Indian equity markets gave way to the bears during the truncated trading week ended Friday, as investors' sentiments were eroded by speculation of a possible US rate hike and weak macro-economic data.The key indices ended with losses of more than half a per cent each, although they showed some recovery on the last day of trade on the back of short covering and value buying at lower levels.The 30-scrip sensitive index (Sensex) of the BSE closed the week's trade with a loss of 198.22 points or 0.69 per cent at 28,599.03 points.Similarly, the 51-scrip Nifty of the National Stock Exchange (NSE) edged down 86.85 points or 0.98 per cent to close at 8,779.85 points.The Indian markets were closed on Tuesday on account of Eid-ul-Zuha."Global stock markets looked a bit nervous after energy consumers and producers both predicted an oil glut likely to persist well into next year," said D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors.
"However, weak US retail sales data undermined the argument that the Federal Reserve will raise interest rates next week and supported the global equity markets," Aggarwal said."Below par macroeconomic data spoiled the mood of the market participants of late. However on Friday, the domestic market rallied, tracking positive global markets after weak US data reduced the chance of an interest rate increase by the Fed at next week's meeting." The benchmark indices started off the trading week on a weak note, as the global and domestic markets remained subdued over the possibility of a US rate hike.A hike can potentially lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India, and is also expected to dent business margins as access to capital from the US will become expensive.
The Fed's FOMC (Federal Open Market Committee) will meet on September 20-21.In addition, disappointing macro-economic data -- the Wholesale Price Index (WPI) for August and the Index of Industrial Production (IIP) for July -- released during the week dented investors' sentiments.While the factory output data released on Monday showed a negative growth of (-)2.4 per cent in July, provisional data released on Tuesday showed that the annual rate of inflation based on wholesale prices (WPI) moved up to 3.74 per cent in August.Moreover, depreciation of the rupee added to the downward trajectory.The Indian rupee weakened by 30 paise to close at 66.98 against a US dollar from its previous close of 66.68 last week.However, the risk-taking appetite of investors was enhanced on the last day of trade as lower than expected economy data from the US reduced the risk of a rate hike.Investors' sentiments were also buoyed by the Bank of England's decision to maintain its policy rates and asset purchases. It also hinted at a further rate cut, if required.
Besides, expectations of a interest rate cut by the Reserve Bank of India (RBI) on the back of lower Consumer Price Index (CPI) data for August, value buying and short covering helped the key indices pare their losses.The CPI data released after market hours on Monday showed that the annual retail inflation had eased by 100 basis points to 5.05 per cent in August.In addition, domestic markets were lifted by positive macro-economic data released on Thursday, which showed that India's trade deficit declined sharply by 38.1 per cent to $7.67 billion in August 2016.According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, although the equity markets traded with volatile sentiments due to profit booking at higher levels, they witnessed good recovery from lower levels due to buying support from traders.
"Investors' sentiments got some comfort after the country's retail inflation slowed to 5.05 per cent in August, led by easing food prices, especially vegetables, and making a strong case for newly-appointed RBI Governor Urjit Patel to cut rates in the next monetary policy review on October 4, 2016," Desai said."Sentiments also got some support with report that Prime Minister Narendra Modi has reviewed preparations for roll-out of the new Goods and Services Tax (GST) regime, possibly from April 1 next year, with Finance Minister Arun Jaitley and his team making a presentation on the milestones achieved and the road ahead."Desai added that the outflow of foreign funds during the week pressurised the equity markets at higher levels.Provisional figures from the stock exchanges showed that the week witnessed an outflow of Rs 64.93 crore.Figures from the National Securities Depository (NSDL) disclosed that foreign portfolio investors (FPIs) were net sellers of equities worth Rs 1,005.08 crore, or $150.02 million from September 12-16.
Among the individual Sensex stocks, Reliance Industries was the top gainer (up 4.20 per cent at Rs 1,075.65), followed by Infosys (up 2.16 per cent at Rs 1,060.35), ONGC (up 2.05 per cent at Rs 251.30), Tata Consultancy Services (up 1.72 per cent at Rs 2,361.15) and Maruti Suzuki (up 1.52 per cent at Rs 5,565.95).The losers were led by Tata Steel (down 10.88 per cent at Rs 359.05), Tata Motors (down 6.10 per cent at Rs 548.90), Power Grid (down 5.52 per cent at Rs 175.55), Mahindra and Mahindra (down 5.44 per cent at Rs 1,408.35) and State Bank of India (down 5.06 per cent at Rs 254.40).