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Weekly Market Update: NIFTY and Sensex suffered correction.

Date: 9/12/2018

Short Market Update: Rupee lost 2% against the dollar, Crude Oil prices rose as much as 5% after OPEC members meeting. Markets underwent correction this week due to macroeconomic factors.

On Friday, markets rallied thanks to strong global cues, with BSE Sensex up 361.12 points or 1.02% and closed at Rs 35,673.25, and NSE Nifty up 92.50 points or 0.87% at Rs 10,693.70. BSE Mid Cap up by 33.26 points or 0.23% and closed at Rs 14,717.49. And, BSE Small Cap was down 38.65 points or 0.27% and ended at Rs 14,104.65.

Global, as well as domestic macro indicators, dictated the market this week. After a positive start to the week, Indian stock markets witnessed a major sell-off across sectors. Weak global markets with increasing concerns over oil prices and assembly elections shook Indian markets.

Sensex fell 1.44% points this week, while NIFTY fell 1.62%.

The rupee lost 2% (Rs. 1.24) against the dollar during the week even after the crude prices eased a bit. On Friday, 7th December the crude prices shot up by almost 5% on account of the meeting of OPEC members who decided to cut production by more than one million barrels per day. The cuts will start in January 2019 and will last 6 months. This plan came up after the crude oil prices slipped 30% since October 2018.

Monetary Policy

For the second consecutive time, the Monetary Policy Committee kept the benchmark policy rate unchanged. The monetary policy stance remains unchanged at ‘calibrated tightening’.

Repo Rate at 6.5%

Reverse Repo Rate at 6.25%

Cash Reserve Ratio at 4%

Equity Mutual Fund inflows witness the biggest fall since March

Due to increased market volatility, global trade war and uncertainty over the upcoming state elections, the equity mutual fund inflows including ELSS, fell the most in seven months. According to the data released by AMFI, Equity inflows fell by 33% over the previous month to Rs 8,414 crore in November.

RBI tightens rules for the working capital facility

Sanctioning of working capital facilities for firms would be done more judiciously by banks. This may be available at higher costs. According to these guidelines:

  • Borrowers with a working capital limit of Rs 150 crore and above will need avail of the first 40% of their limit in the form of a “working capital demand loan”. This will come into effect from April 1, 2019. From July 1, the loan component will go up to 60%.
  • Additionally, banks will need to set aside capital for the unused portion of the working capital facility.

Krishnamurthy Subramanian – The Next Chief Economic Adviser

Krishnamurthy Subramanian, an associate professor at Indian School of Business and a banking expert, as the country’s next chief economic adviser. He will be succeeding Arvind Subramanian, who stepped down in June 2018. He has a Ph.D. from Chicago-Booth and an alumnus of Indian Institute of Technology, Kanpur and Indian Institute of Management, Calcutta.

Krishnamurthy Subramanian has been part of expert committees on corporate governance for the Securities and Exchange Board of India and on bank governance for the Reserve Bank of India. He serves as a member of SEBI’s Standing Committees on Alternative Investment Policy, Primary Markets, Secondary Markets, and Research. Currently, he also serves on the boards of Bandhan Bank Ltd., the National Institute of Bank Management, and the RBI Academy.

GSK-HUL Merger

GlaxoSmithKline Plc’s nutrition business to be taken over by Unilever Plc and then merge their Indian units in a deal worth £3.1 billion or $3.8 billion. The merger is between GSK Consumer Healthcare Ltd. and Hindustan Unilever Ltd. This gives GSK approximately 5.7% stake in HUL, while Unilever’s holding in the Indian unit will drop by 5.3% to 61.9%. The deal is expected to close in one year subject to approvals.

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