Global equities were jittery during the week due to fears of a trade war between the United States and China, which could impact industrial investments and output. President Donald Trump announced tariffs of $60 billion on Chinese imports and Beijing responded with plans for reciprocal tariffs.
The Nifty ended a tad below 10,000 on Friday, the lowest since October 2017, on widespread selling in metals and financial sectors. The rupee snapped a two-week fall to end at 65 against the dollar.
Brent crude hit $70 a barrel as heightened geopolitical tensions coincided with signs that production curbs by OPEC and Russia would continue into 2019.
The U.S Fed announced an expected 25 bps interest rate hike, taking the federal funds rate to 1.50-1.75 percent. The median forecast for 2018 remained at three rate hikes. The commentary was slightly hawkish with higher growth and interest rate projections going forward.
Global markets are increasingly worried about a rise in private borrowing rates – Libor rose to its highest levels since 2008 reaching 2.25 percent.
On the stock specific front, GAIL was in focus on reports that IOC and BPCL may buy 26 percent stake each in the gas utility. GAIL will become their subsidiary and will continue to operate as a listed company with an independent board.
SpiceJet, InterGlobe Aviation and Jet Airways were watched after air passenger traffic in February reported a 24 percent increase over the same period last year. Data released by the DGCA showed Indian airlines carried 10.7 million passengers during the month, up from 8.6 million in February 2017. IndiGo remained the market leader, carrying 39.9 percent of Indian passengers. Jet Airways came in next at 16.8 percent, followed by Air India with 13.2 percent.
ONGC was also in the limelight as crude prices jumped to a seven-month high. OMCs dipped as the rise in oil prices will lead to increase in working capital requirements and short-term debt levels.
Indian banks are increasingly disclosing frauds in the wake of the PNB sage, the latest one being Union Bank of India. Media reports said the CBI has filed a case against Hyderabad-based Totem Infrastructure Ltd for allegedly defrauding a consortium of eight banks led by Union Bank of India to the tune of 13.94 billion rupees.
The coming week is a truncated one as markets will remain closed on Thursday and Friday on account of Mahavir Jayanti and Good Friday festivals. Volatility will likely continue due to expiry of derivative contracts on Wednesday.
Mutual Fund SIPs, especially the ones initiated within the last one year, have begun to show losses. Since retail investors’ participation in domestic MFs was the main driver for markets in the past year, it will be interesting to see how they react to the recent losses. In case they decide to continue or hold their investments, the Nifty could consolidate around the 9,500 level. But if investors start exiting, we may witness panic.
However, with corporate earnings showing an uptick, valuations will turn favourable around Nifty 9500-9800 levels. We could also start seeing the benefits of GST in the next 2-3 quarters as it completes a 12-month cycle. The e-way bill could further improve collections. It’s time for those holding cash to start investing in tranches on major “down days”.
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.