Markets Await Budget 2019
Indian benchmark indices have maintained their composure despite the negative headwinds coming from an expected populist budget in view of the farm crisis and political compulsions. The earnings of major index companies were in-line with market estimates, thereby helping the market resist a steep fall. The BSE Sensex hovered around the 36,000 level during the fortnight, while Nifty50 swung between 10,800 and 10,660 levels.
The broader market indices made a grimmer picture with the BSE Mid-cap and Small-cap losing 3.26 per cent and 4.11 per cent, respectively, during the fortnight. On the sectoral front, other than the BSE IT index which managed to post a 5.24 per cent gain, all indices lost ground with BSE Auto and BSE Power dipping the most, down by 6.78 and 4.71 per cent, respectively. Other indices such as Metal, FMCG, Realty and Bankex lost by 3.57, 2.52, 2.35 and 1.38 per cent, respectively, during the fortnight.
The global markets were rather upbeat recently, with the Donald Trump administration in the US managing to strike a temporary deal with their Democratic counterparts to end the US government shutdown, albeit for two weeks. In Europe, the Theresa May government survived a no-confidence motion amidst the rejection of her Brexit deal. The British parliament is in a Catch-22 situation, wherein it can neither disagree to leave the EU, nor agree to the terms of exiting the EU. Also, hopes of progression in the US-China talks helped the international markets. The US indices Dow Jones Industrial, Nasdaq and S&P 500 gained by 3.09 per cent, 2.77 per cent and 2.64 per cent, respectively, during the fortnight. The Brexit deal loss caused UK’s FTSE100 to drop by 1.57 per cent, while the German DAX and the French CAC40 were up by 3.62 per cent and 3.02 per cent, respectively. The Asian markets as always, followed their US counterparts and posted positive gains for the fortnight with Hang Seng, Japan’s Nikkei and Shanghai Composite index gaining 3.38 per cent, 2.03 per cent and 1.88 per cent, respectively.
Institutional trading data showed that FIIs were net sellers to the tune of Rs 2,510.29 crore, while DIIs were net buyers with an inflow of Rs 1,906.97 crore during the fortnight.
Going ahead, Indian markets can ride on the fact that crude oil prices are seeing a downtrend due to increase in the US supplies. Brent crude oil futures were near US$60 per barrel during the fortnight. However, the political crisis in Venezuela can decrease crude oil supplies to the international market, albeit to a small extent.
Moreover, as political mud-slinging between the ruling NDA and the now united opposition intensifies as the general election nears, questions about India’s economy, integrity of the financial sector, industrial and GDP growth cropping up in every other debate in the media may create negative ripples in the market. One such tremor was experienced by the equity markets when the stocks of ICICI Bank and Zee Entertainment (ZEEL) dropped recently. The stock of ICICI Bank witnessed selling pressure when the CBI mentioned its former CEO Chanda Kochhar in an FIR for conspiring with Videocon promoter Venugopal Dhoot to cheat the bank. ZEEL was punished when news reports suggested that its parent company Essel Group has links to a company, Nityank Infrapower, which is being investigated for fraud during demonetisation. The fear of political uncertainty post the election results and the worsening global trade scenario are forcing investors to stay away from the markets.
