Investors eye macro data for next cues

Spooked by the hawkish tone of the US Fed hinting higher interest rates next year, aggressive sell-off by FIIs, sharp fall in index heavyweights like HDFC Bank, rising diplomatic tension between India and Canada and weak global cues; the domestic stock market posted one of the biggest weekly losses in last two years. BSE Sensex plunged 1,830 points or 2.70 per cent to 66,009 points, while NSE Nifty tanked 518 points or 2.57 per cent to 19,674 points. Shaken by the nervousness in frontline stocks, the correction was also seen in broader markets. Both the Nifty Mid-cap and Small-cap indices fell 1.7 per cent and 2.5 per cent. With China getting less attractive, over a period of time, FIIs don’t have any option, but to come back to the Indian markets say observers. The US 10-year treasury yields jumped 4.49 percent during the week, the highest level since 2007. The JPMorgan’s decision to include Indian government bonds in its bond index is viewed favourably. Rising international crude oil prices, attributed to expectations of increased demand in China, coupled with supply cuts, contributed to inflation concerns.

Near-term direction of the markets will be dictated mostly by global cues (including US GDP numbers, bond yields) due to absence of major domestic data points and the F&O settlement. It is pertinent to observe that even in the face of a 33 per cent correction in small-caps last year, many investors remained resilient and did not panic, and suggesting that fear of market downturns may not drive them away.

Same may be the case in current scenario say some stock brokers. Despite weak sentiment in the secondary markets, momentum in the primary market is expected to continue with 16 IPOs worth nearly Rs4,000 crore lined up to open for subscription next week including JSW Infrastructure, Updater Services, Valiant Laboratories and Vaibhav Jewellers.

F&O / SECTOR WATCH

Ahead of the monthly F&O settlement week, sharp volatility was seen in the derivatives segment. While the Nifty experienced a decline of over two per cent, Bank Nifty fell by more than three per cent. The maximum Call Open Interest in the Nifty was visible at 19,800 strike, followed by 20,000 & 19,900 strikes.

(The author is a senior maket analyst and former vice- chairman, Andhra Pradesh State Planning Board)