Markets ended lower in a highly volatile trading week with the Nifty falling 2.65 percent to 10,030. Crude slumped 4.2 percent to a two-month low of $75 but negative global cues, disappointing quarterly results and liquidity concerns over the NBFC crisis had a negative impact on stocks.
Benchmark indices logged their seventh weekly loss in eight as liquidity shortage and a selloff by foreign investors weighed on investor sentiment. The Nifty ended the October derivative series with a massive loss of 7.77 percent over its September expiry. FIIs were net seller in cash markets on almost all trading sessions in the October series and cumulatively sold equities worth 255 billion rupees.
Yes Bank was the top loser on the Nifty, down 17 percent after its profit missed estimates on higher provisions in the second quarter. The mid-cap and small-cap indexes declined by 1.3 percent and 3.4 percent, respectively.
Globally, geopolitical issues remained over the killing of Saudi journalist Jamal Khashoggi. U.S. markets wiped out all the gains made this year as investors perceived that corporate earnings may be topping out on mixed earnings and weak housing data.
Brent oil prices retreated from the highs of $85 to touch $75 after Saudi Arabia and other producers assured that they would make all efforts to fill any potential gap in supply. As U.S. prepares to reimpose sanctions on Iran, the Chinese government has asked its two state oil companies to avoid purchasing oil from Tehran. Meanwhile closer home, retail prices for petrol and diesel were reduced by nearly 2.4 rupees and 1.5 rupees respectively in the last 10 days.
On the stock specific front, Equitas Holdings and Ujjivan Financial Services fell the most since their listing after the RBI clarified that promoters of small finance banks must list their banking units separately within three years of operation in line with the regulator’s licensing requirements. Since this will result in a dual listing of the bank and the holding company, these stocks traded sharply lower as markets began assigning a holding company discount to these companies.
Bharti Airtel was in focus after it revealed its plan to raise $1.25 billion by offering stakes in Airtel Africa to private equity players including Warburg Pincus.
On the global macroeconomic front, the IMF said a full-blown trade war could shave off more than 0.8 percent of global growth in 2020. However, the trade conflicts are also paving way for new relationships. China and Japan signed a $30 billion currency swap agreement which allows the exchange of local currencies between the central banks of the two countries. This could be the beginning of a new trend.
In India, fiscal deficit widened in the first half of 2018-19 to 95.3 percent of the budget estimate, mainly on account of slow growth in revenue collections. The deficit was at 91.3 percent at September-end of the last financial year.
For the coming week, quarterly earnings, global equity markets, crude oil, FII activity and rupee movement are expected to dictate the Indian market trend. Earnings have been a mixed bag so far and stock volatility is expected to continue amid global and domestic headwinds. If the Nifty manages to hold above 10,000- 9,950 levels, then we may see some short covering bounce in the coming days.
Some of the key corporates set to declare their numbers are BPCL, HPCL, IOC, Colgate, Tata Power, Union Bank, Bank of Baroda, Tech Mahindra, Dabur, L&T, Lupin, Tata Motors, Vedanta, HDFC, Axis Bank, NTPC and SAIL.
On the macro front, IIP data for September will be unveiled on Wednesday. Industrial production increased 4.2 percent in August, following an upwardly revised 7.3 percent rise in July. Nikkei Manufacturing PMI for October will be announced on Thursday. It rose to 52.2 in September from a three-month low of 51.7 a month earlier. Auto sales data for October will also be released during the week.
Market sentiment is so weak that any positive news flow is getting muffled. With the rupee stabilising and oil correcting, investor despondency has latched on to the possibility of a liquidity crisis due to the NBFC imbroglio. Upcoming state elections will also add to the anxiety. I would advise investors to wait on the sidelines till sanity returns to the markets.
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.
The views expressed in this article are not those of Reuters News.