Indian equity markets slip on cheap oil (Weekly Review)

Mumbai, Jan 23 (IANS) Receding crude oil prices, combined with bearish global cues and a plunge in the rupee value, dented the Indian equity markets during the just-concluded weekly trade.

Selling frenzy by foreign investors, coupled with falling exports and dwindling global growth, led both the bellwether indices to close the week on a flat note.
Nevertheless, during the intra-week trade, both indices had touched levels previously seen during May, 2014.
The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE) closed flat — 19.38 points or 0.07 percent down — to 24,435.66 points.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) declined marginally by 15.35 points or 0.20 percent to 7,422.45 points.
During the week, both indices fell in three out of five trading sessions. This receded the barometer index to a new 52-week low– twice in the just concluded weekly trade.
The broader markets, too, declined in line with the headline indices, as relentless selling took place in high beta stocks.
Sector-wise, all major indices recovered their initial losses in the latter part of the week to end on a flat note, barring the media and metal indices.
The Indian bellwethers were pushed south by a number of domestic and global negative cues such as the Chinese economic crisis.
Selling pressure was stoked by disappointing December exports’ data, which touched a 13-month low.
Further, investors’ confidence was eroded after the International Monetary Fund (IMF) slashed its global growth forecasts for the third time in less than a year.
“Bearish global cues, plunge in the rupee value and continuous weakness in crude oil prices pulled down Indian markets throughout the week,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
However, a relief rally on Friday helped the bellwether indices to pare their losses.
Vaibhav Agarwal, vice president and research head at Angel Broking, said: “The markets ended the week on a flat note after the ECB (European Central Bank) hinted at further stimulus at its next meeting in March.”
In addition, stiffening of crude oil prices, which edged-up around $30-level from lows of $26-mark accelerated buying activity.
“Week ended with recovery all over the globe due to oil prices rebounding from a 12-year low, posting their biggest daily gain this year,” noted Dhruv Desai, director and chief operating officer at Tradebulls.
Nitasha Shankar, vice president for research with YES Securities, cited that buying activity at lower levels also supported the upward movement of markets.
“Indian markets ended an extremely volatile week on a flattish note. Further, headline index Nifty has formed a ‘hammer candlestick’ on the weekly chart indicating buying at lower levels,” Shankar noted.
Besides, a strengthening rupee restored investors’ risk taking appetite.
Even the clarification from Chinese Vice President Li Yuanchao that the country has no plans to pursue a devaluation policy cheered investors.
On a weekly basis, the rupee closed flat at 67.63 (January 22) to a US dollar from its previous close of 67.63 to a greenback (January 15).
However, it touched a 28-month low of 68.17 to a US dollar — its weakest level since early September 2013 during the intra-day trade on January 20.
The weakness in the rupee value indicates the massive foreign funds outflow from the Indian equity and debt markets.
This was evident as foreign portfolio investors (FPIs) were net sellers during the week under review.
The National Securities Depository Limited (NSDL) figures showed that the FPIs were net sellers during the week ended January 22 2016. They divested Rs.8,836.59 crore or $1.30 billion in the equity and debt markets from January 18-22.
Similarly, the data with stock exchanges showed that the FPIs sold stocks worth Rs.4,634.64 crore in the week under review.
Nevertheless, the data further showed that DIIs bought stocks worth Rs.5,986.56 crore.
“While global factors influencing the local markets are causing significant headwinds and as a result foreign investors continue to remain sellers,” pointed-out Pankaj Sharma, head of equities for Equirus Securities.
“One silver lining is that domestic investors largely see the correction as a buying opportunity and go long on select picks, when valuations are less demanding.”
(Rohit Vaid can be contacted at [email protected])