Global headwinds subdue equity markets (Weekly Review)

Negative global cues, combined with the logjam in parliament and profit booking, depressed the Indian equity markets during the just concluded weekly trade.

Nevertheless, value buying at lower levels, healthy fourth quarter (Q4) results and stable crude oil prices averted a full scale sell-off.

This resulted in the equity markets trading in a narrow range due to a neck-and-neck race between the bulls and the bears.

During the week under review, the barometer 30-scrip sensitive index (Sensex) of the BSE declined by 231.52 points or 0.89 percent to 25,606.62 points.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) slipped by 49.5 points or 0.62 percent to 7,849.80 points.

Besides, the broader markets underperformed the headline indices and closed marginally in the red, led by profit booking.

In addition, the unwinding of long positions due to the futures and options (F&O) expiry dented sentiments.

"Indian markets ended another week on a muted tone extending the range bound consolidation. A sustained trade above the lower end of the range may extend the range bound movement," Nitasha Shankar, senior vice president for research with YES Securities, told IANS.

"VIX (volatility index) is approaching upper band of the bull zone portending to choppy and volatile sessions in the coming week."

Further, volatility was sparked by the US FOMC (US federal open market committee) meet and the Bank of Japan's (BoJ) monetary policy review.

The BoJ's comments dragged the global and domestic markets lower among the two central banks' announcements last week.

The global markets were spooked after the BoJ decided to maintain its monetary policy. Investors were disappointed as they expected a further easing by the BoJ.

"Bank of Japan's shocking call on monetary policy by deciding to keep its interest rates unchanged, with no additional stimulus disturbed the global environment and added to the selling pressure," said Dhruv Desai, director and chief operating officer, Tradebulls.

Anand James, chief market strategist, Geojit BNP Paribas Financial Services pointed out that the impact of the BoJ's decision was further accentuated by the fact that Japanese markets went on a long holiday.

"The rush to close positions led to a near four percent plunge at close in Nikkei, casting a cloud on the bullish sentiments across the globe," James said.

On the flip side, the US FOMC meet, as expected, kept interest rates unchanged, but signalled confidence in the US economic outlook, leaving the door open for a rate hike in June.

"The FOMC's confidence in the US economic outlook, and the lack of reference to the global risks, were seen as encouraging signs for the market," James said, adding: "Crude oil's steady rise and close above $45 per barrel remained supportive."

James added that Indian markets remained buoyant, helped by healthy quarterly earning figures which have been above expectations.

Pankaj Sharma, head of equities for Equirus Securities said: "If this trend sustains, the earning season may not really help or would go against the markets which under the circumstances is not a completely undesirable outcome."

Even a healthy rise in foreign funds' inflow during the week under review supported prices and countered global headwinds.

Data with stock exchanges revealed that FPIs (Foreign Portfolio Investors) purchased stocks worth Rs.1,060.89 crore during the week under review.

The same data showed that domestic institutional investors (DIIs) sold stocks worth Rs.1,409.89 crore.

Figures from the National Securities Depository Limited (NSDL) showed that the FPIs invested Rs.1,681.68 crore or $252.48 million in the equity markets from April 25-29.

Furthermore, a firm rupee boosted investors sentiments.

On a weekly basis, the Indian rupee gained 15 paise to 66.33 (April 29) against a US dollar from its previous close of 66.48 (April 22) to a greenback.

"April turned out be a low volatile month, in line with its historical volatility," elaborated Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities.

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

--IANS

rv/vm