A businessman covers his eyes as he can't watch a descending stock chart and an ominous shadow of a bear that is cast on the wall above him.
Credit: Special Arrangement
The NSE Nifty is expected to continue with the weak trends it saw last week, when it fell 616 points or 2.5 per cent, to 23,533. In fact, the index has corrected more than 10 per cent from its all time high of 26,277 levels touched in September, on back of persistent selling by foreign institutional investors and subdued quarterly earnings.
This week again will be a truncated one on account of trading holiday on November 20 (Wednesday) due to Maharashtra assembly elections. With the earnings season now over, investors will shift their focus on global cues and FIIs activity, who have not reduced their selling intensity. Key events to watch out for this week include October retail data for Europe and composite PMI data for the United States and India.
Last week, all sectoral indices closed with losses of 2-5 per cent, except IT. Midcap and smallcap indices lost 4.1 per cent and 4.6 per cent respectively on a weekly basis. China’s new stimulus package redirected FII flows from India towards China. Weak July-September earnings intensified the FII exodus, leading to record outflows from Indian equities of Rs 1.42 lakhs from October till date.
The Trump factor has triggered profound changes in markets already. The surge in US bond yields and the strengthening of the Dollar index are strong headwinds for equity markets in emerging economies like India. On the positive side, while the fine print on immigration policy, corporate taxes and trade wars under Trump’s administration will matter, globally the view is that it will be far more business friendly as compared to the outgoing regime.
Technology spending has been depressed over the past two years, and it is believed that a new regime, along with continued rate cuts, augurs well for the tech spending cycle. Healthcare and US banks will continue to lead growth for IT services while manufacturing (especially aerospace and automotive) may face short-term headwinds.
On the domestic front, retail inflation for October climbed to a 14-month high of 6.21 per cent, dimming hopes for an interest rate cut by the Reserve Bank of India in the near term. Wholesale inflation returned to above 2 per cent in October, reaching a four-month high. The US retail inflation numbers, however, were in line with expectations, fuelling hopes that the Federal Reserve might continue with its rate cut trajectory.
Primary markets continued to be in action with four IPO listings last week. The Swiggy IPO had a better than expected listing amid a volatile situation. It listed at Rs 420 with 7.7 per cent premium over the issue price and further closed with significant gains of 10.5 per cent at Rs 464 indicating positive interest. Niva Bupa Health Insurance also had a decent debut, gaining 6 per cent upon listing. The other two IPOs of Sagility India and Acme Solar had a lacklustre listing on the bourses. This week, focus will shift to the Rs 10,000 crore IPO of NTPC Green Energy which is a subsidiary of NTPC Ltd.
(The author is head of Research, Wealth Management, Motilal Oswal Financial Services)