Global cues, F&O expiry dent equity markets

Mumbai:Indian equity markets were dragged lower during the week ended Friday by weak global cues and derivatives expiry. The key Indian indices mostly traded around the flat line with a negative bias -- losing more than a percentage each -- due to lack of bullish signals from the economy.  The 30-scrip sensitive index (Sensex) of the BSE edged down 294.75 points or 1.05 per cent during the week to end at 27,782.25 points. Similarly, the wider 51-scrip Nifty of the National Stock Exchange (NSE) slipped by 94.35 points or 1.09 per cent to 8,572.55 points. "After struggling to find a clear sense of direction for a few weeks, this week saw a bearish sentiment in the markets and the key indices lost more than a percentage point in the week just gone by," Pankaj Sharma, Head of Equities, Equirus Securities,said. 

"The appointment of Urjit Patel as the successor of Raghuram Rajan was in general perceived to be a good move by the government, but it also raised market concerns that the hawkish RBI (Reserve Bank of India) stance on interest rates would continue," Sharma said. "Though it may not be the only reason to explain this weakness, the banking space was under pressure this week and we saw many stocks showing a net decline." Although the government's decision last Saturday to appoint economist and banker Urjit R. Patel as the next RBI Governor raised hopes on the continuity of the central bank's policies, it could not boost the market sentiment.  Consequently, the benchmark indices started off the week on a negative note, further prompted by mixed global cues. The markets also traded with apprehension as caution prevailed ahead of US Fed Reserve Chair Janet Yellen's speech on Friday -- a pointer to a possible interest rate hike, which can potentially lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India. "Indian stock markets, along with the global markets, came off during the week as investors waited on the sidelines for the Janet Yellen speech to sense whether and when Federal Reserve would like to hike the interest rates," said D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors. Further, volatility was induced in the equity markets by futures and options (F&O) expiry. According to Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, rollovers in derivatives expiry for August were seen above the six-month average, hinting that the September series could upstage the previous' month's peaks. In addition, Dhruv Desai, Director and Chief Operating Officer of Tradebulls, said Indian equity markets traded with bearish sentiments during the week mainly due to profit booking at higher levels from traders. "On the domestic front, sentiments were undermined by a private report indicating that India Inc is enduring its worst earnings drawdown of the last 20 years, burdened by weak growth, high interest costs with excessive private sector debt and over-capitalized balance sheets," Desai told IANS. "However, investors got some comfort with Goldman Sachs' report that Indian economy is expected to clock 7.9 per cent growth in the current fiscal driven by better monsoon, government pay hike, key reforms and FDI (foreign direct investment) inflows." Moreover, lower crude oil prices, substantial money outflows from the domestic market and lack of earnings in economic data added to the downward trajectory. The rupee showed no signs of appreciation and remained steady at 67.06 against a US dollar for the week ended Aug 26. "Market participants remained cautious after FIIs (foreign institutional investors) had turned net sellers in recent trading session in both equities and derivatives for the first time this month," Desai added. "Some money outflow was seen by FIIs from the Indian market last week which pressurised prices at higher levels." Provisional figures from the stock exchanges showed that the week witnessed an outflow of Rs 370.70 crore. Figures from the National Securities Depository (NSDL) disclosed that foreign portfolio investors (FPIs) were net sellers of equities worth Rs 626.63 crore, or $92.89 million from August 22-26. Among the individual Sensex stocks, Gail was the top gainer (up 4.26 per cent at Rs 379.20), followed by Cipla (up 2.24 per cent at Rs 568), Reliance Industries (up 1.27 per cent at Rs 1,027.70), ITC (up 1.08 per cent at Rs 253.75) and HDFC Bank (up 1.04 per cent at Rs 1,257.90). The losers were led by Wipro (down 5.89 per cent at Rs 489.95), Tata Steel (down 5.72 per cent at Rs 369.85), Adani Ports (down 5.66 per cent at Rs 257.55), NTPC (down 5.25 per cent at Rs 158) and State Bank of India (SBI) (down 4.56 per cent at Rs 246.70).