Sensex: Gear up for a choppy trade ride
Markets would be extremely choppy and volatile this week. Though falling crude prices are a godsend gift for India and its increasing fiscal deficit, it may not be the same for those countries dependent on oil exports and who in turn are also investors in global equity markets. Global markets have turned cautious and with Christmas holidays just a week away, the world is busy booking profits. The Dow Jones lost 678 points, or three point seven per cent, to close at 17.28. The weekly fall was one of the worst over the last three years.
The benchmark Sensex, which saw its biggest weekly loss in three years, could see correction continuing even this week as investors react to tepid macroeconomic data, including factory output. Wholesale price index-based inflation data for November on Monday and developments in the Winter Session will also influence trading.
Economic data last week was mixed with November retail (consumer price index) inflation falling to four point three eight per cent, its lowest level since the new series began in January 2012. Retail inflation was five point five two per cent in the previous month of FY14 and 11.16 per cent in November FY13. News on the factory output front was a dampener with the index of industrial production falling to a negative four point two per cent. The clamour for rate cut early next year would further increase with the government stressing that falling inflation is positive and the unexpected decline in industrial production needs to be stemmed.
Promoters of Infosys sold shares worth Rs 6,400 crore and most of this was bought by foreign institutional investors (FIIs), which saw a huge inflow of almost Rs 5,000 crore last Monday. Calling it coincidence or by any other name, shares of Infosys have been falling after they went ex-bonus and even faster after news of the founders share sale.
FIIs turned sellers after Monday and their net purchase for the week reduced to Rs 3,240 crore (effectively they sold close to Rs 1700 crore in four days after Tuesday) while domestic institutions bought shares worth Rs 870 crore.
The correction in markets was badly needed and came at a great time. Open interest in the December series was at a record high when it opened. The December series began with open interest of Rs 82,310 crore, which was 13 per cent higher than what the November series began. With month after month ending positive, the fear factor in markets had simply vanished and the bulls were having a great time. It’s the fall in crude prices, which first acted as a big trigger and is now acting as the spoilsport.
The bill for acquisition of coal blocks and subsequent sale by e-auction has been passed by Parliament. One should see progress on this front in the next six weeks. If all goes well, there would be some more business which would get conducted in the Winter Session.
The market will face tough times ahead with festive mood kicking in globally. Economic data on Friday was a mixed bag and global cues were not encouraging either. This week could witness some more weakness and further consolidation. In case, you wish to buy into the fall, it may be a good idea provided you are patient.