But experts say downside limited, pockets of opportunities for investors
The rupee on Friday rebounded from the near-80 levels to close higher by 17 paise at 79.82 against the US currency following a recovery in the domestic stocks and weakness in the greenback in overseas markets. The US dollar retreated from the two-decade high levels against a basket of six currencies which supported the rupee sentiment. At the interbank foreign exchange market, the local currency opened at 79.95 and witnessed an intra-day high of 79.82 and a low of 79.96 against the US dollar in the day trade. ,
Titan was the top gainer in the Sensex pack, rising 3.5 per cent, followed by Kotak Bank, SBI, Maruti Suzuki, Bajaj Finance, HUL, Axis Bank and Sun Pharma. On the other hand, NTPC, Tech Mahindra, PowerGrid and Infosys were the laggards.
In the latest large opinion poll, the opposition Bharatiya Janata Party and its allies were forecast to win a narrow majority in the 543-seat lower house of parliament, compared with previous surveys predicting that they would fall short.
Sanjay Mookim, India equity strategist at Bank of America Merrill Lynch, tells Puneet Wadhwa that this is not a time for investors to dabble in relatively small and illiquid stocks.
'Long-term retail investors should not worry about these sharp dips and jumps if they have chosen their stocks wisely.' 'Short-term volatility is a given and a rise and fall of two-three per cent should not worry them.'
With the Nifty50 just about 3 per cent away from its all-time closing high of 18,812 points, analysts at BofA Securities suggest investors book profit. Their reasons for the advice include risks like the possibility of a cut in corporate earnings growth forecasts, high valuation (one-year forward P/E of 19.5x), interest rates staying elevated for longer-than-expected and credit tightening. Going ahead, they expect the Nifty50 index to drop to 16,000 levels - down nearly 12 per cent from the current level of 18,255 points, which they believe would be a good time to buy.
Equities in India saw record FPI inflows of $16.8 billion in November and December, taking the benchmark indices to new highs.
Equity and oil markets can breathe easy for now, as the developments in Russia are unlikely to trigger a runaway rally in crude oil prices, said analysts. India, which imports nearly 80 per cent of its crude oil requirement, has been dependent on cheap Russian oil over the past few months to keep inflation - a sore point for the equity markets - in check. For the Indian markets that are expected to remain volatile amid these developments, analysts believe, the progress of monsoon, fund flows - both foreign institutional investor (FII) and domestic - and the upcoming corporate earnings season back home remain key.
Most markets have seen significant erosion in investors' wealth this year
It came down from $1.94 billion in 2009-10 to $1.17 billion the next year and to $1.11 billion in 2011-12.
The rupee hit a near 10-month high as an alliance led by pro-reform and business friendly Hindu nationalist Narendra was on course for an absolute majority.
Rally restricted to big stocks; FIIs have hit investment caps in many large companies.
Since 2005, in 8 out of 10 years (except in CY11 and CY14) the benchmark indices have given positive returns in December.
The Rupee is expected to weaken further against the dollar.
Experts said equity raising was also hampered due to flight of capital from foreign investors. FIIs have sold more $500 million (Rs 3,200 crore) in October.
Half of the sharp rise in stocks in 2014 was driven by re-ratings - rise in price-to-earning ratios on hopes the new government would turn around the economy which will reflect in corporate earnings.
Infosys was the top gainer in the Sensex pack, rising 2.36 per cent, followed by HDFC Bank up 1.39 per cent.
Among Sensex constituents, Vedanta fell 3.40 per cent, followed by SBI 3.17 per cent, Yes Bank 3.11 per cent, Axis Bank 1.68 per cent, ONGC 1.60 per cent, Power Grid 1.52 per cent and HDFC 1.48 per cent.
Dhawal Dalal, executive vice-president & head, fixed income, DSP BlackRock Investment Managers, expects the central bank to hold rates for the rest of calendar year 2016.
It hopes to attract billions of dollars in investment by this move, and may ease some restrictions on foreign inflows.
In spite of the high number of exits, Reliance group firms of both brothers continue to be darlings of small investors
'Markets are likely to remain choppy for the next 6 months.'
Forex dealers said besides dollar gaining against other currencies in the global markets, increased demand for the American currency from importers and lower opening in the domestic equity market influenced the rupee.
A'Market valuation is another concern.'
'India is trading at steep valuations and there have been a number of IPOs, especially in the insurance sector, that have had an impact on secondary market liquidity.'
High net worth individuals (HNIs) are considered more investment-savvy than retail investors.
Titan was the top gainer in the Sensex pack, rising around 4 per cent, followed by HDFC, Nestle India, IndusInd Bank, UltraTech Cement and Bharti Airtel. On the other hand, Bajaj Auto, Tata Steel and NTPC were the laggards.
Aditya Birla Money MD talks about liquidity concerns in the market.
'Our preference remains for the less-expensive industrial stocks, which are showing good earnings momentum.'
Any change in rates would mean more volatility; else, poll outcome-fuelled rally expected to continue.
Government bonds yields are likely to trade in a range, owing to profit booking.
A good monsoon could rein in food inflation. Largely good corporate results mean better days are ahead. Nifty may reach record levels, points out Devangshu Datta.
'Continue with your SIPs to get the benefit of lower average prices in this challenging market environment.'
The Sensex took just five trading sessions to surpass the 36,000-level milestone, from 35,000.
Two senior ministry officials, who declined to be named, said the aim was to attract more capital flows from wealth funds in West Asian countries.
Demonetisation, Donald Trump's surprise victory in the US presidential elections, and the fear that US Fed may hike rates in the upcoming policy review in December have dented market sentiments, report Puneet Wadhwa & Deepak Korgaonkar.
The rupee has been falling for five straight weeks, taking its losses this quarter to 6.6 per cent, making it the worst performing currencies in Asia during this period.
With a new government in place, the outlook on economy and political stability has improved
SBI was the top gainer in the Sensex pack, spurting over 2 per cent, followed by TCS, Tech Mahindra, HUL, Bajaj Finance, Kotak Bank and Titan. On the other hand, IndusInd Bank, PowerGrid, Bharti Airtel, Asian Paints and HDFC Bank were among the laggards.
The watershed 2014 Indian election has thrown a decisive mandate after 30 years of coalition-based governments.
