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China and commodities push Indian equities south (Weekly Review)

128 Days ago

Mumabi: Slump across commodity prices - and the Chinese economy - coupled with disappointing domestic macro-economic data, plunged Indian equity markets by around two percent during the just-concluded weekly trade.

Both the bellwether indices of the Indian equity markets closed the week at a new 15-month low.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), declined by 479.29 points or 1.92 percent to 24,455.04 points from its previous weekly close at 24,934.33 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) declined during the week under review. It ended lower by 163.55 points or 2.15 percent to 7,437.80 points.

During the week under review, both the bellwether indices fell in four out of five trading sessions. This receded the barometer index to a new 52-week low-- three times in the weekly trade just concluded.

Besides, the week ended January 15, saw Sensex hit its lowest level in more than 19-months, while Nifty plunged to almost 18-months low.

Nearly, 50 percent of the stocks on the Nifty traded at or within five percent of their 52-week low.

The broader markets, too, declined in line with the headline indices, as profit booking was seen across sectors and stocks.

Moreover, the sell-off was broad based as Nifty's small and mid-cap indices lost in the range of 2.5-3.5 percent during the week.

Sector-wise, banking stocks wrer the hardest hit, followed by metals, pharma and auto sectors, whereas energy and FMCG (fast moving consumer goods) indices traded flat.

The Indian bellwethers were pushed south by the Chinese economic crisis and fears of an accelerated devaluation of the yuan.

Vaibhav Agarwal, vice president and research head at Angel Broking, said: "The new year continued to be negative for the markets in its second week as concerns over a global slowdown sparked by a fall in crude prices and negative macro data from China spooked markets."

Similar opinion was echoed by Gaurav Jain, director with Hem Securities. Jain elaborated that a slump across commodities worldwide especially crude oil and a sharp sell-off in global equities in line with Chinese markets depressed Indian markets.

In addition, volatility was spiked by diminishing hopes of an interest rate cut, as key macro-economic data points showed an acceleration in inflation trends.

The wholesale price index (WPI) and the annual retail inflation rates for December moved up.

"Data released earlier in the week had showed that CPI rose while WPI's deflation slowed down, suggesting that inflation worries persist," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

"This diminished hopes that the RBI (Reserve Bank of India) could consider easing rates further down, when it meets on February 2nd."

However, India's industrial production witnessed a contraction during the festive Diwali month in November, 2015 primarily due to a high base effect.

"IIP figures were at the lowest in 4 years, but the markets did not react too negatively given the seasonality and base effects," James noted.

Furthermore, sentiments were subdued due to a disappointing start to the quarterly earnings of India Inc.

"The numbers for industrial production and inflation were bad and two of the large caps also disappointed with 3Q (third quarter) results, HUL (Hindustan Unilever) in FMCG space and TCS (Tata Consultancy Service) in IT (information technology)," pointed-out Pankaj Sharma, head of equities for Equirus Securities.

However, markets seemed to have ignored the positives, especially the Infosys Q3 results or the healthy equity in-take by the domestic institutional investors (DIIs).

"The only silver lining was Infosys results and after a bumper 3Q performance, it looks increasingly clear that fundamentals have started to improve for the company," Sharma cited.

Moreover, a weak rupee and increased selling activity by foreign portfolio investors (FPIs) eroded investors' confidence.

On a weekly basis, the rupee weakened by 96 paise to 67.60 (January 15) to a US dollar from its previous close of 66.64 to a greenback (January 8).

The National Securities Depository Limited (NSDL) figures showed that the FPIs were net sellers during the week ended January 15 2016. They divested Rs.3,458.33 crore or $368.3 million in the equity and debt markets from January 11-15.

Similarly, the data with stock exchanges showed that the FPIs sold stocks worth Rs.4,281.89 crore in the week under review.

Nevertheless, the data further showed that DIIs bought stocks worth Rs.3,876.09 crore.

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

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