Stockmarket participants expect the Budget to be a major trigger for Indian equities.
Pavan Burugula reports.
Illustration: Uttam Ghosh/Rediff.com
The Indian benchmark indices fell 1% on Friday ahead of Donald Trump's take over as US President.
While the benchmark Sensex closed 274.1 points or 1% lower at 27,034, the Nifty lost 85.75 points or 1% to close at 8,349.3.
Even the broader markets showed a similar trend as the mid cap and small cap indices lost 1.54% and 1.27% respectively.
Weak global cues also impacted the movement of the Sensex as the majority of European indices closed in the red during the last session after US Fed Chair Janet Yellen reiterated that the US Federal Open Market Committee doesn't plan to keep interest rates lower for a long time.
According to market participants, this bout of selling in the street was on the account of nervousness among investors across Asian markets about the possible policy stance Donald Trump would take on various sensitive issues including free trade, environmental issues and work visa issuances for foreign nationals.
Further, the markets are yet to completely factor the risks such as downturn in the outsourcing market which could impact Indian IT sector especially, experts add.
"The Indian market ended the trading session on a jittery note amid high volatility as investors remained cautious ahead of the US president's inauguration speech," said Jayant Manglik, President, retail distribution, Religare Securities.
"Barring FMCG," he added, "all major indices saw selling pressure as broader market sentiment remained subdued after the Federal Reserve Chairman's hawkish policy stance and unchanged policy rates by the ECB (European Central Bank)."
Axis Bank was the biggest drag in the 30 member Sensex as its shares slumped close to 7% on the back of weaker than expected earnings. The net profit of the private lender fell 73% in Q3 year-on-year (y-o-y).
The fall in Axis shares also weighed down on the banking index which closed 1.7% lower. Shares of Punjab National Bank and Bank of Baroda fell more than 3% each while shares of SBI lost 2.8%, stock exchanges data showed.
Tata Steel, Adani Ports and L&T were among the other losers in the Sensex as their shares fell in the range of 2.1% to 3.6%.
Market observers also feel that corporate earnings for the quarter ending December could turn a double whammy for the Indian markets as analysts predict both the top line and bottom line of India Inc to shrink due to the impact of demonetisation in the quarter ending December 2016.
"I think the earnings for Q3 would not be subtle due to the impact of demonetisation. The worst hit sectors would be housing, real estate and two wheeler manufacturers," said Prateek Agrawal, CIO, ASK Investment Managers.
"However, we could still have some bright spots," he added. "For instance, oil and gas and metal players are expected to do well while the bottom-line of public sector banks might improve on an annual basis due to the low base."
Going forward, market participants expect the Union Budget to be a major trigger for Indian equities as corporate India expects tax cuts, stimulus and increased social spending.
"Market participants are expecting a robust Budget for fiscal 2018 after the government's strong move to ban currency notes," Manglik added.