Desperately Seeking Triggers

The markets remained quite lacklustre during the past fortnight, to the disappointment of many. It behaved so insipidly that the market participants had literally nothing to do except stare at the screens. The Sensex and Nifty went down by 0.66 per cent and 0.78 per cent respectively in the last fortnight. There are no actual triggers in the market that could have actually impacted it.

However, there is no dearth of negative news flows. Political inertia continues to prevail. The UPA government does not seem to be in a mood to give investors any reason to cheer. Every time there seems to be a ray of hope, the government comes up with something new to throw the celebrations off gear. Take for instance, the General Anti-Avoidance Rules (GAAR) that denies double taxation treaty benefits to foreign institutions routing their money through Mauritius, which is a tax heaven. As per the GAAR, standalone FIIs having no permanent establishment in Mauritius will be taxed. There is lot of ambiguity on this front though, and till date, the clouds over it haven’t been cleared. In this light, the markets may continue to behave in the same manner, as a majority of FII inflows come in through this route.

On the market front, only five of the 13 main broader indices have been able to end the fortnight in the green. The main laggard during the last fortnight was the Metals index, which ended with a loss of more than two and a half percentage points. The Realty (-2.32 per cent), Power (1.68 per cent) and Banking (1.66 per cent) indices followed suit.

The defensive sectors were the ones that remained in the limelight during the last fortnight. The FMCG index was the main gainer, having closed with a gain of more than two percentage points. The Healthcare index too ended in the green, with a gain of more than one and half percentage points.

The global markets too remained subdued, with those in Asia witnessing a southward journey. Nikkei (-2.64 per cent) and Shanghai (-4.85 per cent) closed in the red. Dow Jones remained flat. On the European front too, the markets were in the red, with the FTSE closing down by 2.14 per cent.

Going forward, the financial results season would now be watched keenly. Any positive signal in the earnings will act as a major trigger for the markets. Also, any stance taken by the government on the diesel price de-regulation may add to the positive sentiments. However, the government is already fighting battles on non-core issues, and hence, it is unlikely that something may come up soon and change the fundamentals. The RBI’s monetary policy due in the mid of this month is also likely to give some direction to the markets.