The Nifty fell 1.5 percent to 10,527 levels, with mid-cap and small-cap indexes ending lower by 0.78 percent and 0.9 percent, respectively. On the institutional front, FIIs sold 8.56 billion rupees in equities while DIIs were net buyers to the tune of three billion rupees.
Crude oil prices fell sharply by about 5 percent on increasing inventories amid expectations that demand may fall due to a gloomy global growth outlook. Brent crude oil futures hit their lowest since December 2017 at $61.52 per barrel.
The fall came even as markets expect the OPEC to start withholding supply after a meeting planned for December 6. The rupee, which witnessed a steep rise of 78 paise on Thursday, closed the week at 70.67 against the dollar.
The much-awaited RBI board meeting ended without any negative surprises. The central bank agreed to set up an external committee to examine its capital framework, extend the implementation deadline for the Basel-III capital framework by a year, and consider a restructuring scheme for loans to MSMEs. Additionally, the much-discussed prompt corrective action (PCA) framework will be examined by the Board for Financial Supervision.
PSU Banks remained in focus during the week after a senior finance ministry official said the government was planning to infuse 450-500 billion rupees as capital in public sector banks by the end of December.
The government has so far infused 198.5 rupees into seven state-owned banks through recapitalisation bonds in FY19. The 2018 Union Budget had projected issuance of bonds worth 650 billion rupees to infuse funds into banks.
Yes Bank resumed its downward spiral with the resignation of non-executive independent director R Chandrashekhar, the third key official to relinquishing his post in a week, hiking concerns over the lender’s ability to govern operations in a transparent manner.
Automobile companies, especially passenger vehicles and two-wheelers, are likely to report subdued November sales with reports indicating that inventory with dealers is the highest in the past five years. This is due to tightening of liquidity, a rise in insurance costs and high fuel prices.
Telecom stocks were in focus with Vodafone Idea and Bharti Airtel holding a meeting with investors during the week.
Vodafone Idea said its merger integration is moving ahead of plan and the telco will be able to unlock synergies worth 140 billion rupees by FY21 rather than its earlier estimate of FY23.
Bharti Airtel’s management said it was confident in the company’s ability to navigate the current challenging phase and suggested a likely bottoming of ARPU. Meanwhile, it lost one of its prime customers, the Indian Railways, to Reliance Jio.
Interestingly, Fitch stated that competition in the telecom sector is set to ease significantly next year as Jio pursues a less-aggressive pricing strategy, which should help the industry’s ARPU - a key performance indicator.
For the coming week, assembly elections, the rupee’s movement and oil prices will be the key factors for markets. Volatility is expected to continue ahead of derivatives contract expiry on Thursday.
On the macro front, third-quarter GDP data will be announced on November 30. The Indian economy grew 8.2 percent in the second quarter, above 7.7 percent witnessed in the previous three months. Globally, the U.S. Fed will release the minutes from its November 7-8 policy meeting on November 30.
Markets are presently in a phase of consolidation. We could start to see a decisive move only after the counting of votes for the assembly elections on December 11 as the other concerns like oil prices and the rupee have turned benign.
Ambareesh Baliga has about 25 years of experience in the stock market and has worked with Karvy and Kotak groups in the past. He is a regular market commentator on various business channels. He is a commerce graduate from Calcutta University and a qualified cost accountant.