Market Tests 38,000 As The Rally Continues

We had yet another eventful fortnight with the BSE Sensex touching the 38,000 mark as the market reached the last leg of Q1 earnings season. The run-up to the psychological barrier of 38,000 level was fuelled by strong earnings growth and a revival in the FII inflows. But the rally hit a roadblock as the Indian rupee plunged along with other emerging market currencies, following a steep drop in the Turkish lira. Turkey is on the brink of recession as the US administration doubled import tariffs on Turkish steel and aluminium, following a political stand-off. 

During the fortnight, global markets were busy digesting the US President Donald Trump’s tweets on trade war and the rising geopolitical concerns. Dow Jones fell 0.54 per cent, while S&P 500 and Nasdaq remained in the positive terrain, gaining 0.51 per cent and 1.31 per cent, respectively. The European markets reacted sharply to the threat of disruption in trade, with DAX going down by 3.39 per cent, while FTSE 100 and CAC 40 sliding down by 0.45 per cent and 1.76 per cent, respectively, during the fortnight. The Asian markets also traded negatively with Hang Seng, Nikkei, and Shanghai exchanges down by 1.52 per cent, 1.83 per cent, 2.72 per cent, respectively. 

Despite all the mayhem in the global markets, the Indian market was sailing strong. The BSE Sensex gained by 1.43 per cent, while Nifty gained 1.34 per cent in the fortnight. The boarder markets followed the benchmark indices and were trading firmly in the green. The BSE Mid-cap and Small-cap indices gained 1.87 per cent and 2.03 per cent, respectively. Sector-wise, the Auto sector was the only sector that lost ground during the fortnight. The BSE Auto index was down by 0.14 per cent, while the Metal index gained the most, notching up a gain of 4.05 per cent, followed by Bankex, up by 3.27 per cent, and FMCG, up by 2.47 per cent. The IT, Power and Realty indices gained by 1.15 per cent, 1.91 per cent and 1.77 per cent, respectively. 

In a sharp contrast to the usual trend, the FIIs were net buyers, while DIIs turned net sellers during the fortnight. The FIIs registered a net inflow of Rs 2,788.88 crore, while the DIIs registered a net outflow of Rs. 756.41 crore during the fortnight. Among the most tracked commodities, Brude crude continued its uptrend and traded above US$72 per barrel as data suggested that Saudi Arabia reduced production to avert an oversupply in the global market. The safe haven metal gold had few takers during the fortnight, despite the looming trade war concern and the new Turkey crisis brewing in the Middle-East. Gold traded at an year-and-half low of US$1,200 in the international market. 

Traditional defensives and export-oriented stocks remained upbeat and are expected to do well and give direction to the market in the upcoming trading sessions.