STOCKS
Indian equities slipped on the Greek crisis and fears of a Chinese market meltdown during the weekly trade ended July 10, as investors were reluctant to chase higher prices in a time of uncertainty
However, the drastic impact of the two crisis was somewhat belied by hopes of a healthy first quarter results season, positive US Fed stand on rate cuts, good progress of monsoon and a downtrend in crude oil prices.
The barometer index of the Indian equity markets, the 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) lost 431.39 points or 1.53 percent during the weekly trade ended July 10.
The index closed at 27,661.40 points in the week under review from the previous closing of 28,092.79 points on July 3. The downfall comes after three consecutive weeks of gains. Sensex had ended the previous weekly trade at 28,092.79 points from the previous weekly closing of 27,811.84 points on June 26. Investor sentiments were impacted by the Greek rejection through the July 4 referendum on the new terms of a bailout package. Other negative factors – like the continuous slide in the Chinese markets for a while that has now eroded nearly 40 percent of the stock value – also caused panic.
More importantly, the inability of the Chinese government, fund houses and brokerage firms to arrest the fall led to global sell-offs.
“Initially in the week gone by, there was optimism that the Greece crisis will be resolved and there wouldn’t be any spill-over effects on India. There was also good data on crude oil prices, monsoon progress and US Fed’s indication of a delay in rate hike,” Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS.
“However, as the week progressed, the international sell-offs due to China coupled with stalemate in Greece debt talks and anxiety over the Q1 results caused panic and sell-off here. Investors weren’t interested in chasing higher prices in uncertain times,” James added.
The markets started the week on a healthy note. On Monday, it chose to ignore the “no” vote in Greece and instead focused on a likely delay in the US interest rate cuts. It gained 116 points or 0.40 percent Monday. After that point, the downturn began, the markets Tuesday closed flat – some 37 points or 0.13 percent down. The barometer index lost 484 points Wednesday and 114 points Thursday.
However, it gained some traction Friday and rose 87.74 points or 0.32 per cent.
According to Devendra Nevgi, chief executive of ZyFin Advisors, “All the asset classes of the Indian markets be it currency, equity and bond showed good resilience towards the two crisis. That’s the reason why the fall was short-lived and the impact was mitigated.”
“India is very much insulated from the two crisis due to its strong economic fundamentals and hopes of a healthy Q1 numbers coupled with a good monsoon,” Nevgi told IANS.
The other factor that mitigated the impact on the Indian markets was the lower job creation in the US which led the US Fed to give an indication of a delay in the US rate hike.
The US Fed’s FOMC (Federal Open Market Committee) minutes gave a positive indication of a delay in rate hike.
Even the sharp fall in the light sweet crude oil of West Texas Intermediate (WTI) futures and options index helped improve market sentiments.
The India markets, which depend on Brent crude oil index, are also affected by the price movements of the WTI.
However, the main trigger for the coming period will be the Q1 earnings results cited Gaurav Jain, director with Hem Securities.
“The first quarter results and the upcoming parliament session are the main concerns right now. The Chinese market lows and the efforts to stabilise it and the stalemate in the Greek issue will be short-lived triggers,” Jain told IANS.
The losers:
Biggest index contributors to the fall were Vedanta (14.4 per cent), Tata Motors (7.24 per cent), Tata Steel (6.64 per cent), NTPC (6.48 per cent), GAIL (6.44 per cent), Hindalco (5.38 per cent), Infosys (5.34 per cent), ONGC (5.02 per cent), TCS (5.10 per cent), M&M (4.83 per cent), Bajaj Auto (4.45 per cent), Bharti Artel (3.76 per cent), HDFC (2.51 per cent), HUL (2.49 per cent), Maruti (1.64 per cent), Lupin (1.52 per cent), ITC (1.75 per cent), Axis Bank (1.31 per cent) Reliance (0.51 per cent) and Wipro (0.22 per cent).
The gainers:
Notable gainers included Dr Reddys (4.41 per cent), BHEL (4.08 per cent) L&T (3.54 per cent) Sun Pharma (3.49 per cent) HDFC Bank (1.45 per cent) SBI (0.61 per cent), Coal India (0.59 per cent) and Cipla (0.13 per cent).
FOREX
Despite a slide in local equities, the rupee strengthened further by 5 paise to close at 63.39 against the American currency in a highly volatile trade due to sustained dollar selling by banks and exporters
The greenback’s weakness in overseas and robust capital inflows to equities and debt markets weighed on the local unit, a forex dealer said.
However, Greece developments and a sell-off in equities worldwide following the steep Chinese stock decline limited the rupee’s rise, he added.
At the Interbank Foreign Exchange market, the rupee commenced sharply lower at 63.62 per dollar against last weekend’s close of 63.44 and dived to hit a low of 63.65.
Later, it rebounded smartly from its one-week low on the back of heavy dollar selling by state-owned banks as well as good dollar supply from exporters and foreign funds amid purported intervention by RBI.
This helped the local currency touch a fresh high of 63.30, before settling the week at 63.39, a gain of five paise, or 0.08 per cent.
The domestic currency hovered in a range of 63.3000 and 63.6500 per dollar during the week.
Overseas, the dollar remained broadly lower against a basket of major currencies on hopes of progress in Greece debt negotiations amid optimism that the country’s international creditors may accept it.
In the forward market, the premium ended lower. Forward dollar premium payable in December finished lower at 210-212 from last weekend’s level of 218-220 paise and far-forward contract maturing in June 2016 also closed lower at 433-435 paise as against the last weekend’s level of 440-442 paise.
RBI fixed the reference rate for the dollar at 63.3793 and the euro at 70.4334 from preceding weekend’s level of 63.3963 and 70.3319, respectively.
The rupee gained against the pound sterling to close the week at 98.48 from 99.13 previous weekend while it slipped to 70.91 per euro from 70.39.
The domestic currency declined further against the Japanese currency to end at 51.84 per 100 yen from preceding weekend’s level of 51.61.
BULLION
Gold and silver weakened further for the third week in row at the domestic bullion market on selling pressure as well as listless trade mirroring the global trend
The week saw the precious metals starting sluggish to drop further as gold hit a three-month low to revisit 25K level and silver 34K level on sustained sell-off from stockists and investors and suffered mainly by subdued global markets; though it successfully regained 26K and 36K level on speculative as well as bouts of low-level buying the anxiety still persisted.
The precious metals wobbled at the International market as US dollar turned bullish amid lingering nervousness over the Greek crisis and the tumble in Chinese stock markets on aggressive regulatory action led to worries over Chinese growth and uncertainties as the country is a major bullion consumer.
Though, the recovery in Chinese share prices cooled fears, the volatility in precious metals continued following Federal Reserve minutes and its chairwomen Janet Yellen’s comments hoping interest rate hike later this year on shows signs of improvement in the US economy leading to dullness in gold appeal.
In the New York comex trade, gold for August contract fell by USD 5.60 to settle at USD 1,157.90 an ounce against USD 1,163.50 an ounce and silver for september delivery dropped to USD 15.481 an ounce from 15.562 an ounce.
Standard gold (99.5 purity) commenced steady at Rs 26,190 and later dipped to hit a low of Rs 25,835 before closing at Rs 26,020 as against the preceding weekend’s closing level of Rs 26,190, showing a loss of Rs 170, or 0.65 per cent per 10 grams.
Pure gold (99.9 purity) resumed stable at Rs26,340 and later dropped to a low of Rs 25,985 before ending at Rs 26,170 as compared to Rs 26,340 last weekend, also revealing a fall of Rs 170, or 0.65 per cent per 10 grams. Silver ready (.999 fineness) opened lower at Rs36,140 and later dipped to a low of Rs34,760 before finishing at Rs36,095 from last Saturday’s closing level of Rs36,350, registering a loss of Rs255, or 0.70 per cent per kilo.
