n Weak global cues, concerns over instability & RBI?s hawkish stance stalling reforms weigh

Indian equities extended losses on Friday for the sixth consecutive session amid weak global cues and concerns over political instability and RBI’s hawkish stance that could stall efforts to revive growth. The benchmark S&P BSE Sensex completed its worst weekly loss in 15 months, falling below the psychological 19,000 mark during the week.

On Friday, the 30-share BSE Sensex fell 57 points or 0.3% to 18735, while the broader 50-share Nifty lost 7.4 points or 0.13% to close at 5651, lowest close in four months. Foreign institutional investors (FIIs) sold shares worth $2.6 million, and domestic institutional investors sold shares worth $25 million, provisional BSE data showed. In the year to date, FIIs have bought shares worth $9.86 billion.

It was a dismal week for the market, with the benchmark S&P BSE Sensex losing 3.6%. A controversial bailout plan mooted by Cyprus renewed fears of a debt crisis in Europe, which pulled down global markets on Monday. The Indian benchmark indices traded in the red for the entire session on Monday, before closing at their lowest levels in nearly two weeks.

On Tuesday, RBI obliged with a 25 basis points cut in the repo rate to 7.5% from 7.75%. However, the central bank’s underlying commentary remained hawkish indicating limited room for further rate cuts owing to sustained inflationary pressures.

On Wednesday, the benchmark Sensex fell below the psychological mark of 19,000 for the first time in three weeks as concerns related to the stability of the government made investors take a cautious stance towards equity. The day also witnessed some political upheaval, with five DMK ministers submitting resignation to the prime minister, raising concerns over the fate of key reform bills like pension and insurance, which are pending in Parliament.

?Going forward, several doubts will be raised in the minds of investors as to how the government will go ahead with reform process and whether the disinvestment process will go through smoothly,? said K Subramanyam, AVP, Institutional Research, Asit C Mehta.

Most of the Asian markets slid lower on Friday. The Hang Seng and Jakarta Composite fell 0.5% and 1.66%, respectively, and the Nikkei 225 fell the most at 2.35%. China’s Shanghai Composite bucked the trend and rose 0.17%. Among the major European indices, the FTSE 100, the DAX and the CAC were all trading marginally in the green at about 5.00 pm India time.

Back home, 18 of the 30 Sensex stocks declined on Friday. In the broader market, breadth was weak with 1,882 stocks traded on BSE ending lower compared with 984 that ended higher. Most of the 13 S&P BSE sectoral indices ended in the red. The realty and consumer durables indices declined the most, while the S&P BSE Power index rose the most at 0.27%.

The coming week is likely to be volatile as well with F&O expiry due on Thursday. ?Technically, the market has closed near long-term support levels from where ideally some recovery is expected .5600-5650 levels will prove crucial next week,? said Subramanyam.

The NSE cash turnover on Friday was at R10,352 crore, and the six monthly daily average is about R11,000 crore. Turnover in derivatives was about R1.83 lakh crore and the daily average for the past six months is R1.26 lakh crore.

India VIX, a volatility index based on the CNX Nifty index option prices, slid 5.8% on Friday to 15.54. VIX is a measure of the market’s expectation of volatility over the near term and in general increases when the market is bearish and decreases when the market is bullish.