Bulls Await Diwali Crackers
In a positive for the Indian economy, Brent crude oil prices cooled-off following Saudi’s pledge to fill up the gap in oil output due to Iran sanctions.
It has been a testing time for the Indian equity markets this fortnight. For a naïve investor, it might look like the Indian markets are being punished in isolation, but data shows that the global markets were down 5 per cent, when the Sensex and Nifty lost just 1 per cent in the same period. The Q2FY19 corporate earnings have been generally in-line with street expectations, thereby giving markets enough fuel to gain positive momentum.
During the fortnight, broader market indices, BSE Mid-cap and Small-cap, gained by 2 per cent despite the benchmark indices showing a negative bias. Sectorwise, the depreciating rupee and the renewed antics of the Trump administration targeting H1B visas pulled down the IT stocks. BSE IT fell massively by 6 per cent as front-runner IT stocks reported good numbers, but the other major IT players reported mixed results. The Auto index was down by 3 per cent on the back of lower sales due to reduced lending from NBFCs. The index that gained the most during the fortnight was FMCG index, which was up 4 per cent, while Power and Bankex indices were up 3 and 2 per cent, respectively. Realty moved up by one per cent, while Metal index remained unchanged during the fortnight.
On the other hand, the growing geopolitical tension arising from the murder of Saudi journalist Jamal Khashoggi is hitting the global economy with uncertainty in crude oil prices, and an emerging threat of a global boycott of Saudis, as the US and France reevaluate trade ties. These tensions pulled down the US and European markets nearly by 5 per cent during the fortnight. The Dow Jones Industrial Average and S&P 500 lost 5 per cent each, while NASDAQ was down by 4 per cent. In the European markets, the French CAC40 was down by 5 per cent, the German DAX was down 4 per cent, while UK’s FTSE lost 3 per cent, during the fortnight.
Asian markets echoed the concerns of slowing economic growth in China as the Q3 GDP figure is forecast at 6.5 per cent, lowest since the global financial crisis of 2008 on the back of increased trade friction between China and the US. The Japan-based Nikkei lost the most and was down 4 per cent, followed by Shanghai which was down 2 per cent while Hang Seng was down by 0.19 per cent during the fortnight.
The exodus of FIIs continued, but investments by domestic institutional investors failed to match up to disinvestments by the FIIs. The trading data showed that the FIIs were net sellers, with a net outflow of Rs 15,637.79 crore, while DIIs were net buyers with a net inflow of Rs. 11,782.63 crore.
In a positive for the Indian economy, Brent crude oil prices cooled-off following Saudi’s pledge to fill up the gap in oil output due to Iran sanctions. Brent crude fell below US$80 per barrel and was trading at US$76 per barrel. Following this, the Indian rupee also jumped up against the US dollar and was trading at Rs. 73.23 per dollar. With a dynamic global trade environment and the results season being in full steam, the Indian markets are expected to remain a happening place in the upcoming festive season.
