Equity market sinks amidst Chennai rains and GST impasse
| Saturday, December 5, 2015 - 19:52
Mumbai: An imminent US rate hike, coupled with negative macro-economic data and slow progress in evolving political consensus to pass a key economic legislation in parliament depressed the Indian equity markets during the just concluded weekly trade.
Both the bellwether indices of the Indian equity markets ended in the red after two consecutive weeks of gains.
The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), declined by 490.09 points or 1.87 percent to 25,638.11 points from its previous weekly close at 26,128.20 points.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) receded during the weekly trade ended December 4. It ended lower by 160.8 points or 2.02 percent to 7,781.90 points.
Lack of progress towards the GST (goods and services tax) bill in the parliament had investors disappointed, elaborated Vaibhav Agarwal, vice president and research head with Angel Broking.
"Lack of progress towards the GST resulted in some volatility in the absence of any other major triggers," Agarwal told reporters.
The government needs to pass the GST bill in this session to meet the April 1, 2016, roll-out deadline, as just parliamentary approval is not sufficient enough for the pan-India indirect tax regime.
The bill has cleared the Lok Sabha and is now with the Rajya Sabha, where the Congress and other parties have demanded a series of amendments.
Apart from the GST, sentiments were depressed as volumes thinned following incessant rains and flooding in Chennai that impacted automobile and information technology (IT) industries which are located there.
"The flooding in Chennai has had a negative impact on sentiments due to the presence of large automobile and IT clusters' in the area, whose operations were disturbed due to the flooding," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told the press.
The city and its nearby industrial areas are hubs for automobile and IT industries and house operations of companies like TVS Motors, Infosys, TCS and Cognizant Technology.
Furthermore, the rains and flooding that followed is expected to adversely impact output of automobile companies during December.
Besides Chennai floods, hawkish comments from the US Federal Reserves' (US Fed) Chairperson Janet Yellen and a meagre stimulus package from the European Central Bank (ECB) through its bond buying program had investors spooked.
"US Fed Chairman Yellen's speech indicating a certain hike in its meet during mid of the current month and status quo policy of ECB created havoc for the Indian benchmarks during the week," Gaurav Jain, director of Hem Securities said.
On Wednesday, Yallen had said that she is looking forward to a US interest rate hike which will be seen as a testament to the country's economic recovery.
On the other hand, the ECB cut its deposit rate by 10 basis points against markets' expectation of a 20 basis points reduction.
In addition, the ECB extended its bond-buying program till at least March-17 2016. However, it did not increase the limit of the stimulus measure.
Besides global factors, negative macro economic data and consistent selling by FPIs (foreign portfolio investors) affected rupee's strength and investors appetite to chase prices.
"The FPIs have been on a selling spree since March. They are constantly selling to reallocate funds they have invested in the Indian equity which is increasingly being viewed as over valued," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told reporters.
"The selling pressure by the FPIs is also dragging the rupee value lower."
However, on a weekly basis, the rupee gained six paise at 66.70 to a US dollar (December 4) from its previous close of 66.76 (November 27). However, it had dipped to a 27-month low of 67.01 on Friday.
The value of the Indian rupee has been dented due to selling spree in the Indian debt and equity markets by foreign funds ahead of the US Fed's imminent rate hike decision slated for December.
The National Securities Depository Limited (NSDL) figures showed that the FPIs sold Rs.3,362.77 crore or $503.32 million in equity and debt markets from November 30 to December 4.
The data with stock exchanges showed that the FPIs sold stocks worth Rs.3,447.17 crore in the period under review ended December 4.
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.
Whereas, during the just concluded weekly trade, the domestic institutional investors (DIIs) bought stocks worth Rs.2,308.29 crore.