Indian stock markets ended the week on a high note as global equities rebounded amid expectations of slower rate hikes by the U.S. Fed and easing of U.S.-China trade tensions. The rupee and crude oil prices also supported sentiments.
The key highlight for the week came from Fed chair Jerome Powell, who said rates are “just below” neutral. Investors took this as a sign that the Fed may not increase rates much further. Global bond yields fell and equities rallied.
The Nifty ended the week higher by 3.3 percent to close at 10,876 levels. Mid-cap and the small-cap indices continued to underperform even as they rose 1 percent and 0.5 percent, respectively. On the institutional activity front, FIIs turned net buyers to the tune of 23.25 billion, and DIIs also bought 25.14 billion in equities during the week.
The rupee continued to strengthen and traded below 70 against the dollar for the first time in three months. The rupee has rebounded sharply from record lows hit in October due to falling oil prices, positive FII inflows and the dovish commentary from the Fed.
Crude oil prices recorded its worst loss in 10 years in November as markets waits for the OPEC meeting on December 6 and this weekend’s G20 summit for signs that Saudi Arabia and Russia can head off a worldwide supply glut.
Back home, troubles continued to mount for Yes Bank with reports that promoter Rana Kapoor’s investment companies borrowed from mutual funds and invested the money as equity in a finance company. This led Moody’s to quickly downgrade its ratings, citing corporate governance concerns and implications of the upcoming management transition on the bank’s growth strategy. ICRA followed suit with its own downgrade. There seems no relief in sight for the lender, with shares having dropped around 50 percent so far in 2018.
NBFCs were also in focus after the RBI relaxed norms for securitisation transactions for over five-year loans by non-banking financial entities for the next six months. The move will benefit housing finance companies, infrastructure lenders, and new commercial vehicle financiers. Reduction in minimum holding period is a big positive for liquidity strapped companies.
Sun Pharma was also in the limelight after a whistle-blower alleged numerous irregularities against the company, its main promoter Dilip Shanghvi and others. SEBI is likely to reopen an insider trading case against the company and probe alleged lapses in raising of funds overseas.
India’s second-quarter GDP expanded at a slower-than-expected pace of 7.1 percent despite a lower base, compared to 8.2 percent in the June quarter and 6.3 percent in the same period last year.
December would be an extremely important one for equity markets globally as it could be a deciding factor in terms of the next market direction. For the upcoming trading week, the outcome of the G20 summit will be closely watched. Next on investors’ radar is the OPEC meeting on December 6, which would give us a sense of where oil output is headed and the outlook on demand. And then there’s the Fed meeting on December 18-19.
On the domestic front, markets are expected to react to Friday’s dismal GDP numbers on Monday. November automobile sale data will also be watched. Companies that have reported their numbers - Maruti, Honda and Ford - have all shown a decline in sales. But that’s hardly surprising as most auto companies are expected to report poor festive sales and an inventory build-up in November. And then there is the RBI monetary policy outcome on December 5. A repo rate cut is off the table as inflation is lower than the RBI’s target of 4 percent in October.
The release of exit polls of state elections on December 7 and the counting of votes on December 11 will swing markets. The election results could create volatility in the short term, which could be a buying opportunity.
Ambareesh Baliga has about 25 years of experience in the stock market and has worked with Karvy and Kotak groups in the past. He is a regular market commentator on various business channels. He is a commerce graduate from Calcutta University and a qualified cost accountant.
The views expressed in this article are not those of Reuters News.