Profit booking, negative global cues dent equity markets (Weekly Review)

Mumbai, April 2 (IANS) Profit booking, along with caution over a US rate hike and subdued derivatives expiry, depressed the Indian equity markets during the just concluded weekly trade.

Investors were spooked by the ongoing issues surrounding the domestic pharmaceutical sector and upcoming macro-economic data.

Further, negative global cues such as deflation in Europe, slowdown in China and lower crude oil prices deterred traders to chase prices.

However, dovish comments from US Federal Reserve Chairman Janet Yellen and healthy foreign fund inflows countered the downtrend and helped key indices pare their losses.

A hike in the US interest rates is expected to lead away Foreign Portfolio Investors (FPIs) from emerging markets such as India.

Besides, Tuesday’s economic reform measure to allow 100 percent foreign capital in e-commerce with some riders cheered investors.

The move is expected to benefit not just foreign multi-brand retail entities like Amazon and e-Bay, but also single-brand overseas chains like Adidas, Ikea and Nike.

In addition, hopes of a rate cut by the Reserve Bank of India (RBI) supported prices.

Investors expect the RBI to cut key lending rates on the back of the union budget’s fiscal prudence measures, reduction in small savings interest rates and low inflation.

The RBI will conduct its first bi-monthly monetary policy review for 2016-17 on April 5.

The volatile weekly trade, led the barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) to clos flat. It inched-down by 68 points or 0.26 percent to 25,269.64 points

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) slipped by 3.45 points or 0.04 percent to 7,713.05 points.

“The Fed chairwoman’s cautious note on Tuesday calmed global markets. Despite this, Indian markets’s volatility continued amidst a subdued derivatives expiry,” Anand James, chief market strategist, Geojit BNP Paribas Financial Services, told IANS.

Vaibhav Agarwal, vice president and research head at Angel Broking, pointed out that investors remained reluctant to chase prices as they feared another quarter of lower-than-expected results.

“Indian shares fell on Friday, a day after hitting a near three-month high, as investors braced for yet another weak quarter for earnings,” Agarwal told IANS.

On the global front, Asian markets took a beating by the end of week as Standard & Poor’s (S&P) cut China’s credit outlook to negative.

“Asian markets took a beating with S&P cutting China’s credit outlook, and with a bank survey showing that Japan’s big manufacturers’ business sentiment not only worsened to the lowest in three years, but is expected to worsen in the coming quarter as well,” Agarwal noted.

According to Dhruv Desai, director and chief operating officer, Tradebulls, other global cues such as negative consumer price inflation in the euro zone dented sentiments.

“The global rally extended on the voice from the Fed chair but the global risks remained, including uncertainty over China and low oil prices,” Desai told IANS.

Sector-wise, broader markets outperformed with gains of one percent led by strong buying in the high beta stocks.

“Banks and auto stocks propelled the rally this week. Bank index gained two percent while Auto index gained one percent,” stated Nitasha Shankar, vice president for research with YES Securities.

“Pharma and metal sectors remained major drags, pulling down the Nifty and Sensex,” Shankar noted.

Nevertheless, a healthy rise in foreign funds’ inflow supported prices and countered global headwinds.

“This market performance was largely driven by fresh inflows from foreign investors. So while this is not bad, the sustainability of the rally is dependant on how local factors would be able to support the markets,” elaborated Pankaj Sharma, head of equities for Equirus Securities.

During March, FPIs bought Rs.21,143 crore in the equity markets, figures furnished by the National Securities Depository Limited (NSDL) disclosed.

For the week under review, data with stock exchanges revealed that FPIs invested in stocks worth Rs.8,269.49 crore.

Conversely, the same data showed that domestic institutional investors (DIIs) sold stocks worth Rs.6,858.51 crore.

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

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