Weekly: Markets slump on FII outflows, weak rupee

Markets ended the week on a negative note with benchmark indices falling nearly two-per cent amid looming fear that the falling local currency may further lead to overseas investors paring positions in Indian equities.

So far in June, FIIs have net bought shares to the tune of roughly Rs 118 crore after, pouring in a little over Rs 83,300 crore.

The 30-share Sensex ended down 90 points at 19,429 while the 50-share Nifty ended down 40 points at 5,881 after touching an intra-day low of 5,871. For the week, Sensex shed 331 points or 1.7% to 19,429.23.

The broader markets ended flat with mid-caps falling 0.02 per cent while small-caps gained 0.3 per cent in the corresponding period.

Global risk appetite was also frail on worries that the US Federal Reserve may scale-back its bond-buying program by the end of the year.

Meanwhile, Friday’s Non-Farm Payroll (NFP) data showed that the American employers took on more workers than forecast in May as the world’s largest economy weathered the impact of higher taxes and federal spending cuts.

Payrolls rose 175,000 after a revised 149,000 increase in April that was smaller than first estimated, Labor Department figures showed today in Washington. The median forecast in a Bloomberg survey forecasted a gain of 163,000.

However, the unemployment rate climbed to 7.6 percent from 7.5 percent as a surge in the number of people entering the labor force swamped the number of positions available.

For the week, the Dow rose 0.9 percent, while the S&P gained 0.8 percent and the Nasdaq 0.4 percent.

European stocks, however, posted their third weekly drop amid concern that the Federal Reserve may reduce bond buying as soon as September and as the European Central Bank refrained from announcing new stimulus measures.

RUPEE AT 1-YEAR LOW

The rupee, which on Friday breached the 57-a-dollar closing level for the first time since July last year, came close to its all-time low of 57.33, on concerns that the US Federal Reserve might lower the pace of its quantitative easing and continued demand from domestic oil companies.

The Indian currency has dropped 5.7 per cent since the beginning of May to be the worst-performing Asian currency during the period. The central bank has not intervened aggressively to stem the fall.

MOVERS & SHAKERS

The key sectoral gainer on the Sensex was Information Technology index that booked a gain of over 1 per cent while consumer durables, PSU, autos fell between 2-4 per cent in the week.

Reliance Communications Ltd gained 9 per cent even after striking a $2.1 billion telecoms tower pact with Reliance Industries' telecommunications unit, Reliance Jio Infocomm.

Tata Motors Ltd fell nearly 4 percent on fears that China could impose retaliatory trade duties on luxury cars imported from the European Union may weigh on unit Jaguar Land Rover Ltd's earnings outlook.

Titan Industries Ltd ended 7 percent down for the week after government increased import duty on gold by a third to 8 percent on Wednesday, which was seen hurting its earnings outlook.

OUTLOOK

Investors will keep a close eye on rupee movement which will decide the trend of FII flows in ndea-term. Inflation and industrial production data would also be key ahead of the Reserve Bank of India's policy review on June 17 for near-term direction.

Domestically, key events to be watched out for will be April industrial output, May CPI inflation (Wednesday) and May WPI inflation (Friday).

Globally, Bank of Japan’s monetary policy decision (Tuesday), Euro-zone CPI (Wednesday), the European Central Bank’s monthly report on prevailing economic situation , US retail sales and BoJ minutes of meeting (Thursday) will be crucial.