The News International Team
Global rating agency S&P’s outlook upgrade came as a sigh of relief for the Indian equity benchmarks. It helped indices trim losses for the week triggered by geopolitical tensions, Supreme Court’s coal verdict, deferment of gas pricing and FIIs selling.
The 30-share BSE Sensex fell 464.1 points or 1.7 percent to close at 26626.32 and the 50-share NSE Nifty lost 152.6 points or 1.9 percent to 7968.85 while the broader markets hit badly. The CNX Midcap and BSE Smallcap indices were down 3.7 percent and 6 percent, respectively.
Though the market corrected, Helios Capital founder and fund manager Samir Arora said the market was not expensive, but investors had to be choosy about what they were buying.
“The event type returns related to the election and the success of Mr Modi in the elections are over; it is now a more regular market – regular market means that there is a cyclical upturn happening, inflation is declining, current account deficit is in control and next year, there may be interest rate cuts,” he added.
The recovery on last day of the week may also be an indication that the market will closely watch Prime Minister Narendra Modi’s US visit that will start in early morning on Saturday. But experts believe this could be a non event for the market as according to them, domestic growth led by implementation of reforms and the next Union Budget are very important factors than these visits.
Ruchir Sharma, Head of Emerging Markets and Global Macro, Morgan Stanley Investment Management dismisses all the hoopla about Prime Minister Narendra Modi’s maiden visit to the United States.
“All the investment talks in US will be just that – talks and slogans. But from a domestic policy perspective, the second year beginning with the Budget will be critical for the government,” he said.
Arora feels Modi should focus on some of the domestic issues like goods and services tax after he is back from the US.
Sharma believes that the Sensex hitting a year-end high of 30000 is unlikely as the global economic environment is not conducive for the market rally.
Events of the week
Apart from poor European flash PMI data on Tuesday and weak US housing data on Monday, geopolitical tensions hit global equities too. The US and five Arab allies on Tuesday carried out the first strikes against Islamic state militants in Syria. The Pentagon said warplanes, drones and tomahawk missiles were used in the attacks, which targeted several ISIS held areas.
On the home turf, foreign institutional investors sold more than Rs 3,500 crore worth of equity shares during the week. Even there was major outflow of funds from emerging markets due to profit taking.
Supreme Court on Wednesday announced verdict on coal block allocation case. It cancelled 214 (out of 218) coal blocks, and exempted four blocks including allocations to Sasan UMPP and NTPC and SAIL.
The apex court gave six months time for government to make alternate arrangements. Attorney General said Rs 295 per tonne penalty was imposed on all cancelled block holders.
Cabinet committee on economic affairs deferred gas pricing to November 15 on Wednesday evening.
Even the expiry on Thursday was not good for the market. The Nifty, which failed to hold the 8000 level on expiry day for September derivative contracts, fell for the first time in last eight series.
Standard & Poor’s Ratings Services on Friday revised its outlook on India to stable from negative . However, earlier in April 2012, the rating agency had cut India’s outlook to negative.
It affirmed ‘BBB-‘ long-term and ‘A-3’ short-term unsolicited sovereign credit ratings on India. It also affirmed transfer and convertibility assessment of ‘BBB+’.
“India’s improved political setting offers a conducive environment for reforms, which could boost growth prospects and improve fiscal management. Its external position is a key credit strength and well-entrenched democratic political system is another credit support,” it reasoned.
The rating agency said it could raise the rating if the economy reverts to a real per capita GDP trend growth of 5.5 percent per year and fiscal, external, or inflation metrics improve.
Stocks in action
All sectoral indices except FMCG closed in red. Bank Nifty fell 3.4 percent and CNX PSU Bank index tanked 7 percent due to huge exposure to mining and related sectors.
BSE Realty lost the most among indices, down 8.2 percent followed by Capital Goods, Metals, Power and Oil & Gas with 3-5 percent. However, BSE FMCG bucked the trend, up 2.3 percent.
Among stocks, JSPL tanked 12.6 percent due to de-allocation of blocks. BHEL, PNB, Tata Steel, Asian Paints, ICICI Bank, Reliance Industries, Bank of Baroda, DLF, SBI and ACC were down 5-9 percent.
However, ITC, HCL Technologies, HUL, ONGC, Mahindra and Mahindra and HDFC Bank outperformed, up 1-3 percent.
In the midcap space, Usha Martin, Suzlon Energy, Jayaswal Neco, Prakash Industries, Sasken Communications, JP Associates, Unitech, Andhra Bank, GMR Infrastructure and Allahabad Bank crashed 16-38 percent.
For the next week, the key events to watch out for would be Prime Minister Narendra Modi’s event and September auto sales numbers.
Next week will be truncated week as the market will have three trading sessions followed by two-day holiday.