Markets dip for 2nd day on global concerns

After rallying for a week on strong domestic cues, markets have gone in a correction mode

Indian equity markets continued their southward journey on Friday, amid volatility as concerns over next week’s US Federal Reserve meet and persistent worries about the UK’s referendum on whether to stay in the European Union loomed large. Market participants were also cautious as they were expecting the Index of Industrial Production (IIP) figures for April, to be issued after market hours. The Sensex on the BSE ended 128 points or 0.5 per cent lower at 26,636. The National Stock Exchange’s Nifty50 settled below the 8,200 mark at 8,170, down by 33 points or 0.5 per cent.

After rallying for a week on strong domestic cues, the markets have gone into a correction mode. For the rest of the month, global factors are likely to dominate the domestic markets. Gautam Chhaocharia, head of India research at UBS, says: “Valuations are at an all-time high for certain sectors, as well as the markets. Our year-end target for the Nifty remains 7,500.” Adding: “Global factors would remain important to watch for. Also, the GST (goods and services tax) passage hope has helped the rally in the past month.”

After it was revealed, the IIP data for April was a shocker, as it showed a fall of 0.8 per cent, mainly due to a slowing manufacturing sector.

Around the world, European markets took a beating on persistent worries about the UK referendum, on June 23. Also, a weak finish on Wall Street dampened the sentiment. The FTSE 100, CAC 40 and DAX dropped between 1.5-2 per cent. In Asia, the Nikkei, Hong Kong’s Hang Seng and China’s Shanghai Composite closed 0.4-1.6 per cent lower.

In the commodities market, oil retreated again on Friday on account of profit booking, after it climbed a high in nearly eight months. Brent crude slipped 1.2 per cent to $51.30 a barrel.

On the sectoral level, most of the sectors ended in the red, with rate-sensitive sectors declining the most.

Among individual stocks, Infosys lagged for a second day, amid worries that pay increases and higher visa fees could impact margins in the first quarter of the current financial year. Volatility in growth in the near term and a cautious outlook for the retail sector, among other verticals, also remained a worry. The stock dropped 0.4 per cent.

Among stocks that weighed on the market on Friday were Tata Motors, GAIl, Tata Steel and State Bank of India, losing two per cent each.

Meanwhile, according to Moody’s Investors Service, the government will have to infuse Rs 1.2 lakh crore into public sector banks by 2020 to bolster their balance sheets and make good the losses they've had. This is way higher than the additional Rs 45,000 crore capital infusion plan envisaged by the government in its Budget.

Next week, market participants will keep an eye on the inflation rate data, to be announced on Monday. The Wholesale Price Index data would be announced on Tuesday and could bring volatility in the market.
 

Meanwhile, the Foreign Institutional investors (FIIs) were the net buyers to the tune of Rs 234.2 on Thursday as per the provisional stock exchange data.