Indian stocks rose for the third consecutive week for the first time since August on signs that liquidity could increase and the market correction was more or less over. Benign oil prices and the rupee’s appreciation against the dollar also boosted sentiment.
Positive cues from global equities also helped Indian indices after reports emerged late Thursday that the U.S. could reach a trade deal with China during the G20 summit. The optimism was, however, tempered by heightened political turmoil in the UK, where several ministers resigned after disagreeing with PM Theresa May’s proposed Brexit deal.
The Nifty ended the week higher by 0.9 percent at 10,682. The mid-cap and small-cap indexes underperformed large-caps. On the sectoral front, banking index gained the most, with the Nifty PSU Bank index up 2.5 percent for the week. Nifty Pharma index was the top loser, down 3.5 percent. FIIs were net buyers to the tune of 35 billion rupees, while DIIs sold 15.47 billion in equities.
The rupee advanced as Brent crude continued to slide below $68 a barrel along with a decline in the dollar index. Hopes of measures to ease liquidity in the upcoming RBI monetary policy meeting has boosted confidence in bond markets, helping the Indian currency.
On the stock-specific front, Jet Airways gained 35 percent during the week after reports indicated that Tata Group is in talks to acquire the debt-laden carrier. PSU Banks were also in focus as the NCTL approved UltraTech Cement’s revised bid of 79.60 billion rupees for Binani Cement.
Reliance Industries rose on expectation that its subsidiary Reliance Jio Infocomm will raise tariffs, which will bring an end to an intense two-year price war for market share. This also led to a spike in shares of Bharti Airtel and Vodafone-Idea to around 10 percent and 16.5 percent, respectively.
Yes Bank resumed its decline (down 17 percent) after two weeks of gains following the churn in its top management. PSUs were in focus as the government looks at buybacks to meet its divestment target. The government expects to garner close to 50 billion rupees through share buybacks by public sector companies, including that of Coal India, by the end of January.
On the macro front, IIP expanded in September due to growth in sectors including electricity, mining, infrastructure and construction. It expanded at 4.5 percent in September, compared to 4.3 percent in August. CPI moderated to a 13-month low of 3.31 percent, staying below the RBI’s medium-term target of 4 percent for the third-consecutive month on favourable base effect in food prices.
India’s trade deficit widened to $17.13 billion in October from a five-month low of $13.98 billion a month back. While the widening of trade deficit is a negative, the recent fall in oil prices will ensure that the deficit is contained going ahead.
Separately, ratings agency Fitch said weak fiscal metrics continue to weigh on the country’s sovereign rating. It reaffirmed India’s ‘BBB-‘ rating, warning that “significant” policy changes were needed to reduce the general government debt level to 60 percent of GDP by March 2025.
For the coming week, movements in global equities, the rupee and crude oil prices will dictate the trend in Indian markets. The Nifty is expected to move in a narrow range in the near-term due to market volatility in the ongoing election season.
The ongoing spat between the government and the RBI has cast a spotlight on the central bank’s board meeting on Monday, which is otherwise a routine exercise.
The government hopes that the RBI will address issues related to liquidity to NBFCs and credit flow for small businesses. Discussions over the RBI’s economic capital framework would continue, and the government doesn’t expect any quick resolution on the subject. The earlier fear that RBI Governor Urjit Patel may resign seems to have dissipated.
Globally, U.S. durable goods orders data for October will be declared on November 21, while U.S. Markit Composite PMI, U.S. Markit Manufacturing PMI and U.S. Markit Services PMI for November will be unveiled on November 23.
As I have been suggesting for the past couple of weeks, markets seem to have bottomed out so it’s time to utilise available liquidity to buy afresh.
Ambareesh Baliga has about 25 years of experience in the stock market and has worked with Karvy and Kotak groups in the past. He is a regular market commentator on various business channels. He is a commerce graduate from Calcutta University and a qualified cost accountant.