Haywire cues confuse investors, markets close flat

Mumbai, Aug 1:

The Indian equity markets closed flat during the weekly trade ended July 31, as investors were awaiting clarity on the number of regulatory issues and international outcome.

However, the volatile week closed without a bang as investors were pacified by various government clarifications and reform plans.

The barometer index of the Indian equity markets, the 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE) gained marginally by 2.25 points during the week under review.

The index closed at 28,114.56 points in the week under review from the previous closing of 28,112.31 points on July 24.

The flattish movement came a week after the barometer index fell by 351 points or 1.23 percent to 28,112.31 points during the week ended July 24.

Initially investors were wary about the US Fed’s decision on interest rates and the future and options expiry (F&O). However, both the events came in line and better-than-expected for the markets.

“The US Fed’S decision to keep the rate intact and not giving out any hawkish commentary buoyed Indian markets. The the FOMC (Federal Open Market Committee) did recognise the growth in US jobs and house sales,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

“If the US economy continues to grow at this rate the chances of a rate hike goes up. However, any hike will be gradual and is not expected to impact the Indian markets due to the strong fundamentals here.”

If interest rates in the US are hiked, the FPIs (Foreign Portfolio Investors) are expected to be led away from emerging markets such as India.

According to analysts, other factors like the proposal to regulate foreign funds, worries over retrospective taxes and a crash in Chinese markets further fuelled investor anxiety.

The barometer index lost over 650 points on Monday and Tuesday. The main reason for the fall emanated from the recommendations made by the Special Investigation Team (SIT) appointed by the Supreme Court on black money.

The SIT had recommended that the participatory note, or P-Note, route of overseas funds investing in Indian stocks be stringently regulated.

However, the markets stabilised after both the government and the regulator SEBI (Securities and Exchange Board of India) clarified that the SIT did not recommend a ban on P-Notes.

“The government’s clarification on the recommendations made by the Justice A.P. Shah committee on minimum alternate tax (MAT) and the P-Notes calmed investors’ anxiety,” Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS.

James pointed out that the healthy roll-over from expiry of July derivative contracts and announcement of Rs.70,000 crore in PSBs (public sector banks) in the next four years boosted markets in the later stages of the week.

“The news of capital infusion in the banking sector by the government lifted the banking index which drove prices. The mild up-tick in the roll-over of F&O positions after expiry showed that investors were gaining confidence,” James elaborated.

The expiry roll-over stood at 61.7 percent which was more than last month’s data.

Dipen Shah, head of private client group research with Kotak Securities, said that the markets rose on the back of better-than-expected numbers from a few companies and increased expectations of the passage of the GST bill.

“The government is making all efforts to pass the GST Bill in the current session of parliament,” Shah said citing that the cabinet has approved a revised version of the GST bill that incorporates recommendations from a parliamentary panel.

Vaibhav Agarwal, vice president and research head of Angel Broking, told IANS that the markets are also optimistic of a rate cut in the upcoming monetary policy review by the Reserve Bank of India (RBI) which is scheduled for August 4.

“The markets are optimistic of a rate cut given the fact that there has been only a slight up-tick in inflation and the monsoon has performed better-than-expected.”

India Inc. is demanding a rate cut as it believes that this may be the last time in this calendar year for RBI to ease lending before inflation spirals up again and the US Fed decides on its own rates in September. (IANS)