.

Investors participation in the cash markets segment during the first week of this month was seen upwards of Rs.19,000 crore across exchanges, however, the daily figures slid to sub-Rs.16,000 crore just before the FOMC and rose back again to Rs.20,000 crore post the US Fed’s announcements.

This trend is expected to continue elaborated James adding that investors will now focus back on the Reserve Bank of India’s (RBI) next policy meet and inflation trends.

“The FOMC signal that the further rate hike would be moderate, has some investors, even factoring in the chances of more easing action from the RBI, provided inflation remains under check,” James added.

Nevertheless, the trends in FPI investments will have a major bearing on market trajectory, given the fact that they had taken out Rs.23,352 crore during the period between August-September. In November alone, the foreign investors off-loaded stocks worth around Rs.9,000 crore.

“A dovish tone from the US Fed stating that future rate hikes will depend on global scenario or if the US economic conditions persist helped buoy sentiments,” Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services, told IANS.

“This might lead to the greater inflows as unlike last US Fed rate hike, when emerging markets were on a growth path. But this time we are seeing faltering economies. Though India is better placed.”

After the FOMC meet, the relentless selling by foreign investors in the Indian equity markets halted during week ended December 18.

The National Securities Depository Limited (NSDL) figures showed that the FPIs were net buyers during the week ended December 18. They bought Rs.544.23 crore or $83.32 million in equity and debt markets from December 14-18.

The data with stock exchanges showed that the FPIs bought stocks worth only Rs.19.4 crore in the week ended December 18.

“With no significant domestic triggers and the uncertainty of the rate hikes behind us, we expect markets to consolidate at current levels. Also with the holiday season coming up, FIIs (Foreign Institutional Investors) flows could taper towards the year end resulting in reduced volatility,” Vaibhav Agarwal, vice president and research head at Angel Broking, told IANS.

The Indian equity markets will remain close on December 25 on account of Christmas. The currency derivative segment will remain closed to observe Id-e-Milad on the coming Thursday.

For the week ended December 18, short coverings and value buying at lower levels pushed both the bellwether indices of the Indian equity markets higher by nearly two percent each.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), rose 474.79 points or 1.89 percent to 25,519.22 points from its previous weekly close at 25,044.43 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) gained during the week ended December 18. It ended higher by 151.5 points or 1.99 percent to 7,761.95 points.

(Rohit Vaid can be contacted at rohit.v@ians.in)

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