The day started off with a gap up opening and ended with some moderate gains.
FII ended as net buyers.
Asian markets were trading higher and ended higher.
Mid caps were trading higher.
NIFTY magic levels :
NIFTY Spot - 4529.9
Support - 4471.10 and 4413.55
Resistance - 4566.7 and 4603.25
NIFTY Auto generated technical analysis.
Foreign Institutional Investors, who deserted the Indian bourses last year, leaving them to face the heat of the global economic crisis are likely to make a come back in the second half of this year.
FIIs, which pulled out over 13 billion dollar from the Indian stock markets in 2008, following severe credit crunch in the US and Europe are likely to again gain momentum in the later part of this year.
According to a latest India strategy report by BNP Paribas, currency appreciation could be a significant driver of FII inflows.
"Our outlook on Rupee appreciation implies that FII inflows into Indian equities could restart in H2CY09. Concerns on capital outflows still exist (due to deleveraging in developed markets), but our empirical analysis shows currency appreciation is a significant driver of FII inflows," BNP Paribas analyst Manishi Raychaudhuri said in the report.
The report stated that even as there is an ongoing debate about whether currency appreciation causes FII inflows or vice-versa.
Meanwhile, not giving any prediction about the time period by when the FII flows into the country may be revived, Coxe Advisors LLC Global Capital Markets Strategist and CEO Donald Coxe told PTI that with return of confidence in the market the inflows would pick up.
"By some estimates, USD 650 billion in dollar-denominated bank loans to Emerging Market private sector banks need to be refinanced or rolled over in 2009, and that is a steep overhang.
If the refinancing moves smoothly for even a few months, there will be a huge return of confidence and FII will respond favourably," Coxe said.
The BNP Paribas report revealed that the Indian experience shows currency appreciation to be the causal variable and when the Rupee had started appreciating from mid-2002, FII flows had began accelerating a year later from mid-2003.
Further, brokerage firm Reliance Money said in its market strategy report that going forward, higher capital flows coming back led by strong FII buying and more than expected appreciation in the Indian Rupee would be the positive drivers for the market.
"Markets are likely to continue to be governed by the momentum driven by the global news flows, which is predominantly negative with potential earnings downgrades expected in the near medium term," the Reliance Money report said.
In January so far, FIIs sold as much as Rs 3,961.80 crore (nearly one billion dollar. However, they have been buying in debt segment to the tune of Rs 1,045 crore in the month.
FIIs had been net sellers in Indian equities to the extent of USD 13.3 billion in calender year 2008, the first time since 1999. And this outflow was on the back of a record inflow of USD 17.4 billion in 2007.
According to another domestic brokerage Motilal Oswal's report, following the significant outflows by FIIs, their holdings in BSE 500 companies came down to 16.7 per cent in September 2008 from 19.4 per cent in 2005. - ET
The markets commenced the last week on a strong note against the backdrop of RBI’s sudden cut in policy rates over the weekend which was further augmented by strong global cues. With alternate bouts of buying and selling being the order during the first half of the week, the sentiment was further boosted after reports that PSU bankers reached a consensus to cut interest rates on advances by 75 basis points, and on deposits by 50 bps. Resultantly, there was a sharp rally at the bourses.
However, the biggest event of the week remained the US Presidential election wherein Barack Obama, the Democrat nominee was elected as the 44th US President. However, hardly had the election dust settled that global investors again began despairing about the economy. The Bank of England surprised investors on Thursday, 6 November, by slashing its key rate by 1.5%, bringing borrowing costs down to the lowest since the 1950s.
Prevalent uncertainty, lack of fund buying coupled with weakness in the international markets and profit booking at higher levels finally led to a steep correction in the domestic market on the penultimate and previous day of the week.
Concerns on inflation, which again increased to 10.72% against the market expectation of a single digit rate too added to the selling pressure. Lastly, Reliance Industries posted its third worst fall in percentage terms on a single day during the week gone by following a slew of adverse news and unsubstantiated rumours about the company.
The recovery on the last trading day against the backdrop of favorable global cues however helped the market to end the week on a positive note.
Though the US Presidential election results attracted a lot of media attention, it failed to bolster investor sentiment across the globe, mired as it is in the ongoing financial crisis. Thus, despite a slew of measures taken by the Government and the RBI to arrest the stock market mayhem, the Indian markets remain vulnerable to yet another FII sell-off driven onslaught.
The foretaste of the economic slowdown was already witnessed in the subdued performance of Indian Inc. during the latest result season. Further, with major economies such as US, Europe and Japan already in a recessionary mode, it will be a while before the global economy gets back on track. Lowering of India’s growth forecast of by the International Monetary Fund (IMF) to 6.3% too signals tough times ahead for the Indian Inc.
The upcoming announcement of IIP numbers in India and the truncated week ahead could also add to the ongoing uncertainty and trigger increased volatility.
However on a positive note, the Indian Rupee is now showing signs of strengthening against the backdrop of ease in FII outflows and dollar sales by exporters. This coupled with the cooling of crude prices could have a positive impact on the inflation which still remains above the RBI tolerance level.
For now, with the Q2 results season now out of the way, there are concerns that Q3 may be even worse as the lag effect of the impact of inflationary pressures and interest rates that were raised mid-year could manifest themselves in the numbers. Thus, the market may remain lacklustre as selling at every sharp upmove would result into sharp downswings. The silver lining of course remains in the fact that there are again umpteen options for long term investors to fuel up their portfolios with. Read the full post...
