Finally the market stabilised in the week gone by, following calmness in peers especially in China where measures were taken to curb fall. Overall there was a global consolidation ahead of Federal Reserve’s two-day meeting beginning September 17.
During the week, the Sensex gained 1.6 percent and Nifty rallied 1.7 percent on short covering in most beaten down stocks (especially in banks, infrastructure, oil, metals and autos). It was after a massive 11 percent slide in previous four consecutive weeks due to slowdown in China and huge outflow of foreign money. Global indices gained around 1-1.5 percent during the week.
Foreign institutional investors net sold more than Rs 23,500 crore worth of shares since September, out of which nearly Rs 15,000 crore worth of selling was seen during August 21-27. On other side, the market has consistently been getting support from domestic institutional investors as they bought around Rs 22,500 crore worth of shares since September on strong economic fundamentals and on hopes of earnings recovery towards the end of FY16.
In the truncated week ahead, Fed’s move will be keenly watched. Majority of market experts as well as economists do not expect a rate hike especially after (recent) lower-than-expected non-farm payrolls data and diminishing China woes. Hoever, they still expect a major indication from Fed on rate hike.
President of Sri-Kumar Global Strategies, Komal Sri-Kumar (in an interview to CNBC on September 10) said he expects the central bank to delay rate hike until 2017. He believes financial markets are underestimating the global impact of a slowing China and an ongoing currency war touched off by the Fed’s extraordinary monetary policies.
Back home, even though (by surprise) Fed hikes rate, it won’t have much impact on Indian equities, feel experts.
“I don’t worry about US. A quarter percent hike, it doesn’t matter. It is not that I don’t care, there is enough evidence of the last whatever number of cycles you can see where after the first interest rate hike the market is actually up some 20-30 percent,” said Samir Arora of Helios Capital in an interview to CNBC-TV18 (on September 10).
Dhananjay Sinha, Head of Research, Emkay Global Financial Services said RBI’s rate decision would largely depend on after effects of Fed policy. Domestic restraints for RBI such as inflation and transmission of interest rates to banking sector have sort of turned favourable for a 25bps rate cut, he added.
Aditya Birla Money said although flows may remain volatile and keep pressure on the Indian stock markets in short term, but the situation is shaping up well for India from medium to long term perspective.
The brokerage believes falling crude and other commodity prices, strong forex reserves, healthy GDP growth of India, low inflation, moderation of growth in other emerging countries, etc are the major developments that shall be positive for India from medium to long term perspective.
Brent crude oil prices declined more than 2 percent to settle at USD 48.14 a barrel during the week after Goldman Sachs in its recent note said crude oil prices could fall as low as USD 20 a barrel.
July industrial output data (on Friday) was better than consensus at 4.2 percent (against forecast of 3.5 percent) compared to 4.4 percent in June. India’s current account deficit narrowed to USD 6.2 billion (1.2 percent of GDP) in April-June quarter from USD 7.8 billion (1.6 percent of GDP) in the year-ago period while balance of payments surplus rose marginally to USD 11.4 billion in Q1FY16 from USD 11.2 billion in same quarter last year.
Other major event to watch out for next week would be consumer price index inflation for August, which is expected to at 3.47 percent against 3.78 percent in July (according to a CNBC-TV18 poll).
India markets will remain closed on September 17 for Ganesh Chaturthi holiday.
Other global events would include the outcome of Bank of Japan’s two-day meet outcome, Australia’s RBA minutes (September 15) and China Home price index (September 18).