Active Stocks
Wed Apr 24 2024 15:59:54
  1. Tata Steel share price
  2. 165.50 2.73%
  1. NTPC share price
  2. 351.25 1.25%
  1. Power Grid Corporation Of India share price
  2. 290.00 1.75%
  1. Infosys share price
  2. 1,431.85 -0.68%
  1. ITC share price
  2. 428.85 -0.08%
Business News/ Market / Stock-market-news/  Why markets may remain weak in the near term
BackBack

Why markets may remain weak in the near term

There are at least three reasons why the markets are likely to remain weak and volatile in the near term

Among the many other reasons, the uncertainty regarding monsoon in the country and the possibility of a rate hike in the US are likely to keep markets on the edge in the near term. Photo: AFPPremium
Among the many other reasons, the uncertainty regarding monsoon in the country and the possibility of a rate hike in the US are likely to keep markets on the edge in the near term. Photo: AFP

New Delhi: The Indian stock market has been fairly volatile in the recent past. The equity market, as reflected by S&P BSE Sensex, for example, went up 1.9% and 1.5% on 8 and 11 May, respectively, but fell 2.3% on 12 May. It recovered a bit on the next day, but is down 1% since the beginning of the year and over 9% from the all-time highs reached on 4 March.

There are at least three reasons why the markets are likely to remain weak and volatile in the near term. The inflation-based consumer price index (CPI) has declined 4.87% in April compared with 5.25% in the previous month, and markets are hoping for another rate cut in the June policy, a 25 basis point rate cut will only have a limited impact as it might also be the last in the current cycle. One basis point is one-hundredth of a percentage point.

Markets are also disappointed by the fact that the government was unable to get the bills related to the goods and services tax (GST) and the new land acquisition bill passed in the budget session of Parliament that ended earlier this week. The passage of these bills may not have immediately translated into higher earnings, but it would have provided a sentimental boost to the market.

Company earnings for the March quarter have also been disappointing and any revival is now only expected in the second half of the current financial year. “On the domestic front, earning downgrades are still continuing and it is not clear how the earnings will pan out in the current fiscal year. The picture will get clear when all numbers for the fourth quarter (January- March 2015) are out," said Vinod Nair, head (fundamental research), Geojit BNP Paribas Financial Services Ltd. Until there is some clarity on the earnings, volatility may continue.

Also, the rise in bond yields in the European and US markets will continue to have an impact on the Indian stock market. “German and US bond yields surged to their highest in more than five months, making equities look more expensive in comparison with debt and keeping Asian stock markets subdued," noted a Reuters report on 15 May. As a result, foreign portfolio investors have become net sellers in recent days and have sold shares worth about $ 778.06 million so far in May.

“Foreign investors are churning their portfolio and it is clear that money is moving out of India," said Daljeet Kohli, head of research, IndiaNivesh Securities Pvt. Ltd, adding that he expects markets to fall another 5% from the current level.

Moreover, the uncertainty regarding monsoon in the country and the possibility of a rate hike in the US are likely to keep markets on the edge in the near term.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 15 May 2015, 02:22 PM IST
Next Story footLogo
Recommended For You