Markets In Consolidation Mood

Indian markets are in consolidation mode and are waiting for the outcome of Gujarat elections. Now that the RBI has kept the interest rate unchanged, markets will look forward to the development in the global markets. The RBI statement seems to be more balanced this time around than the one in October where the central bank appeared to be concerned about inflation. 

Indian markets in the last 15 days managed to underperform the global peers even as Sensex and Nifty both climbed down by 1.7 per cent each. 

On the global front, American markets performed well. Dow Jones, with a gain of over 3.5 per cent, was the best performing global index, followed by S&P 500 which rose 2.2 per cent in the last two weeks. However, NASDAQ slipped 0.23 per cent. European markets showed mixed sentiments. France’s CAC40 outperformed its European peers with close to one per cent return. Germany’s DAX remained flat, whereas London’s FTSE 500 slid 0.61 per cent. Except for the Japanese markets, Asian stocks slipped across the board. Shanghai was down 2.44 per cent while Hang Seng was down 0.42 per cent during the fortnight amid fears over central banks tightening liquidity. Nikkei managed to post positive return of over 2 per cent during the same period. 

Locally, almost all the sectoral indices traded in the red in the past two weeks, except for the IT index which remained flat. Since November 21, Metal index has plummeted over 5 per cent followed by Bankex, which declined over 2.5 per cent. Only Small-cap and Mid-cap indices somewhat managed to challenge the bearish equity sentiment with positive returns of 0.97 and 0.20 per cent, respectively, in the two-week period. 

The FIIs have sold stocks worth Rs 4311 crore in the last couple of weeks, whereas the domestic institutional investors bought equities worth Rs 4879 crore. 

While the long-term perspective remains intact for the Indian markets, the much-awaited correction in stock prices can only make it cheaper for investors to enter the market. The Q2FY18 results have been better than estimated and going ahead it is expected that the earnings quality will improve. 

The primary market will be active in the coming days with several issues lined up and seeing active interest from the institutional investors. Indian rupee has strengthened in the past couple of weeks and is trading at its three-month high against USD. This augurs well for the importers and may not be good news for the exporters. It will be interesting to see if RBI intervenes to stabilise the rupee. 

Investors will keep a close eye on the strengthening INR and crude oil prices, along with developments in Europe over Brexit talks. The escalating tensions between North Korea and the US will be also closely tracked

The long-term perspective remains intact for the Indian markets, the much-awaited correction in stock prices can only make it cheaper for investors to enter the market. The Q2FY18 results have been better than estimated and going ahead it is expected that the earnings quality will improve.