 "Bears maul markets as China dragon slumbers")
The BSE Sensex after plunging 1,650 points, the biggest fall in seven years, and the CNX Nifty after breaking its psychological level of 8,000, recovered during the latter half of the week on the back of a rebound in Chinese equities and heartening US second quarter GDP data.
For the week ended August 28, the Sensex nosedived 974 points, or 3.6 per cent, to close at 26,392, after falling to a low of 25,298. The 50-share Nifty dipped 298 points, or 3.6 per cent, to close the week at 8,002.
The broader markets also followed suit, with BSE Mid-cap and Small-cap indices dropping 457 points or 4.1 per cent and 618 points or 5.3 per cent, respectively.
Meanwhile, the FIIs were net sellers to the tune of Rs 12,565.52 crore in four trading sessions from August 24 to 27.
Rupee
The devaluation of yuan, Chinese currency, impacted the currencies of emerging markets, with Indian rupee falling to a fresh two year low of 66.71 on Monday. The demand for the greenback from banks and exporters and concerns of a foreign capital outflow amid weakness in the local equities weighed on rupee, which ended the week at Rs 66.08. Anindya Banerjee, associate vice-president - currency derivatives, Kotak Securities, said, “We can expect more reflationary policies from China which can have a negative spill over on the Asian and EM currencies. The Indian rupee can remain within a range of 65.50 and 67.00 levels against the dollar. In case, the pair moves above 67.00, the risk of a spiral towards 68.50/69.00 can arise.”
Rahul Shah, VP Equity Advisory Group, Motilal Oswal, says, “Going ahead, globally financial markets shall focus on Jackson hole gathering line up over weekend for comments and reassurance from some of the top level officials attending on the state of the global economy while key economy data lined up from US Fed shall be the crucial for the US.” He further said, “Technically Nifty looks positive and can test immediate resistance at 8,350.”
Kunal Bothra, head-advisory, LKP Securities, said, “I believe that September would be full of key events such as Fed meet, RBI mid-year policy review as well as Bihar elections, the outcomes of which could decide the near-term trend.”
Key events
The worries of a slowdown in China, which could affect the global economies, sent tremors across the world financial markets. However, the central bank of China announced the injection of 140 billion yuan into the economy on Tuesday as a band-aid to its ailing economy. The move helped Chinese equities to rebound, which in turn tried to stabilise the global markets.
Further, the US Fed Reserve hinted that the proposed interest rate hike for September now looks like a distant possibility. Also, a robust GDP data in the US for the period between April-June, which showed that the US economy grew faster than expected, has also calmed investors' nerves across the globe.
Sectors & stocks
The banking, capital goods, oil & gas and auto sectors were among the top losers during the week, dropping between three and six per cent each on the Sensex. Of the 30 Sensex stocks, 27 ended with losses while Vedanta, Tata Motors and Coal India ended with 1.7-2.5 per cent higher.
From the banking and financial space, SBI, ICICI Bank, HDFC Bank, Axis Bank witnessed profit taking to end three-seven per cent lower. In the auto space, Maruti Suzuki, Hero MotoCorp, Bajaj Auto, M&M all plunged between five-eight per cent each.
The week ahead
Macroeconomic data, trend in the global equities, movement of rupee against the dollar and crude oil prices will dictate terms on bourses for the upcoming week. India’s GDP data for the first quarter of 2015 is scheduled for release next week. The automobile companies will start releasing their sales figures for August from September 1. In the US, the non-farm payrolls data for August will be announced on Friday.