With Diwali approaching
there has been little corporate news other than results announcements. Yet the
ingredients for a boost are coming together. The
recent market setback should be viewed as an opportunity. Inflation moving
favourably, oil price retreating, eventually these movements will bring monetary
easing and a further policy boost to GDP growth.
The last week saw a sustained
selloff in equity markets as investors panicked in the face of widespread
evidence of economic fragility and speculation about the imminence of monetary
tightening in key economies. In the event, reassurance from central bankers
calmed markets at the close but not before heavy losses had been incurred.
Amidst all of this, Indian markets were brittle, as the Nifty shed 80 points to
close down 1% at 7780 after trading in a range of 2.6%.
Compare this to its
recent highs around 8300 and we remain short of a 'correction', down 6.3%. This
week’s fall was driven by net equity sales of $405mil by FIIs, as domestic
institutions were net buyers of $281mil. Market breadth was negative though not
deeply so: declining stocks were ahead of advances by 3:2. There was heavy
concentration in three stocks, Reliance, TCS and HCL Tech, which were sold
heavily on disappointment with quarterly results; together they contributed 80%
of the net points’ loss. Unlike developed markets, volatility has remained
subdued. By the market’s close, rumours of
substantial gains in two state elections by the governing BJP were boosting
sentiment for next week’s opening.