If this week’s lows hold and Nifty closes above 8,030, it may recover some of this month’s losses
The S&P BSE Sensex closed the week that ended on 12th June at 26,425 (down 343 points or 1.28%), while the NSE’s CNX Nifty closed at 7,983 (down 132 points or 1.62%). Previous week we had mentioned that 50-stock Nifty continues to remain weak and a close above 8,200 is needed for the down move to end temporarily.
The 50-stock index opened Monday marginally higher at 8,124 and immediately hit the day’s high, but later was pulled lower. The benchmark moved down gradually and closed in the red for the sixth consecutive session. That day, oil cartel Organization of the Petroleum Exporting Countries (OPEC) had decided to keep its collective output level unchanged at 30 million barrels a day. This was the second time in six months that it decided to take no action amid a global glut of crude and weak oil prices.
The Reserve Bank of India (RBI) on Monday issued a notification allowing banks to seize control of a company if a debt restructuring fails and sell their stake in the defaulting firm to recover dues.
On Tuesday, the Nifty moved in a narrow range for the entire session. Railway Minister Suresh Prabhu said that the Indian government will invest Rs8.5 lakh crore over the next five years to develop India’s railway services. This is expected to kickstart related manufacturing.
This downtrend in the Nifty was broken on Wednesday as the 50-stock index gained 102.05 points (or 1.27%) to close at 8,124.45. Sugar stocks had something to cheer about that day. The Union Cabinet approved Rs6,000 crore interest-free loan to sugar mills for making payments to cane farmers. Cane arrears amounting to Rs22,000 crore of farmers are still pending. Sugar prices both in domestic and global market have fallen to the lowest levels in the last six years. India's sugar production is estimated to touch all time high of 28.3 million tonnes (MT) in 2014-15.
The RBI laid down draft rules for companies to sell rupee bonds offshore, setting a limit on the price of the bonds at 500 basis points above government bonds of similar maturities. The price cap is not particularly restrictive, but the appeal of the bonds to offshore investors is likely to be limited for now, analysts said. The value of the rupee is uncertain as an increase in US interest rates begins to look more likely.
On Thursday, the 50-stock benchmark opened in the green and immediately hit the day’s high. This was followed by Nifty making a gradual down move. The benchmark lost 159 points and closed Thursday near the day’s low.
India is on the path to emerge as the fastest growing economy on the World Bank’s growth chart of major economies for the first time. In its latest report, the World Bank expects India to grow at 7.5% in 2015, outpacing China, which is poised to grow at 7.1%. The collapse in commodity prices has been a boon for the country. Concerns over the current account deficit, fiscal deficit and inflation have all dissipated with the fall in oil prices. This, coupled with reforms has raised confidence in the economy adds the report.
On Friday, the US government has reportedly opened an investigation against two of the biggest Indian outsourcing companies for possible violations of H1-B visa rules. The Department of Labour has opened the investigation against Tata Consultancy Services (TCS) and Infosys Ltd for possible violations of rules for visas for foreign technology workers under contracts they held with an electric utility Southern California Edison. The move by the Labour Department comes days after reports that hundreds of employees at entertainment giant Walt Disney were laid off and replaced with Indians holding H1-B visas.
India's financial market regulatory framework on Friday got the top-most ratings from the global bodies of banking and capital market regulators, with RBI and SEBI being rated better than their peers in China and the US. In the latest global 'assessment study' of the regulatory framework for financial market infrastructures across the world, only six countries, including India, have got the highest score of 4 for all eight parameters on a scale of one to four. The other five countries are Australia, Brazil, Hong Kong, Japan and Singapore. The 'Rating Level 4' means that RBI and Sebi have all regulatory measures "fully in force".
The CNX Nifty closed Friday at 7,982.90.
For the week, Nifty has closed down 1.62%. Over the week, the S&P BSE Sensex has closed down 1.28% at 26,425.
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were: