With the Indian stock markets plunging to 20-month low and Indian rupee falling to over over two-year low, both are now back at the May 2014 level before Narendra Modi came to power. The BSE Sensex was trading 616.98 points down at 23,862.86 at around 2.45 pm. Similarly, NSE Nifty was trading 187.10 points down at 7,248.00 durig the same time. Track markets here
The Indian rupee breached the 68-mark against the dollar for the first time since September 4, 2013, by falling 42 paise to trade at 68.07 at 1.15 pm on strong dollar demand from importers amid continuing capital outflow by foreign funds. The local currency opened sharply lower at 67.77 from its previous close of 67.65 and breached 68 level for the time since September 4, 2013, to hit a low of 68.07 (intra-day), down 42 paise.
The Sensex closed the session on May 16, 2014, when the BJP-led NDA government assumed office, at 24,121.74 points. Sensex plunged 417.80 points to close at 24,062.04 on Wednesday (Jan 20, 2016), while NSE Nifty fell below 7,400-mark by falling 125.80 points to 7,309.30.
Falling crude oil prices, lower rupee, massive sell-off, tracking bearish overseas cues after IMF slashed global growth forecast are some of the reasons that are denting the stock market sentiments. In a quarterly update to its World Economic Outlook on Tuesday, IMF said the global economy will expand 3.4 per cent in 2016, down from an earlier estimated 3.6 per cent in October. It also trimmed its forecast for growth in 2017 to 3.6 per cent, down from 3.8 per cent three months ago.
Vidya Bala, head of mutual funds research, Fundsindia.com, said, “We expect equity market continue to be volatile for the first half of 2016, meanwhile we can see some short rally that we saw yesterday. However, India is relatively in better position as compared to other emerging markets. Lower crude prices have helped India to repair itself internally in terms of current deficit. In the stock market it is a time to do some bargain hunting due to attractive valuations.”
Foreign Portfolio Investors have sold shares worth Rs 6,384.57 crore in past 13 trading sessions in January and markets have ended in the red on 9 trading days despite domestic institutional investors bought shares worth Rs 7866.30 crore this year so far.
The BSE Midcap and BSE Smallcap index fell 8.11 per cent and 11.07 per cent, respectively, since the beginning of January.
Kotak Institutional Equities in a research note on Monday said, “We do not rule out a further correction in the Indian market given the confluence of several negative global and local events. However, the correction will offer investors an opportunity to increase exposure to good long-term stocks where valuations are reaching interesting levels. India’s macroeconomic position is quite decent and growth challenges are being addressed. We stick to our view of second-half recovery and 10-15 per cent returns for the year.”
The brokerage added that apart from concerns about global growth, the macroeconomic condition of emerging markets and the health of the Chinese economy, the correction in Indian markets was also due to heightened concerns about non-performing assets in the Indian banking system.
On market movement in the ongoing calendar year, Hitesh Agarwal, head research, Reliance Securities told Financial Express online in an interview that the calendar year 2016 is likely to be a story of two halves, with the earlier part likely to remain challenging not just for the economy but also for equity investors alike.
“The Indian economy is likely to gather some steam towards the latter half, as the effects of increased government spending and the impact of additional consumer spending on account of the implementation of the 7th Pay Commission and OROP starts to positively reflect in incremental discretionary consumer spending. We expect these to keep Indian equities in good stead in the year ahead. Overall, we expect 2016 to be a positive year for the Indian stock market. A 10-15 per cent return by the year end from the Indian stock market is very much possible, ” he added.