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Nachiket Kelkar
Nachiket Kelkar

EQUITY

Market watch: Weakness prevails across global markets

new-bse-sensex-reuters (File) Bombay Stock Exchange | Agencies

India's benchmark stock indices slipped on Friday tracking weakness in global markets, but buying in select bluechip stocks like Reliance Industries in late trading helped pare some losses. Both the BSE Sensex and the wider NSE Nifty50 ended only slightly lower.

Weakness prevailed through the day across global markets, as oil prices fell and minutes of the latest meeting of the European Central Bank showed it was open to further steps to reduce monetary stimulus.

The Sensex closed around 9 points or 0.03 per cent lower to 31,360.63 and the Nifty was also down around 9 points or 0.1 per cent to end at 9,665.80.

Overseas, Japan's Nikkei, Hong Kong's Hang Seng and Korean Kospi, all closed in the red. Major European indices were also trading flat to negative.

For the week, however, the Sensex rose 1.4 per cent and the Nifty was also up 1.5 per cent, its biggest weekly gain since late-May.

The biggest gainer on the Sensex on Friday was Reliance Industries, the stock rose 3.4 per cent to hit a 9-year high. Shares of pharma major Lupin surged more than 3 per cent after it announced the launch of generic opthalmic solution in the US.

Among the losers, HDFC, Asian Paints, Infosys, Axis Bank and ICICI Bank, all declined more than 1 per cent. Auto stocks like Tata Motors, Mahindra & Mahindra, Bajaj Auto and Hero MotoCorp also ended lower.

Since hitting a life high of 31,522.87 on June 22, the Sensex has declined 0.5 per cent, in signs that markets may be consolidating ahead of first quarter earnings announcement.

So far, this year, markets have run up sharply on the back of huge domestic as well as foreign fund flows. Since December 31, 2016, the Sensex is up close to 18 per cent.

So far in 2017, FIIs have pumped in Rs 53,484 crore in India's equity markets, while domestic asset management companies too have seen over Rs 40,000 crore coming in equity mutual funds.

There are some worries given that a wider corporate earnings recovery is still not seen. While the government's move to ban high value currency notes in November last year hurt companies across sectors, some near-term speed bumps are also expected due to the Goods and Services Tax that came into effect from July 1.

"There is a concern...What ever reasons you give, the earnings recovery has not happened. Demonetisation and now GST are also causing a disruption," said R. Sreesankar, head of institutional equities at broking firm Prabhudas Lilladher.

However, he expects fund flows to remain strong and therefore several stocks will continue to trade at expensive valuations.

While the GST rollout has so far been smooth, the focus will now shift to the corporate earnings for the April-June quarter, which kickstart from next week and analysts see few reasons to cheer.

While inventory clearing and discounts offered by companies ahead of GST rollout are seen hurting revenues of automobile companies, telecom companies will continue to bleed amid hyper competition led by Reliance Jio. Pharma companies will also be impacted by domestic disruption due to GST. Banks will continue to report high provisioning for bad loans. Software services companies could see some cross-currency tailwinds, but revenue growth is likely to be slower amid slow spending by some of their major clients like US banks.

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Topics : #Equity market

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