Markets Take A Breather After The Run-Up
Markets experienced tremendous swing that lasted for seven consecutive sessions this fortnight. This can be seen as one of the many mood swings that are expected in the run-up to the polls. Once again, the BSE Sensex and Nifty outperformed their global peers by gaining close to 4 per cent. Much of these gains can be attributed to the optimism about a stable government and the comeback of the FIIs. The fortnight also saw bouts of profit-booking at higher levels.
Banking stocks and index heavyweights were the frontrunners of the March rally, while auto stocks were reeling under selling pressure with production cuts announced by major auto companies. Participating in the broad-based rally, the sectoral indices BSE Mid-Cap and BSE Small-Cap gained 1.84 per cent and 1.58 per cent, respectively. The sector that was buzzing the most and registered humongous gains was BSE Realty with a gain of 12.65 per cent, followed by Bankex which was up by 6.64 per cent and BSE Power, up by 4.35 per cent, while the BSE IT, BSE Metal indices gained by more than a per cent.
India Inc was a happening place this fortnight with loads of new developments. On the one hand, the Jet Airways lenders found no takers for the ailing company and, on the other hand, a one-sided corporate love story brewed between L&T, the suitor and the unimpressed Mindtree promoters, who are seeking non-strategic investors instead of yielding to a hostile takeover bid by the mammoth conglomerate. Also, Ericsson, the operational creditor of Reliance Communication (RCom), was in the limelight as it managed to beat the banks in recovering its dues from RCom.
Internationally, the US markets turned jittery on concerns about an imminent slowdown in the global economy as the US bond yield curve inverted for the first time after 2007. The downtrend was triggered by a contraction in France and German PMIs. The manufacturing index indicated a slowdown in Eurozone, which in part can be attributed to global trade war concerns and a slowdown in China. Major US index Dow Jones Industrial gained marginally by 0.20 per cent, while S&P 500 and Nasdaq indices gained 2.10 per cent and 3.17 per cent, respectively, during the fortnight. The European indices were mixed, reacting to the dismissal manufacturing outlook. The London-based FTSE 100 was up 1.45 per cent, while the German DAX was down by 0.82 per cent and the French CAC 40 was up 0.74 per cent in the fortnight. Overall, the Asian markets were positive, with Hang Seng up by 3.13 per cent, followed by Japan’s Nikkei, which gained 2.86 per cent, and Shanghai Composite gaining 4.52 per cent.
Consequent to the global recessionary fears and decline in the number of active US oil rigs, the crude oil futures were moving southwards. This despite the supply cut by OPEC producers and US sanctions on Iran and Venezuela. Brent Crude futures were trading at US$66.74 per barrel during the fortnight.
The FIIs’ love for the Indian banking stocks knew no bounds this fortnight. Their buying helped the benchmark indices and the Bank Nifty hit record highs during the fortnight. FIIs bought heavily into the stocks of leading private banks. The foreign institutional investors (FIIs) trading data indicated that FIIs were net buyers, while the domestic institutional investor (DIIs) were net sellers. FIIs were net buyers to the tune of Rs.22877.12 crore, while DIIs were net sellers with an outflow of Rs.12,394.12 crore, during the fortnight.
Taking new positions and profit-booking are both expected to go hand-in-hand in the run-up to the polls. The markets are expected to have their own rally amidst the election rallies, campaigning and the public mudslinging between the two leading political parties and their respective allies. Markets will take their own course as our political leaders try to outscore and outlast each other in the minds of the electorate.
