Volatility To Rule The Markets

If you think that the decline of around 1000 points in the Sensex during the last fortnight is an extreme case of a free-fall, then you might have to think again. The current crisis, fuelled by the depreciating Japanese Yen against the dollar and the meek Indian economic parameters led by the high CAD and low growth, is far from over and the recent IIP data only bolstered this notion.

SnapShots
Particulars	Date	Sensex	Nifty
Open	30/05/13	20066.94	6072.15
High	30/05/13	20254.03	6133.75
Low	12/06/13	18969.08	5738.6
Close	12/06/13	19041.13	5760.2
Gain For fortnight		-1025.81	-311.95
% change		-5.11%	-5.14%

Going forward, if the free-fall in currencies continues, it certainly can play a spoilsport for the emerging markets, especially India. In such a scenario, it is imperative for policy makers to intervene and increase foreign inflows. In fact, a greater challenge is to somehow plug the fly of foreign capital that can start due to improving returns in developed debt and equity markets as against the Indian ones.

If we look at the performance of the markets for the last fortnight, it almost looks like a fearful nightmare for investors. The BSE Sensex opened strong on May 30 at 20066 points but lost its ground in the middle sessions owing to unprecedented decline in the INR. It touched its peak of 20254 points on May 30. Pessimism in the markets strengthened since then and with a few shocks in intraday trading sessions, the market closed at 19041 points on June 12, thereby losing a whopping 1025 points. During this period, the Sensex touched its lowest level of 18969 points on June 12, breaking the psychological barrier of 19000 points. The NSE Nifty opened on May 30 at 6072 points and reached its highest level of 6133 points and declined afterward to touch the lowest level of 5738 points on June 12. The Nifty closed at 5760 points on June 12, losing 311 points during the fortnight, marking a decline of 5.14 per cent.

The fortnight saw a panic exodus of FIIs from the Indian debt market. Since May 30, FIIs off-loaded booty worth Rs 13466 crore in the debt market and the tremors of this are being felt in the equity market. FIIs put in a fresh set of Rs 2460 crore into equities till June 10. On the other hand, Mutual funds remained the net sellers of equities worth Rs 543 crore during the fortnight. The combined turnover of the BSE and the NSE remained between Rs 9933 crore and Rs 13471 crore.

Performance Of Global Indices
Index	Country	30-May	12-Jun	% change
Dow	US	15306.02	15122.02	-1.20%
Shanghai	China	2317.75	2210.9	-4.61%
Hang Seng	HongKong	22562.51	21354.66	-5.35%
Nikkei	Japan	14072.9	13317.62	-5.37%
FTSE	UK	6627.2	6340.1	-4.33%
Dax	Germany	8314.2	8222.46	-1.10%
Seoul Composite	S Korea	1999.83	1920.68	-3.96%
Bovespa	Brazil	54633	49770	-8.90%
Taiwan Wtd	Taiwan	8316.97	8116.15	-2.41%
STI	Singapore	3360.08	3170.38	-5.65%

In line with the global mood, all indices shed heavily in the last 15 days amid talks of reversal of QE3 by the Federal Reserve and the declining in China’s economy. The US Dow corrected by 1.20 per cent after a fabulous month-long run. Singapore’s STI, Hong Kong’s Hang Seng, Japan’s Nikkei, China’s Shanghai Composite and UK’s FTSE followed suit and tumbled 5.65 per cent, 5.35 per cent, 5.37 per cent, 4.61 per cent and 4.33 per cent respectively. The biggest loser was Brazil’s Bovespa, which lost a disturbing 8.90 per cent. Not a single major index has shown any appreciation in the fortnight.

With respect to individual stocks, Crisil was the biggest gainer with an appreciation of 24.65 per cent, followed by GSK Consumer, Infosys, GSK Pharma and Videocon industry, which gained by 10.24 per cent, 5.62 per cent, 5.52 per cent and 5.42 per cent respectively. On the other hand, the losers include Jet Airways, which declined by 24.44 per cent, followed by Suzlon, JSPL, Jaypee Infra and Titan, which declined by 24.23 per cent, 23.59 per cent, 22.70 per cent and 21.43 per cent respectively.

Considering the present situation, the markets seem beyond prediction as this financial crisis is difficult to measure. The unwinding of debt has already begun and if this exodus reaches the capital markets, we can see a further downside in the near future. In such a scenario, the entire focus is on the government’s action and its capacity to contain the rupee downfall. The RBI stance in the forthcoming monetary policy meet (June 17, 2013) would be worth waiting for. Meanwhile, it is advisable for investors to book profits.