By Porisma Pompi Gogoi & Rohit Vaid
(IANS) Key Indian equity indices dropped by around a per cent each as investors’ sentiments were eroded on the back of negative global cues during the just concluded weekly trade.
The equity markets were dented on Britain’s vote to exit the EU, which cascaded into a sharp drop in the rupee’s value and dried up foreign fund inflows.
The 30-scrip sensitive index (Sensex) of the BSE plunged by 286.37 points or 1.07 per cent at 26,367 points, whereas the 51-scrip Nifty of the National Stock Exchange (NSE) lost 81.6 points or 0.99 per cent at 8,088.60 points.
The benchmark indices had started the week on a flat note, prompted by the news of Reserve Bank of India (RBI) Governor Raghuram Rajan formally declining a second term.
The global markets, too, remained in a volatile state during the entire week as investors were seen disappointed by US Federal Reserve Chairperson Janet Yellen’s comments on the prospects of jobs’ growth in the world’s largest economy.
However, some value buying after the initial downside helped lift prices. The World Bank’s retention of India’s economic growth forecast at 7.6 per cent for 2016-17 also kept value buying intact.
Moreover, the Indian government’s latest announcements on liberalisation of the foreign direct investment (FDI) regime in the country also gave a slight boost to the Indian economy.
Even the positive announcements on the macro front, such as contraction in the country’s current accout deficit (CAD) also buoyed investors’ sentiments.
However, later in the week, the UK vote to leave the EU triggered volatility in the western economies as well as emerging markets.
According to market observers, the initial volatility was brought about by the Central Bank Governor Raghuram Rajan’s surprise announcement about his plans to quit after the end of his tenure in September.
“But losses were written off by the government announcements on FDI and textile sector policy,” Dhruv Desai, Director and Chief Operating Officer of Tradebulls, told IANS.
Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, told IANS: “Last week we had a cataclysmic end, with Britons’ decision to leave EU which caught markets by surprise.”
“Though the potential for Britain leaving the EU was fairly priced in the earlier weeks, the previous day had given positive hopes that they will choose to remain.”
James pointed out that the negative surprise from Brexit proved too much for the markets.
“The pound dropped to the lowest since 1985, Nikkei fell nearly eight per cent, other Asian markets were also deep in red, and even Australia dropped over three per cent,” he added.
“Indian indices recovered sharply off lows, but yet, Nifty’s close was still 2.5 per cent in red.”
Sector wise, all the sub-indices of the BSE ended in the red. The realty index was down 3.74 per cent, followed by the index for industrials, down 3.62 per cent, and metals was down 3.59 per cent,
Among the individual stocks of the Sensex, Mahindra and Mahindra was the top gainer with 1.12 per cent, followed by Bajaj Auto (up 1.05 per cent), Asian Paints (up 0.48 per cent), GAIL (up 0.33 per cent), and Su Pharmaceuticals (up 0.27 percent).
The losers were led by Tata Motors (down 7.99 per cent), followed by Tata Steel (down 6.37 per cent), Larsen and Toubro (L&T) (down 4.26 per cent), ICICI Bank (down 4.07 per cent) and ONGC (down 3.79 per cent).
The week also saw an outflow of funds due to global concerns. The provisional figures from the stock exchanges suggested that the foreign institutional investors divested stocks worth Rs 641.17 crore during the week under review, while domestic institutional investors purchased scrip worth Rs 1,068.37 crore.
The figures from the National Securities Depository (NSDL) showed that foreign portfolio investors were net sellers of equities worth Rs 4,776.43 crore, or $708.77 million from June 20-24.
Experts further said that the extreme volatility of “Black Friday” — June 24, 2016 — when Britain decided to exit the EU will be overcome eventually, though investors are expected to be “very cautious before taking on any fresh positions.”
On Friday, the Indian rupee weakened by 71 paise to 67.96-97 against a US dollar from its previous close of 67.25-26 to a greenback. It had dived over 1.4 per cent to an intra-day low of 68.22 to a US dollar.
On a weekly basis, the currency fell by 88 paise to 67.96-97 against a US dollar from its previous close of 67.09 to a greenback.
(Porisma Pompi Gogoi and Rohit Vaid can be contacted at email@example.com and firstname.lastname@example.org)