Think Local But Look At Global Happenings Before You Invest

During the first fortnight of May this year, global markets’ sentiments seem to be dampened factoring possibility of a rate hike decision by Federal Reserves in the month of June if economic data improves and finally BREXIT happens in the European Union. So all eyes are now going to be on Fed chief William Dudley and activities around BREXIT.

Global markets are tumbling down due to reigning confusion in the investors’ mind over certain crucial decision in different geographical locations, though. Dow Jones declined by 2.43 per cent during first half of May from 17928 to 17492 level. S&P 500, Hang Seng also declined by 1.74 and 2.14 per cent respectively during the period under consideration. Most of the global indices like NASDAQ, FTSE 100, CAC 40 also have declined. Only Nikkei and Shanghai have been maintaining status quo during the first fortnight of the current month.

On Indian terrain, our stock markets closed in red mostly during the last few days. First two weeks of May were tagged with major events of Mauritius Double Tax Treaty, Bankruptcy Bill and SEBI announcement on P-notes. Indian markets rallied on the news of passing of the Bankruptcy Bill,2016 giving some respite to a crumbled banking stocks. Meanwhile, the markets got spooked when the government signed the protocol amending the Double Taxation Avoidance Agreement (DTAA) with Mauritius plus announcement by SEBI on rules for P-notes.

Sensex slipped by 2.10 per cent from 25772 to 25230 levels and Nifty 50 also declined by 1.99 per cent during the first half of the month. Auto, metal, power and IT sectors also performed negatively during the same period of time. FII’s inflow has rose to Rs 1687 crore adding on to it, mid cap stocks erased all losses of 2016 on renewed buying by Domestic Institutional Investors (DII’s) which increased to Rs 4133.21 crore.

On May 23, Center for Science and Environment (CSE) said that bakery products in India contains cancer causing substances like potassium bromate and potassium iodate. Though major food brands fast jumped in to clarify on the CSE research outcome, heavyweight stocks like Britannia, Jubilant Food works and West Life tanked 2-9 per cent during the first session of the markets since CSE findings were made public. This too dampened the spirit of Indian markets further.  

On May 24 session though mid-cap indices performed flat to negative but some of the mid-size companies have given return handsomely bringing in much cheers among the individual investors. Companies like IndiaBulls Real Estate, KRBL Ltd, Manappuram Finance Ltd., Crobrundum Universal Ltd have given double digit returns on investment made, on account of capacity expansion and double digit growth in profit margins. Companies reaped the benefit of lower commodity prices. With rising commodity prices over Nigerian Crises, in FY17 the play of higher commodity prices may hit margins of companies.

On commodity front, gold is trading in range of 29200-30200 levels while silver is moving in range of 38000-41000. Crude oil has potential to move upward due to improved demand outlook. Indian rupee extending its fall in straight eight sessions and depreciates to 67.49 per dollar on sustained demand for the currency from banks and importers.

With the state elections got over and verdict of the poll battles worked mostly in favour of already existing regimes in West Bengal and Tamilnadu, it gave enough cue that development is not only in mind of investors but also the voters. Assam has witnessed change of guard as BJP took over from Tarun Gogoi-led Congress. Global uncertainty on Fed rate hike, commodity prices and domestic events can oscillate the markets for next couple of months as it leaves investor in bewildered state of mind.