Investors in India are likely to turn back to global markets for guidance in this truncated trading week in the absence of any major local near-term triggers. With the stock largely indifferent to positive events last week, including a rebound in the US economy and better-than-expected September quarter earnings of some top Indian companies, market participants suspect that a sharp fall may be in store in the near future.
“Even though Indian equities will now take cues from global markets, RBI’s policy move remains a drag on the market,” said Gopal Agrawal, equities-head, Mirae Asset Global.
Last week, RBI laid the ground for higher interest rates next year. Investors fear about the impact of rise in interest rates on consumer borrowing and on investment plans of companies, which are still recovering on lower expenses, rather than pick-up in business.
Over the past two weeks, India’s benchmark indices have corrected 8-9%, amid sharp swings, driven by foreign institutional selling worth Rs 4,450 crore in the period. What has been a key worry for investors worldwide is the inability of the markets to hold on to rebounds, of late. Many of them were forced to buy emerging market stocks, including India’s, despite being bearish, on fears of being left out in the rally.
“After global equities rose 70% in six months (and emerging equities 106%), many fund managers who had bought into equities against their better instincts were itching to find an excuse to take profits,” said Garry Evans, global head of equity strategy, HSBC Bank. “A few weaker data points in the US, the first stirrings of central bank
tightening and the end of the third quarter earnings season were enough to give them that,” he said in a report.
Even though the US economy reported a growth in the third quarter, investors remain sceptical about this recovery, as unemployment in the world’s largest economy and importer are yet to recede.
Back home, shares of telecom companies, including Bharti Airtel and Reliance Communications, may remain under pressure on fears the ongoing price wars would dent profitability. Credit Suisse, in a telecom sector report, said despite the sharp share price correction in these stocks in recent weeks, the ‘risk-reward remains unfavourable’.
“Negative news flow, weak earnings and consensus downgrades could continue for the next 6-12 months,” said Credit Suisse. “Stocks need to fall 15-20% below our target prices (30-40% downside from current levels) before we turn buyers,” it added.
“Even though Indian equities will now take cues from global markets, RBI’s policy move remains a drag on the market,” said Gopal Agrawal, equities-head, Mirae Asset Global.
Last week, RBI laid the ground for higher interest rates next year. Investors fear about the impact of rise in interest rates on consumer borrowing and on investment plans of companies, which are still recovering on lower expenses, rather than pick-up in business.
Over the past two weeks, India’s benchmark indices have corrected 8-9%, amid sharp swings, driven by foreign institutional selling worth Rs 4,450 crore in the period. What has been a key worry for investors worldwide is the inability of the markets to hold on to rebounds, of late. Many of them were forced to buy emerging market stocks, including India’s, despite being bearish, on fears of being left out in the rally.
“After global equities rose 70% in six months (and emerging equities 106%), many fund managers who had bought into equities against their better instincts were itching to find an excuse to take profits,” said Garry Evans, global head of equity strategy, HSBC Bank. “A few weaker data points in the US, the first stirrings of central bank
tightening and the end of the third quarter earnings season were enough to give them that,” he said in a report.
Even though the US economy reported a growth in the third quarter, investors remain sceptical about this recovery, as unemployment in the world’s largest economy and importer are yet to recede.
Back home, shares of telecom companies, including Bharti Airtel and Reliance Communications, may remain under pressure on fears the ongoing price wars would dent profitability. Credit Suisse, in a telecom sector report, said despite the sharp share price correction in these stocks in recent weeks, the ‘risk-reward remains unfavourable’.
“Negative news flow, weak earnings and consensus downgrades could continue for the next 6-12 months,” said Credit Suisse. “Stocks need to fall 15-20% below our target prices (30-40% downside from current levels) before we turn buyers,” it added.
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