Markets Holding Themselves But Something Is Fishy

On one hand where the rupee is continuously declining for various reasons, on the other, the markets are somehow holding themselves up. This casts a shadow of doubt on whether a volatile rupee is bad or good for the economy. Having reacted rather sharply to the declining rupee in the beginning the markets have shown some recovery thanks to the government initiatives and the RBI's intervention. But how far this recovery is sustainable is anybody’s bet.

The markets opened flat on August 22 with the Sensex at 17896 points. But since then, they have gained momentum with the Sensex hitting a high of 19007 points on September 4. The state of the markets can be gauged from the fact that the BSE Sensex was at its lowest point on August 28 at 17448 points and had breached the psychological barrier of 17000 points. Since then it has gained 337 points till September 4 before closing to 18234 points.

Similarly the Nifty opened at 5282 points on August 22 and touched its lowest level on August 28 at 5118 points. Thereafter, it reversed course and zoomed to 5580 points on September 4 before closing at 5341 points on the same day, gaining 58 points over the fortnight.

On the global front, the US Dow lost 0.66 per cent over the fortnight, followed by the German Dax which was down 0.55 per cent. On the other hand, the biggest gainer of the fortnight was South Korea’s Seoul composite, which was up 4.16 per cent, followed by the Taiwan Weighted, the Hang Seng, the Brazilian Bovespa, the Japanese Nikkei and the FTSE. Each of these were up 3.33, 2.96, 2.83, 1.94 and 1.81 per cent respectively.

The FII exodus continued during the last fortnight too, signaling not too good times to look for as days pass by. FIIs were net sellers in equities to the tune of Rs 3004 crore in the last 15 days till August 30. On the other hand Indian Mutual funds turned out to be net buyers of equities to the tune of Rs 251 crore over the past fortnight. On the combined turnover front the turnover of BSE and NSE regained some momentum with average turnover ranging between Rs 11376 crore to Rs 19634 crore.

Stock specifically, out of the total, 903 stocks were up from their previous level while 1172 were down from their preceding fortnight levels. A total of 49 stocks remained unchanged. Surprisingly, MCX emerged as the biggest gainer of the fortnight with a 47.66 per cent rise. It was followed by Mahindra Finance, Sesa Goa, Mphasis and United Breweries, which gained 21.68, 18.36, 14.33 and 14.24 per cent respectively. On the negative end Pipavav Defense was the biggest loser with 26.49 per cent decline followed by IDFC, which lost 22 per cent during the fortnight. Other losers included Axis Bank, Adani Enterprises and Federal Bank which declined 19.30, 19 and 16.97 per cent respectively.

Looking at the present state of the markets, looks like the Sensex will hover around its current levels at least until the rupee stabilizes a bit. Actions of FIIs remain a critical element in the shaping of the market going forward. Hope now rests on the stability of the rupee and some good and matured policy decision making of our government.