Markets On A Rollercoaster Ride

The markets saw significant ups and downs throughout the day, which were mainly news-driven. After closing hours on Friday, Sept 14, the government announced allowing higher foreign investment in retail, aviation and broadcasting. These long-awaited reforms were largely appreciated by investors and the markets opened higher to briefly touch a 52-week high today.

Soon after, the appreciation seen started cooling off ahead of the RBI monetary policy review meet held earlier today. On the announcement that there would be no cuts in the repo rate and there would be a 25 bps reduction in CRR, the markets erased all gains and started trading flat. This situation turned around later and an advance was seen as P Chidambaram stated that India will take additional fiscal consolidation measures by the end of October to boost growth.

The dramatic turn of events saw high volatility and ups and downs across the day, but the markets finally closed positive. The Sensex closed higher by 78.04 points or 0.42% at 18542.31 and Nifty closed higher by 32.35 points or 0.58% at 5610.

The global markets were rather subdued today because of concerns over China’s growth. Data on home sales and exports has been disappointing and inaction on the monetary front has contributed to the worries. Property prices have been under tremendous pressure after Hong Kong took steps to cool rising prices by tightening mortgage lending. This resulted in Shanghai Composite seeing a drastic downfall to the extent of 2.16%. European markets also opened negative over Chinese concerns and the FTSE, DAX and CAC trading lower by 0.28%, 0.22% and 0.55% respectively.

On the domestic front, due to policy reforms taken up by the government, Deutsche Bank raised its December target for the Sensex to 20000. The dollar was weak across the currency spectrum due to the Federal Reserve’s steps towards boosting the economy. This resulted in the rupee strengthening and breaking the 54/dollar barrier.

The trend that was seen largely in markets today was a shift from defensive stocks to the riskier sectors. Investors shifted to sectors like Pharma and FMCG to remain protected from systematic risks. With the sudden improvement in the economic outlook, there was major selling seen in pharma and FMCG. FMCG was down by a hefty 3.66% and Healthcare was lower by 1.81%. Extreme selling was witnessed in IT as well. The index was heavily weighed down by Hexaware Tech, TCS and HCL Tech, all of which lost 5.94%, 5.03% and 3.00% respectively.

Among the gainers were retail and aviation stocks, which had copious amounts of appreciation due to the recent policy announcements. Realty stocks too gained heavily on the decision to allow foreign investors to invest 51% domestically. In this sector, HDIL, Phoenix Mills and Indiabulls Real Estate were the top gainers, up by 13.58%, 9.53% and 8.66% respectively. The cut in the CRR also supported this gain. Other interest rate-sensitive sectors like Auto too gained considerably.