Nifty will bounce back sharply, around middle of next week
We had mentioned in last week’s closing report that Nifty and Sensex are still under pressure and that Nifty has to stay above 7,900 for an upmove. The major indices in the Indian stock market have declined by 4% over the week ended Friday, 4 September 2015. Investor sentiments were dented by global cues on Friday.
On Monday, the market suffered marginal losses. Despite hopes of healthy economic expansion data, the slide in Asian bourses and a weaker rupee dented the Indian equity markets during the mid-afternoon trade session on Monday. Analysts pointed out that the negative cues emanating out of Asian markets, especially due to the slide in the Chinese markets, made investors reluctant to chase stocks, even though they have declined sharply. Sector-wise, capital goods, automobile, banks, consumer durables and fast moving consumer goods (FMCG) came under heavy selling pressure.
On Tuesday, most of the indices in the Indian stock market suffered a decline of more than 2%. Almost all the sectors were trading in the red. Heavy selling pressure was seen in metal, banking, realty and consumer durables sectors. The slide in Asian markets and weak macro data sobered investor sentiments, leading the Sensex to close 2.23% down. The Q1 GDP came in at 7%, showing signs of slowing vis-a-vis the 7.5% expansion in the quarter before. But the growth was much higher than 6.7% registered in the first quarter of the last fiscal. The Nikkei India Manufacturing PMI (Purchasing Manufacturer’s Index) for the last month stood at 52.3. This was marginally down from July's 52.7. An index reading of above 50 indicates an overall increase in the manufacturing sector, below 50 an overall decrease.
On Tuesday, sector-wise, all 12 sub-indices of the BSE ended the day's trade in the red. The S&P BSE banking, automobile, capital goods, consumer durables and healthcare indices came under intense selling pressure.
The indices in the Indian stock market did not improve on Wednesday and closed with losses of 1% and higher. The initial gains of over 240 points in the S & P BSE Sensex came on the back of the government's decision that minimum alternate tax (MAT) will not be imposed on foreign portfolio and institutional investors. The bulls could not sustain their buying due to continued weakness in the Asian markets coupled with less-than-expected macro data.
On Wednesday, information technology (IT) index rose by 125.83 points, technology, entertainment and media (TECK) index gained by 54.83 points and fast moving consumer goods (FMCG) index rose by 47.82 points.
On Thursday, a rebound in global exchanges coupled with notification of the latest reform in the retrospective tax regime buoyed investor sentiments. There was a rally in the Indian stock markets and the major indices gained 1%-2% in Thursday’s trading. Further, a rebound in Asian markets and rupee's relative strengthening had also supported the markets gains, on Thursday.
Expectation of an interest rate hike in the US, strengthening crude oil prices and weakening of the rupee value together dented investor sentiments, which led to a severe decline on all the major indices on Friday. Analysts cited the upcoming US non-farm payroll data as the main trigger for the downward trajectory of the markets. The markets were nervous due to the fact that a strong macro data could influence the US Fed's rate decision expected on September 16-17. According to the US Bureau of Labour Statistics, the total non-farm payroll employment increased by 215,000 in July – with the unemployment rate at 5.3%. The US Fed is expected to announce its decision to hike interest rates after a decade or so of easy monetary regime with interest rates pegged at near zero levels during its policy meet scheduled on September 16-17.
High interest rates in the US are expected to lead away the foreign portfolio investors (FPIs) from emerging markets like India. It is also expected to dent business margins as access to capital from the US will become expensive.
Sector-wise, all the 12 sub-indices of the BSE were trading in the red. Intense selling was observed in banking, healthcare, automobile, capital goods and consumer durables stocks on Friday.
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were: