Business
Investors look to reforms to lift market mood (Market Outlook)
Mumbai, June 7
With a 12-percent rain deficit
forecast officially resulting in the sharpest fall in 42 months for key
equity indices during the week ended Friday, analysts said it was in
the government's court to lift the mood by enhanced project spending and
more reforms.
While the sensitive index (Sensex) of the Bombay
Stock Exchange (BSE) fell on four successive days, with a small rise on
Monday, the broader Nifty of the Nation Stock Exchange fell on all the
five trading days, to log the worst weekly drop since December 2011.
For
the Sensex, considering the closing high was 27,959.43 points for the
week and a low of 26,551.97 points, it was a fluctuation of 1,407.46
points. The index ended the week at 26,768.49 points, down to 1,059.95
points, or 3.8 percent. The Nifty fell by a similar margin at 8,114.70.
"Sentiments
were weak due to the concerns over monsoon and Greece. Quarterly
results have also not provided any cheer. Markets also awaited the
non-farm payroll data in US," said Dipen Shah, head of private client
group research with Kotak Securities.
The week saw Reserve Bank
of India (RBI) Governor Raghuram Rajan, calling for urgent steps from
the government to cushion the possibility of a rain deficit, also
lowered the growth forecast for the current fiscal to 7.6 percent from
7.8 percent. It was felt inflation will inch up more than predicted.
"Now
the trigger is with the government, the spending has to start soon. The
government will have concerns about below-average monsoon," said Vinod
Nair, head of fundamental research, Geojit BNP Paribas.
"Also as
the next set of reforms is likely to be considered only by the
forthcoming monsoon session, the timing of initiation in government
spending and the direction, i.e. towards support or growth, will impact
the sentiment," he added.
It also emerged during the week that
foreign funds turned out to be net sellers in May 2015 with an outflow
of Rs.14,272 crore. This was for the first time since August 2013 that
their flow into the Indian markets was negative. Their pull-out in the
past week was Rs.1,883 crore or $227 million.
The week under
review was also the first after the results season for the first quarter
of the last financial year ended March 31 -- which showed some mixed
outcomes.
"Though the just concluded quarter -- first quarter of
2014-15 -- depicted muted top line and bottom line growth, however, the
management commentary suggests improvement in financial performance
from second half of 2015-16 onward, going forward," said ICICI
Securities.
Giving his assessment, Gaurav Jain, director with Hem
Securities, said investors continued to worry over Greece developments,
weak monsoon, sell-off by foreign funds and weak global cues. The
future will be shaped by economic performance, monsoon, rupee movement
and the interest of foreign funds.
"All markets -- debt, equity
and currency -- were down post-policy on account of hawkish stance of
the Reserve Bank. But though markets were down in reaction to the policy
stance, we also believe markets will consolidate," said Anand Shah,
chief investment officer with BNP Paribas Mutual Fund.
He added:
"Going ahead, the progress of monsoon will be closely watched, in
addition to the reforms initiatives of the government. Passage of
important bills like GST are a pre-requisite for the markets to sustain
and rise from current levels."