A rally in benchmark indexes on Friday helped the Indian stock market clock modest gains for the week. The March derivative contract started on a positive note after a dismal February series due to a $1.8 billion fraud reported at Punjab National Bank (PNB). The Nifty gained 0.4 percent for the week to end at 10,491 while the mid- and small-cap indexes underperformed and fell 0.2 percent.
The rupee ended weak at 64.73 rupees per dollar compared with 64.21 last Friday. It had touched a low of 65.05 rupees per dollar during the week.
Technology stocks were in focus after changes in U.S. visa policy. However, a weaker rupee continues to prop up sentiment. The sector gained 3 percent for the week after industry lobby group NASSCOM forecast export revenue growth of 7-9 percent.
The Cabinet approved methodology for auctioning coal mines to private companies in the open market as a commodity, at prices determined by the market. The move will not only enhance efficiency and end the government's monopoly in the coal sector, but would also help in quality improvement besides cutting India’s dependence on imports, according to Coal Minister Piyush Goyal.
Sun Pharma was in focus after it received fewer observations from the U.S. Food and Drug Administration (FDA) for its Halol plant. The stock reacted positively as the number of observations reduced to three from nine.
The fraud reported by Punjab National Bank has had its effect on the government’s plan on consolidation in the banking sector. Reports suggest that a merger among 21 public-sector banks seems unlikely during the current government's tenure, with the focus shifting to revamping the sector. PNB’s woes continue as reports said the government is directing the lender to bear any fraud-related liabilities.
Minutes from the Reserve Bank of India and the U.S. Federal Reserve's latest policy meeting hinted at aggressive tightening going ahead. The minutes of the RBI Monetary Policy Committee’s (MPC) February meeting showed that members were increasingly cautious on upside risks to inflation. Governor Urjit Patel flagged the risk of volatility in domestic financial markets. The minutes of the Federal Reserve's January meeting showed that the U.S. central bank still expects to hike rates three times this year starting March, less than what the market was fearing.
For the coming week, markets are expected to follow global cues and currency movement for further direction. Auto stocks will be in focus as auto companies start announcing monthly sales numbers for February starting Thursday.
On the macro front, manufacturing PMI data will be released on Wednesday along with third-quarter GDP numbers.
GST collections showed a sharp reversal in January and could be a cause of worry along with a weak rupee, the RBI’s hawkish view on inflation and overall rate hikes across the globe. If oil continues to strengthen, we could be staring at difficult times ahead in 2018, coupled with the uncertainties of elections.
Specific to markets, the MSCI index has threatened to reduce India weightage if domestic exchanges continue with their proposal to block data feeds. This could lead to an exodus of India-focused exchange traded funds, in addition to expected outflows due to rate hikes and other issues.
After a correction, the next few days could see a spirited bounceback, but this would probably remain a bounce and traders may utilise the opportunity to reduce positions again. One should use this volatility to hunt for bargains, which were available aplenty in the last few days.
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.