Markets attempted a recovery during the week with the Nifty managing to hold on to the 10,000 level. Sentiments across the globe bounced back following reports that the U.S. and China are trying to prevent an escalation of their trade dispute. Domestic sentiments also got a boost after the government announced lower-than-expected borrowing for the first half of the next fiscal year.
The Nifty ended the week up 1.2 percent at 10,121, while the rupee ended lower at 65.17 a dollar on selling by oil importers for month-end dollar demand amid likely overseas funds outflow from equities. Going forward, the rupee will remain vulnerable to the widening fiscal deficit, surging crude oil prices and monetary policy normalisation in the U.S.
Oil prices traded above $70 per barrel, lifted by expectations that OPEC-leader Saudi Arabia may extend supply cuts into 2019, as well as concerns that the U.S. may re-introduce sanctions against Iran. North Korean leader Kim Jong Un’s trip to China and his meeting with Chinese President Xi Jinping was the geopolitical highlight of the week, and possibly sets the terms for the summit between North and South Korea in April.
A SEBI panel accepted most of the recommendations made by the Uday Kotak-led committee on corporate governance, including splitting of roles of the CEO, MD and chairperson for the top 500 listed firms from April 2020. Investing in the F&O segment for a retail investor will become more difficult with stricter entry norms, and companies facing NCLT may have trading restrictions going ahead.
The government announced a lower-than-expected borrowing programme for H1FY19 at 2.9 trillion rupees, or 48 percent of the budgeted gross annual borrowing of 6.1 trillion rupees. The change in the borrowing calendar can be explained by the lack of demand for government paper from banks, which have been hit by “mark to market” losses on their bond portfolios. However, this resulted in a rally in bond prices, providing relief to fixed income investors as well as banks, as it should help them shore up their bond portfolio for the year-end.
The big business news of the week was Fortis Healthcare’s decision to sell its healthcare business to Manipal Health Enterprises. Fortis investors were, however, disappointed due to the absence of an open offer and the fact that the hospital operator's valuation may have been affected by promoter group issues.
On the stock specific front, Persistent System traded weak after its management said it expects its IP-led revenue to decline by $8 million on a quarterly basis. However, it cited that the pipeline of business opportunity remains strong and it expects to outgrow NASSCOM’s guidance for the industry in FY19.
Shares of GlaxoSmithKline, the parent company of GSK Consumer India, corrected sharply after the company announced that it was initiating a strategic review of Horlicks and its other consumer healthcare nutrition products business to support funding of its Novartis deal, and to increase focus on over-the-counter (OTC) and oral health categories.
The primary market has seen a mixed listing this week. Bandhan Bank made a stellar debut with its shares listed at 499 rupees on the NSE, a 33 percent premium compared to the issue price. Its market cap has surpassed that of most PSU banks including PNB and BoB. On the other end, Hindustan Aeronautics made a tepid debut, ending 8 percent down at 1,125 rupees.
On the political front, the budget session of parliament is heading for a washout as it nears its conclusion on April 6. Meanwhile, the Election Commission has announced that voting for the assembly election in Karnataka will be held on May 12, with results announced May 15.
India's April-February fiscal deficit swelled to 120 percent of the revised estimate for FY18 owing to low non-tax revenues. Fiscal deficit stood at 7.16 trillion rupees in the first 11 months of the financial year, as against the revised estimate of 5.95 trillion rupees. The revenue deficit stood at 5.24 trillion rupees, compared to the revised estimate of 4.34 trillion rupees.
Although GST collections have been lower than expected, there is a view that after the introduction of e-way billing, GST collections may rise due to higher compliance.
The coming week will be a busy one from the macro-economic data perspective, with the RBI monetary policy review on April 5. Policymakers may focus on global developments such as risks emerging from the speeding up of interest rate hikes, U.S. trade protectionist measures, and the implications of the same on exchange rates.
The mood on the street has been extremely cautious, with bouts of selling on any negative development. However, one should continue to deploy cash on every major correction. It could be a painful period after a heady 2017, but we should remember that one can never buy at the bottom and sell at the top - there is a lot of space and opportunity in the middle that you should utilise.
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.