Mumbai, July 25:
The logjam in parliament, lower-than-expected quarterly results and growing concerns over an impending rise in the US interest rates subdued Indian equity markets during the week ended July 24.
The barometer index of the Indian equity markets, the 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) fell by 351 points or 1.23 percent to 28,112.31 points during the week ended July 24.
The index closed at 28,112.31 points in the week under review from the previous closing of 28,463.31 points on July 17.
The bearish movement came a week after the barometer index had gained 801.90 points or 2.89 percent during the weekly trade ended July 17.
“The logjam in the parliament has put a question mark over the government’s ability to pass key legislations like GST (goods and services tax) and land bills,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.
“The logjam may also cast a shadow over the government’s future ability to pass economic reforms.”
According to analysts, key economic data which revealed a strengthening job market in the US created volatility in the Indian markets.
In the week ending July 18, the advance figure of seasonally adjusted initial claims for jobless benefits fell by 26,000 to 255,000, the lowest level since November 1973.
Last month, the US economy added 223,000 jobs and the unemployment rate fell to a seven-year low of 5.3 percent.
Earlier, another set of data showed a rise in US home sales, which grew by 3.2 percent in June to 5.49 million.
These data points which show a recovery in the US economy just before the FOMC (Federal Open Market Committee) meet on July 29 are giving jitters to the markets.
The FOMC meet will give further clues as to when the rate hike might take place there.
With higher interest rates in the US, the FPIs (Foreign Portfolio Investors) are expected to be led away from emerging markets such as India.
“A strong jobs report in US has increased the probability of an earlier rate hike in US,” said Dipen Shah, head of private client group research with Kotak Securities.
The FOMC meet is followed by the future and options (F&O) expiry in the Indian equity markets on July 30. The Indian monetary policy review by the Reserve Bank of India (RBI) is scheduled for August 4. All these upcoming events are making the markets volatile.
The markets also expect a rate cut by the RBI during its monetary policy review as it may be the last time in this calendar year to cut lending rates before inflation spirals up again and the US Fed decides on its own rates in September.
Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS that the earnings downgrade and lower-then-expected results impacted the investors sentiments.
“The 50 percent companies in the Nifty which came out with their results have either given dismal figures or downgraded their earnings. This dampened the scenario. The earnings growth is already in a critical situation and further downgrades only adds worries,” James elaborated.
James pointed-out that the government’s draft financial code which proposes to clip the Reserve Bank of India’s autonomy impacted the banking sector and other interest rate sensitive stocks.
The code if implemented will undermine RBI’s ability to rein-in inflation. This will also discourage investors in taking risks in the future. As RBI has been viewd by many as an anchor for financial stability in the country.
Lastly, the markets were impacted by weak rupee, falling commodity prices and concerns over the monsoon rains which have been 6 percent below normal so far this month, according to IMD (India Meteorological Department).
“Weakening of rupee, oil and global commodities prices weighed on the sentiments. Falling prices of commodities across the world has signalled a slowdown. Markets were also following the progress of monsoon closely as it would be a key consideration for the RBI in its rate decision in the upcoming monetary policy review,” Gaurav Jain, director with Hem Securities told IANS. (IANS)