US Fed meet, derivatives expiry dent sentiments

Mumbai, July 28 (IANS) Bearish sentiment continued to dent the Indian equity markets on Tuesday, as investors were wary about the upcoming US Fed meet and the future and options expiry (F&O).

The government’s explanation that no hasty steps would be taken to implement the recommendations made by the special investigative team (SIT) on participatory note, or P-Note, did not calm the investors’ anxiety.

The SIT appointed by the Supreme Court on black money had recommended that the P-Note route of overseas funds investing in Indian stocks be stringently regulated.

The SIT recommendations had caused a panic in the markets, leading to it plunging by 550.93 points or 1.96 percent on Monday.

Apart from P-Notes, worries over retrospective tax on capital gains, the continuing slide in Chinese markets and the proposed containment of the central bank’s powers to fix key rates subdued the markets.

The barometer S&P 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) fell by over 100 points in the day’s trade.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) closed marginally in the red. It was down 24 points or 0.29 percent at 8,337 points.

The S&P BSE Sensex which opened at 27,630.21 points, closed at 27,459.23 points, down 102.15 points or 0.37 percent from the previous day’s close at 27,561.38 points.

The Sensex touched a high of 27,676.65 points and a low of 27,416.39 points in the intra-day trade.

According to market analysts, Indian exchanges opened with a marginal up-tick and traded in a choppy manner ahead of July F&O expiry and the two-day-long US Fed policy meet scheduled to start on Wednesday.

“The FOMC (Federal Open Market Committee) meet starting on July 29 followed by the F&O expiry on July 30 rattled the markets. Investors were still weary about the P-Notes and Justice A.P. Shah committee’s report on minimum alternate tax (MAT),” Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS.

The FOMC meet will give further clues as to when the rate-hike might take place in the US. With higher interest rates in the US, the FPIs (Foreign Portfolio Investors) are expected to be led away from emerging markets such as India.

These events are followed by the Indian monetary policy review by the Reserve Bank of India (RBI) which is scheduled for August 4.

India Inc. is demanding a rate cut as it believes that this may be the last time in this calendar year for RBI to ease lending before inflation spirals up again and the US Fed decides on its own rates in September.

Gaurav Jain, director with Hem Securities, cited the mixed bag of corporate earnings as having a negative impact on sentiment.

“Continuing downfall in the commodities along with negative cues from key commodity market China also spooked the sentiment,” Jain said.

The continuous slide in the Chinese markets in the last two months has eroded nearly 40 percent of the stock value and caused panic.

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

Sector-wise, healthy buying was observed in capital goods, banks and power scrip. However, healthcare, automobile, metal, oil and gas and realty stocks came under intense selling pressure.

The BSE capital goods index gained by 92.46 points, the bank index was higher by 89.55 points and the power index was marginally up by 8.73 points.

However, healthcare index declined by 144.74 points, automobile index receded by 128.75 points, metal index decreased by 62.22 points, oil and gas index lost 44.98 points and realty index was down by 36.05 points.

Among the Asian markets, Japan’s Nikkei was down 0.10 percent and China’s Shanghai Composite Index declined by 1.68 percent. However, Hong Kong’s Hang Seng gained by 0.62 percent.

In Europe, the London FTSE 100 index was higher by 0.80 percent, while the French CAC 40 gained by 1.31 percent. Germany’s DAX Index rose by 1.61 percent at the closing bell here.



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