Equity markets bearish on US Fed rate hike, fund outflows (Market Review)

Breaking the five-week streak of gains, the Indian equity markets slipped into the negative territory during the week ended Friday on the back of global cues such as the rate hike by the US Federal Reserve.

Besides, prolonged outflow of foreign funds and profit bookings dented the overall investment sentiment.

On Friday, the 30-scrip Sensitive Index (Sensex) of the BSE closed at 31,056.40 points -- down 205.66 points or 0.66 per cent from its previous week's close.

The NSE Nifty fell by 80.2 points or 0.83 per cent to close the week's trade at 9,588.05 points.

"Markets drifted lower this week after trading in a range. This week's losses came after five weeks of gains," Deepak Jasani, Head - Retail research, HDFC Securities, told IANS.

"The BSE mid-cap index fell 0.45 per cent outperforming the Sensex/Nifty, while the BSE small-cap index rose 0.75 per cent."

According to market analysts, rising non-performing assets (NPA) issues and loan waivers by states kept the overall sentiment in the stock markets under check.

"Last week, we witnessed a series of negative news flows. Sentiments were hit as Reserve Bank of India (RBI) announced that it has identified 12 accounts that covered about 25 per cent of the banking system's NPA for immediate resolution under the Insolvency and Bankruptcy Code also saw uncertainty spread across the street," said Vijay Singhania, Director, Trade Smart Online.

"At the global front, the Federal Reserve finally decided to effect an interest rate increase and spoke of additional plans to shrink its $4.5 trillion balance sheet this year even as concerns grew over weak inflation."

The US Federal Reserve on Wednesday raised its benchmark interest rates for the third time since December and unveiled plans to start trimming its balance sheet. The rate is a 25 basis points increase over the current one of 0.91 per cent.

The rate hike assumes significance as it is expected to lead foreign portfolio investors away from emerging markets such as India, and also dent business margins as access to capital from the US will become expensive.

According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, profit booking was witnessed in the equity markets during the week.

"Markets managed to shrug off the rate hike by the US Fed, but profit booking continued. Inflation data came lower than expected and now hopes for rate cut from RBI has increased," Desai told IANS.

The Index of Industrial Production rose to 3.1 per cent in April led by high growth in manufacturing. On the other hand, retail inflation fell to a record low of 2.18 per cent in May, while the wholesale price index based inflation eased to 2.17 per cent during the same month.

"Sentiment in banks remained cautious over the private report indicating that over 65 per cent of the total Rs 9.50 lakh crore of agri debt may potentially get written-off," Desai said.

Figures from the National Securities Depository revealed that foreign portfolio investors (FPIs) invested in a total of equities worth Rs 4,311.57 crore, or $668.78 million, during June 12-16.

Provisional figures from the stock exchanges showed that foreign institutional investors (FIIs) sold stocks worth Rs 2,052.61 crore, while domestic institutional investors (DIIs) purchased scrip worth Rs 2,058.88 crore during the week.

During the week, the Indian rupee weakened by 19 paise to 64.43-44 against the US dollar from it's last week's close at 64.24-25.

The top weekly Sensex gainers were: Reliance Industries (up 3.92 per cent at Rs 1,387.85), Dr. Reddy's Lab (up 1.77 per cent at Rs 2,677.10), NTPC (up 1.49 per cent at Rs 160.25), Power Grid (up 1.33 per cent at Rs 209.50) and Sun Pharma (up 0.83 per cent at Rs 529.15).

The losers were: Wipro (down 5 per cent at Rs 254.95), Tata Consultancy Services (down 4.49 per cent at Rs 2,397.45), Larsen and Toubro (down 2.81 per cent at Rs 1,726.75), Mahindra and Mahindra (down 2.66 per cent at Rs 1,388.55), and Lupin (down 2.55 per cent at Rs 1,131).

(Porisma P. Gogoi can be contacted at porisma.g@ians.in)

--IANS

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