Markets Volatile, But Survive The Headwinds

The demand-supply imbalance is pushing the global crude oil prices up. The global crude oil inventories have dipped to critical levels but the demand has remained robust, creating a demand and supply mismatch. 

Indian equities cooled-off along with the monsoon and in the absence of any major triggers. The benchmark indices managed to keep some of their August gains, with the BSE Sensex up by 0.36 per cent, while Nifty50 was up by 0.28 per cent during the fortnight. The market regulator SEBI relieved the concerns of market participants that huge sums of investment will move out of the market following implementation of the new KYC and beneficiary ownership norms for foreign investors. The regulator has given the investors more time for compliance and constituted a high profile panel to hold consultations with all stakeholders. 

The highlight of the market’s resilience was the rally in metal, pharma and IT stocks. Due to the pressure experienced by the Indian rupee, these exportoriented stocks rose on expectations of better margins. During the fortnight, BSE Metal index registered a gain of 6.37 per cent, while pharma sector, represented by BSE Heathcare gained an impressively 5.4 per cent, followed by IT index which was up substantially by 4.83 per cent. Among other sectoral indices, BSE Power and BSE Auto were up by 2.78 and 0.96 per cent, respectively, while FMCG, Realty and Bankex were down by 2.93, 2.44 and 1.38 per cent, respectively. The broader markets remained mix with Small-Cap index gaining 0.19 per cent, while the Mid-Cap index losing some of its gains as it was down by 0.29 per cent. On the global front, Donald Trump’s trade war rhetoric continued with the US administration threatening additional tariffs of US$ 267 billion on imports originating from Chinese, over and above the previously announced levies. The US markets were up with Dow Jones Industrial and S&P 500 registering 0.80 and 0.14 per cent gains, respectively, while the rest of the global indices were down along with Nasdaq, which was down 0.28 per cent during the fortnight. UK’s FTSE 100, Germany’s DAX and the French CAC 40 were all down by around 3.40 per cent. In Asia, Hong Kong’s Hang Seng lost the most and was down by 2.52 per cent, followed by Shanghai Composite, which was down by 1.37 per cent as also Nikkei was down by 0.50 per cent. 

The trading data for FIIs and DIIs for the fortnight showed that FIIs were net sellers with an outflow of Rs 1,239 crore and DIIs were net buyers with an inflow of Rs 656.13 crore. 

The demand-supply imbalance is pushing the global crude oil prices up. The global crude oil inventories have dipped to critical levels but the demand has remained robust, creating a demand and supply mismatch. With the US oil companies stalling new production and the sanctions against Iran coming into effect in November, the Brent crude futures traded above US$77 per barrel. On the domestic front, the surging crude prices have led to a fall in the Indian rupee, which hit a new low of Rs 72.50 per US dollar. 

Market participants expect government to intervene and chalk out a fuel pricing policy to ease consumers sentiments ahead of state elections. Also, in the case of the rupee, the government is expected to intervene and stabilise the domestic currency. Given these conditions, the market is expected to remain volatile for a while