Anxiety over a weak monsoon, up-ticking inflation, fluctuating rupee value, disappointing corporate earnings coupled with outflow of foreign funds, moderate easing of the monetary policy and rising crude oil prices, have all dented the Indian markets in the week that just concluded.
The barometer 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) closed the weekly trade ended June 12 with losses of over 1.20 percent or 340 points.
This is the third straight week of losses for the barometer index.
The index had ended the previous weekly trade (June 5) at 26,768.49 points -- down by 1,059.95 points, or 3.8 percent. This was the sharpest fall of the index since December 2011.
For the weekly trade ended May 29, the Sensex had lost 129.06 points, or 0.46 percent.
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"The recent fall is more to do with earnings, global developments and some tax issues. Reserve Bank of India's (RBI) language was also a reason for the sharp fall," Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.
Nevgi said that the predictions of a weak monsoon and the government's pro-activeness to deal with it can dilute the impact of inflation and soothe the investors.
Anand James, co-technical head for research with Geojit BNP Paribas, told IANS that "The downfall is more to do with the inability to find more reasons to fuel the next leg of rally."
"In such a scenario, RBI's action may have exacerbated the weakness. The RBI's hawkish language has been interpreted by the market as a signal towards significantly reduced chance of more rate cuts."
The sharp fall that started on June 2 has been attributed to the RBI's less-than-expected easing of the monetary policy and the hawkish outlook given by it which subdued investor sentiments and led a barometer index of the Indian equities markets to crash 660 points.
The RBI had lowered its short term lending rate by 25 basis points. Analysts said that the 25 basis points cut was factored-in by the market and that it was hoping for a 50 basis points cut. Even a cash reserve ratio (CRR) cut was expected, but this also didn't take place.
"RBI's policy is definitely one of the reasons, but there are some other factors which caused such downtrend in the markets like continuous selling by foreign investors, prediction of less than expected rainfall, Greece crisis and the possibility of US Fed rate hike before September," Gaurav Jain, director of Hem Securities, told IANS.
"Disappointing India Inc's fourth quarter earnings have also hurt the sentiments of the investors especially the foreign investors," Jain said.
Sensex during this week had a volatile journey, following the 4 sessions of consecutive losses from last week.
On Monday, the 30-scrip Sensex fell by 245.40 points, while it touched its lowest levels since October last year on Tuesday to close 42 points down. However, as a relief after six consecutive sessions of losses, the benchmark index surged by around 400 points on Wednesday.
But the buoyed up mood was short lived as anxiety over inflation and factory output data led it to plunge nearly 470 points on Thursday. On Friday the index closed marginally up by 54 points or 0.21 percent.
According to the data with the National Securities Depository Limited (NSDL), the 'Foreign Portfolio Investors' (FPIs) in the last 6 weeks have sold stocks worth nearly $3 billion. They had picked-up scrip worth $2.4 billion in April.
"In the first eight sessions of June, FPIs have been net sellers of nearly $1 billion in the Indian equities and additional $0.6 billion in Indian debt markets," Sachin Shah, head of Emkay PMS, revealed to IANS.
Going forward, crude and commodity prices, rupee-dollar movement, Greek position on bailout and the threat of a US Fed rate hike will be the key triggers for sentiments of the markets, predicted Jain.
"Investors will also keep their eyes on WPI (Wholesale Price Index) data due to be released on Monday," Jain added.
Apart from WPI, the better-than-expected consumer price index (CPI) and Index of Industrial Production (IIP) figures which were released after the close of equities markets on Friday will have an impact on Monday.
The US Fed's monetary policy meeting on June 17 will also be watched closely by the market.
(Rohit Vaid can be contacted at rohit.v@ians.in)
