We had mentioned in last week’s closing report that Nifty, Sensex might shed some gains. The major indices of the Indian stock markets were moving sideways through the week and made small losses at the end of the week. The trends of the major indices in the course of the week’s trading are given in the table below:
On Monday, the latest official data showed India was one of the world's fastest growing economies in the March quarter, with GDP growing at a rate of 7.9%. On the other hand, making the case for a rate cut, growth in India's private sector output declined in May as manufacturing and service sectors lost momentum in conditions of softer domestic demand, while services slowed sharply to a six-month low, a business survey on performance of the services sector showed on Friday. The Nikkei Manufacturing Purchasing Managers' Index released on Thursday rose marginally to 50.7 in May from 50.5 in April.
The Indian rupee on Monday strengthened by 37 paise against US dollar during the morning trade. Opening at 66.91 to a US dollar, the Indian rupee reached a high of Rs66.88 per US dollar. On Friday, the rupee closed at Rs67.25. Experts were of the view that the rupee would further strengthen against the US dollar in the wake of poor US job data.
The accommodating monetary policy stance of the Reserve Bank of India despite a status quo on lending rates lifted the investors' mood and boosted key equity market indices on Tuesday. The RBI on Tuesday left its key policy rates and reserve ratios unchanged, concerned over the slight rise in inflation and some domestic and global upside risks that have sprung up since April. Almost all the sectors were trading in the green. Good buying was observed in fast moving consumer goods (FMCG), metal, basic materials and realty sectors. On Tuesday, the major indices of the Indian stock markets rallied and closed with gains of upto 0.87% over Monday’s close. Bank Nifty, in particular, closed 1.57% higher than Monday’s close.
To deal with any market disruption from outflows of up to $20 billion by redemption of foreign currency non-resident (FCNR) deposits, the Reserve Bank of India (RBI) would provide dollar and rupee liquidity if needed, RBI Governor Raghuram Rajan said on Tuesday. "To the extent that people have borrowed to invest in FCNR deposits that leveraged portion may not be renewed. Therefore, there could be outflows of the order of $20 billion or so," Rajan said, while announcing the Reserve Bank of India's second monetary policy review of the fiscal, leaving key interest rates unchanged. "This is something we will monitor. We will supply dollars in case of extreme volatility, but no one should take this for granted. But for sure, we have plenty of dollars that we can supply if necessary," Rajan said.
With the Reserve Bank of India (RBI) not altering policy rates, it will be only the transmission of monetary policy that would influence India's economic development and credit profile, credit rating agency Moody's Investors Service said. In a statement Moody's said the transmission will depend on a range of factors like the effectiveness of the monetary policy framework in maintaining inflation at moderate levels could be tested this year.
Key Indian equity market indices were trading in the green during the afternoon session on Wednesday. Good buying was observed in capital goods, telecom and power sectors, while selling pressure was seen in IT sector. With interest rates likely to remain at the same level until the next review, the major indices have not found the fresh impetus to turn the stock market bullish. A good monsoon and rising rural purchasing power may be the only favourable factor for the next few months.
Assuring continuity in reforms and predictable tax policies, but with a firm hand against evasion, Prime Minister Narendra Modi invited USA Inc to invest in his country to forge a win-win partnership between American innovation and Indian human resource. Speaking at a gala hosted by the US-India Business Council in USA, he also called upon rich nations to open up their economies to goods and services from emerging countries like India as they seek to make world-class merchandise not just for themselves but also for the entire globe. "India is the future human resource powerhouse of the world with a young hard-working population. In my vision, a partnership between American capital and innovation, and Indian human resource and entrepreneurship can be very powerful," Modi said. "I am convinced we can strengthen both our economies through such a partnership," said the prime minister to a packed audience that included the top brass of companies like PepsiCo, Master Card, Warburg Pincus, Lockheeed Martin, Boeing, Westinghouse, Intelsat, Emerson and 8Minute Energy.
Key Indian equity market indices were trading in the red during the afternoon session on Thursday, as technology related stocks plunged, following a negative guidance by Infosys. Good buying was observed in metal and oil and gas sectors. Selling pressure was seen in IT and technology, media and entertainment (TECK). Cues from Asian markets were in the negative and the major indices of the Indian stock markets also fell accordingly.
The US dollar dropped against most major currencies as investors lowered expectations for an interest-rate hike as early as June. In late New York trading on Wednesday, the euro rose to $1.1400 from $1.1365 of the previous session, and the British pound decreased to $1.4508 from $1.4564. The Australian dollar went up to $0.7472 from $0.7455. The dollar bought 106.86 Japanese yen, lower than 107.29 yen of the previous session. The dollar fell to 0.9587 Swiss francs from 0.9650 Swiss francs, and it inched down to 1.2711 Canadian dollars from 1.2767 Canadian dollars. Federal Reserve Chair Janet Yellen said on Monday that further US interest rate-hikes are likely on the way, but did not mention the timing of the hikes. She did not give a time-frame for raising interest rates like she did in May, which was interpreted by many market observers as "dovish".
On Thursday, the Indian rupee did not benefit from the troubles of the US dollar vis-à-vis other currencies. The US dollar was at Rs66.7755, up 0.45% in the afternoon on Thursday. Exporting companies in India are likely to come under revenue pressure. Overall, interest rates and currency markets are likely to have a bearing on FII (foreign institutional investors) investments in Indian stock markets rather than just corporate performance.
On Friday, the major indices of the Indian stock markets fell by about 0.50% or less. The markets were bearish, but buying resistance was there, as it was the last day of trading this week. Good buying was observed in power sector, while selling pressure was seen in auto and consumer durables sectors. NSE turnover was as high as 108.22 crore on Friday, and the trends of the indices were truly indicative. Overall, the share prices are still high, but the bulls are unable to force their way higher. There may be more clarity in next week’s trading when the volumes are high.