Foreign funds' outflow subdue equity markets (Weekly Review)

A massive outflow of foreign funds, along with profit booking and caution ahead of the risk of key global events, subdued the Indian equity markets during the trade week ended Friday.

Besides, investors' sentiments were dented as scrips of Tata Group's subsidiaries receded after Cyrus P. Mistry was removed as the Chairman of Tata Sons.

The subsequent allegations by Mistry on corporate misconduct at the industrial conglomerate further subdued stocks of the group firms.

Moreover, investors were cautious due to the rise in the levels of non-performing assets (NPAs) of the banking sector.

However, short covering, combined with bargain hunting and healthy quarterly results, helped the ky indices to pare some losses.

"Indian equity markets traded with bearish sentiments this week due to profit booking and selling pressure at higher levels. However, some recovery was witnessed from the lower levels during the latter part of the week," Dhruv Desai, Director and Chief Operating Officer of Tradebulls, told IANS.

"Sentiments were undermined after a World Bank report showed that India had moved up by only one spot on the ease of doing business ranking this year, a disappointing result for the Narendra Modi government that took several initiatives."

For the week ended October 28, the 30-scrip sensitive index (Sensex) of the BSE declined by 135.67 points or 0.48 per cent to 27,941.51 points.

Similarly, the 51-scrip Nifty of the National Stock Exchange (NSE) edged lower by 55.05 points or 0.63 per cent to 8,638 points.

In terms of sector-based indices, metal and consumer durables stocks plunged by 2.9 per cent and 2.2 per cent respectively.

The FMCG index was the only sector-based index to close in the positive territory -- up 0.2 per cent.

The end of trade week also marked the closure of the Hindu Samvat 2072 year. Till date in Samvat 2072, the barometer index gained 2,074.56 points or 8.02 per cent, whereas the NSE Nifty swelled by 813 points or 10.38 per cent.

According to Angel Broking, the equity markets lost ground during the early part of the week on the back of weak global cues and poor investors' sentiments due to the ongoing dispute at Tata Sons.

"Indian markets reacted negatively to the public dispute that followed the removal of Cyrus Mistry as Chairman of Tata Sons. This issue further weakened the market after weak global earnings kept global equity indices suppressed," the firm said in a commentary to IANS.

During the week, investors' sentiments were also undermined by an SBI (State Bank of India) report which indicated that manufacturing growth is likely to remain flat.

Other reports such as Moody's assessment on the large-scale decline in private investment in PPP (public private partnership) projects in recent years due to delays in project approvals and land purchases eroded investors' confidence.

On the global front, the stock markets witnessed a mixed trend as investors weighed a mixed batch of corporate earnings reports and economic data, D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, pointed out.

"US stock markets fell and the US dollar slipped from multi-month highs after Bank of England (BoE) Governor Mark Carney cast doubts on expectations for more monetary stimulus," Aggarwal said.

"Also, growing expectations that the US Fed would raise interest rates in December boosted the dollar to its highest level in more than seven months against the euro and about three months against the yen."

In addition, massive outflows of foreign funds depressed the domestic equity markets throughout the week.

The provisional figures from the stock exchanges showed that the week witnessed a foreign funds' outflow of Rs 3,629.63 crore.

Figures from the National Securities Depository (NSDL) disclosed that foreign portfolio investors (FPIs) were net sellers of equities worth Rs 3,740.47 crore, or $559.67 million from October 24 to 28.

On the coming trade week, Aggarwal said: "Next batch of Q2 earning, global macroeconomic data, trend in global markets, investment FPIs and DIIs, the movement of rupee against the dollar and crude oil price movement will give some direction to the market in coming days."

As per Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services, the

GST (Goods and Services Tax) Council meet on November 3 and 4 will be a major theme for the coming week.

"The meet should shape expectations on the rate structure when the winter session of parliament begins on November 16," James said.

"The shortened week should follow global markets closely as a flurry of central bank decisions are awaited."

Key event risks such as the respective meetings of US Fed's FOMC (Federal Open Market Committee), BoE and BoJ (Bank of Japan) are scheduled for next week.

(Rohit Vaid can be contacted at rohit.v@ians.in)

--IANS

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