Sensex and Nifty remained under pressure for the fourth consecutive week this month, losing 1.67% and 1.91% respectively, amid a weak rupee, higher crude prices and persistent outflow of foreign funds. The benchmark stock market indices had their worst month in over two and a half years, with the BSE Sensex shedding over 6% and the NSE Nifty falling nearly 7% in the month of September alone.
“Both the Sensex and the Nifty have fallen the most in any month since February 2016. The Bank Nifty has fallen 10.48% this month — the highest monthly fall since 2013,” VK Sharma, Head Private Client Group & Capital Market Strategy at HDFC Securities, told FE Online. Yes Bank remained the top loser month-to-month on both the BSE and the NSE, plunging 52% on the Sensex and 50% on the Nifty 50 index.
Among the other major events that infused volatility in the equity markets were the US Fed rate hike, government’s imposition of customs duty on a range of items, and sell-off in auto and housing finance stocks amid weak rupee and widening current account. “The default (at IL&FS Financial Services) and subsequent downgrade in its credit rating led to panic sell-off in banking and NBFC space. This sell-off was extended to other sectors as well,” said Vinod Nair, Head of Research, Geojit Financial Services.
“Markets were concerned about the near-term headwinds like quality and increased cost of funds along with tighter liquidity situations. The worse hit was auto, which declined by 8%, followed by metals by 5% and PSU banks by 5%. Mid and small caps lost 5% and 8.5% respectively,” Nair added.
What to expect next week
Going ahead, the Sensex and Nifty are expected to take cues from the RBI’s monetary policy scheduled for next week. The Fourth Bi-monthly Monetary Policy Statement for 2018-19 will be issued on October 5, 2018.
“RBI’s Interest rate decision will be crucially watched given the rise in trade war has escalated and rupee continues to fall. The GDP projection and comments will be watched as there may be some intervention by RBI that may come to give some support,” said Mustafa Nadeem, CEO Epic Research. “Crude oil has been positive and trading above $80 mark which is another whammy for investors sentiment. A higher crude oil price has a direct impact on the Indian economy and its CAD,” he added.
According to Vinod Nair, with RBI policy meet next week as the key event, the market is pricing a 25 bps rate hike. “Investors are yet to gain confidence to start bottom fishing due to lack of liquidity, margin funding and short selling in the market. Weak sentiment is likely to extend till the financial market stabilizes and confidence reverts with accommodative valuation,” Nair added.
Key takeaways this week
Weekly losses: The Sensex plunged 614.46 points or 1.67% this week to close at 36,227.14 points on Friday, the last trading day of September. The Nifty of the National Stock Exchange tanked 212.65 points or 1.91% to end at 10,930.45 points week-on-week.
Top weekly Sensex gainers: TCS (3.84%), Reliance Industries (3.40%), Infosys (3.05%), Axis Bank (2.16%) and HDFC Bank (1.87%).
FII/DII activity: Provisional data from the stock exchanges showed that foreign institutional investors sold stocks worth Rs 3,713.09 crore during the week ended September 28. Domestic institutional investors, on the other hand, purchased stocks worth Rs 8,707.02 crore.