Equity markets slip on Greece crisis, China stocks crash

Mumbai, July 11 (IANS) Indian equities slipped on the Greece crisis and fears of a Chinese market meltdown during the weekly trade ended July 10, as investor were reluctant to chase higher prices in a time of uncertainty.

However, the drastic impact of the two crisis was somewhat belied by hopes of a healthy first quarter results season, positive US Fed stand on rate cuts, good progress of monsoon and a downtrend in crude oil prices.

The barometer index of the Indian equity markets, the 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) lost 431.39 points or 1.53 percent during the weekly trade ended July 10.

The index closed at 27,661.40 points in the week under review from the previous closing of 28,092.79 points on July 3. The downfall comes after three consecutive weeks of gains.

Sensex had ended the previous weekly trade at 28,092.79 points from the previous weekly closing of 27,811.84 points on June 26.

Investor sentiments were impacted by the Greek rejection through the July 4 referendum on the new terms of a bailout package.

Other negative factors – like the continuous slide in the Chinese markets for a while that has now eroded nearly 40 percent of the stock value – also caused panic.

More importantly, the inability of the Chinese government, fund houses and brokerage firms to arrest the fall led to global sell-offs.

“Initially in the week gone by, there was optimism that the Greece crisis will be resolved and there wouldn’t be any spill-over effects on India. There was also good data on crude oil prices, monsoon progress and US Fed’s indication of a delay in rate hike,” Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS.

“However, as the week progressed the international sell-offs due to China coupled-with stalemate in Greece debt talks and anxiety over the Q1 results caused panic and sell-off here. Investors weren’t interested in chasing higher prices in uncertain times,” James added.

The markets started the week on a healthy note. On Monday, it chose to ignore the “no” vote in Greece and instead focused on a likely delay in the US interest rate cuts. It gained 116 points or 0.40 percent on Monday.

After that point, the downturn began, the markets on Tuesday closed flat — some 37 points or 0.13 percent down. The barometer index lost 484 points on Wednesday and 114 points on Thursday.

Whereas, it gained some traction on Friday and rose 87.74 points or 0.32 percent.

According to Devendra Nevgi, chief executive of ZyFin Advisors: “All the asset classes of the Indian markets be it currency, equity and bond showed good resilience towards the two crisis. That’s the reason why the fall was short-lived and the impact was mitigated.”

“India is very much insulated from the two crisis due to its strong economic fundamentals and hopes of a healthy Q1 numbers coupled with a good monsoon,” Nevgi told IANS.

Other factor that mitigated the impact on the Indian markets were the lower job creation in the US which led the US Fed to give an indication of a delay in US rate hike.

The US Fed’s FOMC (Federal Open Market Committee) minutes gave a positive indication of a delay in rate hike.

Even the sharp fall in the light sweet crude oil of West Texas Intermediate (WTI) futures and options index helped improve market sentiments.

The India markets which depends on Brent crude oil index are also effected by the price movements of the WTI.

However, the main trigger for coming period will be the Q1 earnings results cited Gaurav Jain, director with Hem Securities.

“The first quarter results and the upcoming parliament session are the main concerns right now. The Chinese market lows and the efforts to stabilise it and the stalemate in the Greek issue will be short-lived triggers,” Jain told IANS.

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