A Whirlpool Effect
![]()
The government has started an aggressive reforms process after its defeat in Bihar state elections. Following that, the domestic market showed some recovery after the continuous gradual slide discounting the disappointing performance of the Bhartiya Janata Party in Bihar. However, for the last couple of weeks, the markets almost remained at the same levels following other major world markets. The recent newly started geopolitical tension after the Paris terrorist attack remained a factor for concern in all the major global markets. Recently, the Turkey shootdown of a Russian helicopter near the Syrian border has escalated the geopolitical tension.
Over the last couple of weeks, the domestic market indices Sensex and Nifty 50 showed marginal increase of 0.65 and 0.59 per cent. While US market indices like Dow Jones, S&P 500 and NASDAQ too showed marginal increase of more than 0.3 per cent each over the same period, the European stock markets showed mixed bag movement over the Paris terrorist attack. However, the Indian mid-cap and small-cap indices showed considerable strength and surged by 2.37 and 2.99 per cent during the same period.
Anticipating maximum chances of US Federal reserve hiking the interest rates, the foreign institutional investors (FIIs) were selling continuously and net seller of Indian equities worth of Rs 4,044 crore. However, at the same time, the domestic institutional investors (DIIs) were net buyer of Indian equities worth of Rs 3,741 crore during the same period.
Meanwhile, the domestic macro economic data showed a mixed picture about the economy. India’s Wholesale Price Inflation (WPI) continued to remain negative while the Consumer Price Inflation (CPI) has started inching up. WPI contracted for the 12th straight month in October 2015 to a negative -3.81 per cent as compared to -4.54 per cent in September 2015. On the other hand, India’s merchandise exports fell for the 11th consecutive month in October. Exports contracted 17.53 per cent to USD 21.35 billion in October as against USD 25.89 billion in October 2014. The trade deficit marginally narrowed to USD 9.77 billion last month from USD 10.48 billion in September.
Meanwhile, the government continued to implement reforms aggressively. During the last week, CCEA approved a 10 per cent stake sale in Coal India. The IPO plan for Cochin Shipyard and interest subsidy scheme for exporters were also announced. The road ministry got an approval to revive 34 stalled projects. Direct payment of production subsidy to the farmers was also announced. Direct subsidy to farmers for sugarcane sold to sugar mills was also among the sweeteners announced.
Further, the government is likely to give attention to the demands made by the opposition party Congress on several points raised about the GST Bill. The government’s winter session is scheduled from November 26 to December 23 and the NDA government is proactively reaching out to other political parties to support the GST Bill. However, the working of the upcoming winter session will create volatility in the domestic market. The market volatility will further be exaggerated by predictions from the upcoming RBI and US FOMC meeting scheduled on December 1 and December 15-16 respectively.