Business Today

Parliament impasse and likely US rate hike weigh heavy on markets

Experts said apart from GST bill, the relentless selling by foreign investors ahead of a likely US rate hike has negatively impacted equity and rupee value.

Rohit Vaid | December 12, 2015 | Updated 19:26 IST
Parliament impasse, likely US rate hike weigh heavy on mkts
Both the bellwether indices of the Indian equity markets shed over 2.20 per cent during the weekly trade ended December 11. (Photo: Reuters)

The parliament impasse over the passage of key economic legislations, coupled with an imminent US rate hike, drove the Indian equity markets to a second consecutive week of losses.

Both the bellwether indices of the Indian equity markets shed over 2.20 per cent during the weekly trade ended December 11. The bellwether indices had a negative close in four out of the five trading sessions during the week under review, whereas till date in December broad-based key indices have lost close to 4-4.5 per cent.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), declined by 594 points or 2.31 per cent to 25,044.43 points from its previous weekly close at 25,638.11 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) receded during the week under review. It ended lower by 171.45 points or 2.20 per cent to 7,610.45 points.

"Indian benchmark indices Nifty and Sensex are standing close to their 52-week lows, a breakdown from this low could trigger fresh shorts dragging the indices even lower," Nitasha Shankar, vice president for research with YES Securities, told IANS.

"Broader markets underperformed the entire week as high beta stocks witnessed profit bookings and unwinding of long positions."

Shankar elaborated that technical indicators, however, suggested that further correction from here onwards could be short lived and lead to sharp pull back rallies.

During the week under review, factors like the logjam in parliament affecting passage of key economic bills had spooked investors, said Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services.

"There is a growing consensus amongst investors that the current parliament session is going to be a washout. With monsoon session having panned out similarly, it is not as if markets pinned too much hopes of goods and services tax (GST) bill clearance this time," James told IANS.

"But with several key event risks lined up, markets were hoping that the passing of key bills may force a change in sentiments for the better."

Should the bill not secure clearance in this session, it will miss its intended roll-out date of April 1 next year.

Apart from the GST bill, the relentless selling by foreign investors in the Indian markets ahead of a likely US rate hike has negatively impacted equity and rupee value, pointed out Vaibhav Agarwal, vice president and research head with Angel Broking.

"Foreign investors continued to unwind positions ahead of the FOMC (Federal Open Market Committee) meet next week resulting in negative FII (Foreign Institutional Investors) flows this week," Agarwal said.

The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) were net sellers during the week ended December 11. They sold Rs.3,495.29 crore or $522.98 million in equity and debt markets from December 7-11.

The data with stock exchanges showed that the FPIs sold stocks worth Rs.1,437.46 crore in the week ended December 11.

The FPIs have taken out Rs.23,352 crore during the period August-September. In November, the foreign investors have off-loaded stocks worth around Rs.9,000 crore.

On a weekly basis, the rupee weakened by 17 paise at 66.89 (66.8850) (December 11) to a US dollar from its previous close of 66.70 to a greenback (December 4).

Besides the US rate hike, continued fall in commodity prices worldwide and rising concerns over a global slowdown butchered the indices during the week gone by, said Gaurav Jain, director with Hem Securities.

Sector-wise stocks of oil explorers and petroleum products marketing firms extended their falls in the week under review as global black gold prices tumbled to a seven-year low.

The slump in stock prices came after the Organization of the Petroleum Exporting Countries (OPEC) decided to maintain the supply status quo, rejecting calls to reduce output to arrest the price decline.

In November, global price went below the $40-mark for the first time in 11 years.

Pankaj Sharma, head of equities for Equirus Securities, said that the slide in markets has resulted in India underperforming in comparison with other EMs (emerging markets) in the last few months.

"This indicates that the participants in Indian markets can't really take it for granted that India is a better EM versus others," Sharma added.

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