Weekly Market Update: Volatile week for NIFTY and Sensex.

Date: 22/12/2018

Short Market Update: Volatile equity market, Rupee appreciation, Swiggy gets funding, RBI to inject liquidity, Fed rates increased, GST on 22 items cut.

On Friday, markets ended lower, with BSE Sensex down 689.60 points or 1.89% and closed at Rs 35,742.07, and NSE Nifty up 197.70 points or 1.81% at Rs 10,754.00. Even BSE Mid Cap and Small Cap closed in the red. Midcap down by 277.54 points or 1.79% and closed at Rs 15,253.00. And, Small Cap down 148.05 points or 1% and ended at Rs 14,633.62.

Benchmark indices fell sharply after witnessing a rally for seven consecutive trading sessions. Though there was a positive start to the week, markets witnessed selling pressure in the last two days. Sensex down 0.5% this week and closed at Rs 35,742.07, while NIFTY was down by 0.6% and closed at Rs 10,754.

The rupee appreciated 2.35% (Rs 1.65) against the dollar during the week.

RBI to inject Liquidity

RBI to conduct two open market purchases in December worth Rs 15,000 Crore each. Now, the total liquidity infusion via the purchase of bonds for the month would be Rs 50,000 Crore.

A halt in India IPO’s

The last quarter of the year has been the dullest for IPOs. Since May 2014, there hasn’t been a quarter like this without any IPOs. The first six months had 18 offers worth Rs 23,000 Crores, while the last six months has been tepid with just six companies raising Rs 7,500 Crore.

Swiggy gets $ 1Billion

Indian food delivery service company Swiggy receives Rs 7,000 Crore investment from Tencent Holdings Ltd. joined Naspers Ltd.

Bank Recapitalization

The government has sought parliament approval to increase the amount for the funds it intends to infuse into public sector banks in the current year. Supplementary Demand for Grants filed by the Government shows that The Department of Financial Services is seeking to increase the bank recapitalization amount by Rs 41,000 crore.

The fund infusion will fall into four categories:

  • Banks that need to meet minimum regulatory capital norms.
  • Better performing banks under Prompt Corrective Action (PCA) will be given capital to meet 9% CRAR norm and 6% Net NPA requirement to help them come out of PCA.
  • Non-PCA banks which are close to redline to ensure they don’t fall into PCA.
  • Regulatory capital for banks undergoing amalgamation.

Increase in Fed rate

The Fed has increased the rates 9 times from 2015. Currently, the Fed Rate is 2.50%. The rates are at an all-time high after a collapse of the market in 2008. In December 2015 the Fed increased the rate for the first time from 0.25% to 0.50%. The rate was again increased in December 2016. In 2017 and 2018 the Fed increased the rates 3 and 4 times respectively.

GST Council met to cut taxes on 22 items

On 22nd December 2018, the GST council met and announced a cut in taxes for 22 items. Seven items from the highest tax bracket have been removed and moved to a lower tax bracket. Apart from goods, there have been rate cuts in the services too like cinema tickets, third-party insurance premium, services supplied by banks for basic savings deposit and air travel for pilgrims. Changes in the renewable energy sector have also taken place like biogas plants, solar power based devices and solar power generating systems will now have 5% GST.

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