Positive global cues, bargain hunting lift equities markets

Positive global cues, along with rupee appreciation and attractive value propositions, aided the Indian equity markets in making modest gains during the trade week ended Friday.

However, the gains were capped due to the continuous outflow of foreign funds, along with political bickering over the new date of the Union Budget`s presentation on February 1 and lower production by eight core industries (ECI) in November.

Consequently, the trade week saw the barometer 30-scrip Sensitive Index (Sensex) of the BSE gain 132.77 points or 0.5 per cent to 26,759.23 points. 

The wider 51-scrip Nifty of the National Stock Exchange (NSE) rose by 58 points or 0.7 per cent to 8,243.80 points.

According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, the equities markets traded with firm sentiments on the back of rupee appreciation and buying support at lower levels.

"Sentiments remained up-beat with Finance Minister Arun Jaitley`s statement that the impact of demonetisation is clearly visible with tax collection figures seeing double-digit growth," Desai explained.

He elaborated that the risk-taking appetite of investors was enhanced after Jaitley expressed hope that the Goods and Services Tax (GST) will be implemented in 2017.

Other market observers pointed out that the US Federal Reserve`s dovish commentary on the future of the rate hike cycle boosted buying support. 

"The domestic market witnessed volatile trade due to lack of any immediate triggers. However, on Thursday, market gained strength after US Fed`s minutes suggested a less hawkish stance from policy makers," D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, told IANS.

A hike in interest rates by US Federal Open Market Committee (FOMC) can potentially drive foreign portfolio investors (FPI) away from emerging markets such as India, and dent the business margins of corporate sector, as access to capital from the US will become more expensive.

Besides, lending rate cuts by the several domestic banks and Prime Minister Narendra Modi`s announcement of new sops to boost low-cost housing ahead of the Union Budget positively affected investors` sentiment despite India`s December manufacturing PMI (Purchasing Managers` Index) dropping for the first time in a year.

In addition, higher global crude oil prices supported the market`s upward movement. 

"Crude-oil prices erased losses and bounced back into positive territory on Friday on continued signs that OPEC (Organisation of the Petroleum Exporting Countries) members are sticking to their pledges to cut production to reduce the global supply glut," said Deepak Jasani, Head - Retail Research, HDFC Securities.

Furthermore, the rupee strengthened by four paise to 67.97 against a US dollar from last week`s close of 67.93.

"The US dollar clawed back some of its recent losses on Friday, rising against other major currencies ahead of the closely watched US jobs report," Jasani said.

On the other hand, a dismal eight core sector output in November hampered the key indices` upward movement.

The ECI, which comprises nearly 38 per cent weightage of the items included in the Index of Industrial Production (IIP), rose by 4.9 per cent in November, down from 6.6 per cent in October 2016.

"Market participants remained cautious over the report that indicate fiscal impact of the recent measures announced by Prime Minister Modi aimed at helping economically weaker sections could be around Rs 3,500 crore ($513 million)," Desai noted.

Moreover, the continuous outflows of foreign funds also depressed the domestic equities markets.

In terms of investments, provisional figures from the stock exchanges showed the week witnessed a massive outflow of foreign funds worth Rs 1,903.93 crore. The domestic investors purchased scrip worth Rs 1,624.38 crore during the week.

Figures from the National Securities Depository (NSDL) disclosed that FPIs were mainly net sellers in the debt market. They sold total instruments worth Rs 880.43 crore, or $128.73 million from January 2-6.

The top Sensex gainers during the week ended January 6, were: Tata Steel, (up 7.31 per cent at Rs 419.70), Adani Ports (up 6.47 per cent at Rs 285.45), ONGC (up 5.75 per cent at Rs 202.45), Tata Motors (up 5.61 per cent at Rs 497.80), and Maruti Suzuki (up 5.45 per cent at Rs 5,613.10).

The losers were: Infosys (down 3.88 per cent at Rs 971.45), Tata Consultancy Services (TCS) (down 3.32 per cent at Rs 2,283.60), HDFC (down 3.19 per cent at Rs 1,222.15), State Bank of India (SBI) (down 1.52 per cent at Rs 245.95), and HDFC Bank (down 0.91 per cent at Rs 1,193.20).