This is a collection of articles archived for the excellence of their content.
Changes in Sexsex indices
See graphic, Biggest falls in Sensex, 2006-15
See graphic, Biggest falls in Sensex: 2008-15
Changes in stock market indices
As the sensex topped 39,000 for the first time ever, it also quietly crossed another landmark. It was exactly 40 years ago, on April 1, 1979, that the sensex was technically born, starting its journey with a base value of 100 points. In effect, in 40 years, the sensex has risen 390 times. Seen another way, if one had invested Rs 1 lakh in the index on that day, the investment would have been worth Rs 3.9 crore today.
The BSE started publishing the value of the sensex only from 1985 when it was in the 400-point range. The same year it gave the highest annual returns, 94%, while in 2008, it had more than halved, from over 20,000 to a little over 9,600.
‘For any investor, sensex ideal way to make money’
On Monday, boosted by strong global cues, the sensex opened nearly 200 points higher at 38,859, scaled a new all-time peak at 39,116 and closed at 38,872, up 199 points on the day.
The tremendous returns generated by the sensex is a testimony to the power of wealth creation of the stock market, provided the investor is able to withstand the ups and downs that the market throws up once in a while. “People who get scared by volatility and do not stay the journey do not benefit from (the power of) compounding,” said Rajeev Thakkar, fund manager, Parag Parikh Long Term Equity Fund. Also, for investors, it is not advisable to look at stock prices frequently, he said.
Over the last 40 years, India has been witness to the assassination of one Prime Minister and one ex-PM, testing of nuclear bombs, two major stock market scams, a war and several major border skirmishes with Pakistan, terror attacks like 9/11 and 26/ 11, pledging of golds to avoid sovereign debt default and fall of governments at the Centre. Yet, for the index over these 40 years, the average annual retur n was a little over 16%. In comparison, according to some estimates, bank FDs of one-year duration would have given annual average returns of about 7% while the returns from gold would have been in the 9% range.
According to Gajendra Kothari, MD & CEO, Etica Wealth Management, a financial advisory firm, the sensex’s returns over these four decades clearly demonstrates the magnitude of wealth created in the Indian stock market during these years. “Had a retail investor who didn’t know anything about selecting stocks and had no experience of tracking his investments invested in the index, he would have multiplied his wealth several hundred times,” he said. “For any investor, the sensex remains the ideal way to make money. By investing in this index, he participates in the India growth story by having an exposure to 30 best companies in the country,” Kothari said.
Percentage change in stock market indices in 2014: India and the world
Election results and the Sensex
Sensex: on the morning after the results
Sensex movement after poll results, 1991-2014
Election results and the Sensex- 2015-18
Sensex Hits 40K After Modi Win, But Ends In The Red On Fears Of Co Earnings, Liquidity Woes
A continuation of the BJP-led government at the Centre prompted Dalal Street traders to embark on a euphoric rally that took the sensex beyond the 40k mark for the first time ever. However, as the initial euphoria faded and ground realities struck marketmen, the index came down sharply to close at 38,811 — down 299 points on the day. At close, investors were also poorer by Rs 50,000 crore with the BSE’s market capitalisation now at nearly Rs 150 lakh crore.
The sensex opened strong with a 400-point gain, and soon rallied to an all-time peak of 40,125. But from then on, as profit-booking set in, it lost ground. In the last hour of trade, it fell sharply to touch an intra-day low at 38,652, but closed a bit higher from that level.
On the NSE, the Nifty too scaled the 12k mark in early trade, but lost steam soon after and closed 81 points lower at 11,657.
Despite the day’s slide in the sensex, brokerages are optimistic that the government will push forward with its reforms agenda. With an outstanding mandate for Narendra Modi, “we are confident that under his dynamic leadership, the much-needed reforms will be initiated to take the Indian economy to the $5-trillion level soon”, said IIFL Group MD R Venkataraman. The current size is about $2.5 trillion.
The government will now face several hurdles to put the economy on the growth path which has, of late, slowed down significantly with issues like flat corporate earnings, rural distress, liquidity crunch in the system and global trade tensions. Brokers expect Modi to quickly address these issues.
According to Motilal Oswal Financial Services cofounder Raamdeo Agrawal, the new government must harness the power of the stock market to fund developmental needs. “The government can get a few lakh crore of rupees through better management of PSUs and their judicious divestment. Further, the government must focus on increasing smooth flow of capital to entrepreneurs,” he said.
“Aversion to lend is becoming a bigger problem than availability of liquidity and cost of funds. The new government will have to work closely with the RBI and other capital market participants to resolve this crisis on a war footing,” Agrawal said.
According to brokers and dealers, the decisive mandate for the NDA government means there would be continuity of policies and predictability. Market players do not like uncertainty and the Lok Sabha mandate is sure to end the poll-related uncertainty that was there for the last few months.
Institutional players also expect foreign funds, which were on a ‘wait-and-watch’ mode for the past few months due to poll-related uncertainties, to invest in the Indian market. On Thursday, BSE data showed that foreign funds net bought stocks worth about Rs 1,350 crore, while domestic funds were net sellers at nearly Rs 600 crore.
Among the 30 sensex stocks, 15 closed in the red while an equal number closed with gains. HDFC Bank, HDFC and ITC were the top contributors for the index’s 0.8% fall, while IndusInd Bank, ICICI Bank and L&T were top gainers, which helped cushion the slide to some extent.
For Friday, market players expect a flat to negative trading session, which would continue till the new Cabinet and other ministers are in place.
Biggest Gain (In %) A Day After Poll Results
Posts Biggest Gain (In %) A Day After Poll Results
Boosted by strong buying by foreign funds, who are turning bullish on India, after the resounding mandate for the Modi-led government, the sensex allied 623 points to 39,435 on Friday with short covering by speculators helping the surge in the closing hours.
In Friday’s market, the sensex opened slightly higher, dipped a bit and then rallied through the session to an intrasession high of 39,477 and closed just a tad off that mark, up 1.6% for the day.
This was the benchmark’s biggest gain in percentage on the day after the general elections’ results since 1991.
The day’s rally added Rs 2.6 lakh crore with BSE’s market capitalisation now at Rs 152.4 lakh crore. After the Lok Sabha poll results were announced on Thursday, foreign fund managers and institutional dealers had said that global investors, who were on the sidelines for the last few months due to election-related uncertainty, would start buying into India. Other than their comfort about policy continuity under Prime Minister Narendra Modi, they are also bullish on India since this is one of the rare countries around the world which has a large economy and offered higher growth.
At the close of trading on Friday, Foreign portfolio investment (FPIs) were net buyers at Rs 2,026 crore, while domestic funds were net sellers at Rs 195 crore, BSE data showed.
On the NSE, Nifty closed 187 points or 1.6% higher at 11,844. The rupee strengthened 49 paise on Friday to close at 69.53 to a dollar, a three-week closing high for the currency.
Mondays that are manic
See the graphics,
Biggest falls in Sensex: 2008-15 (It is under 'Biggest falls' elsewhere on this page)
Top losers since August 2011
The Times of India, Aug 25 2015
7 of 10 biggest mkt slumps on Mondays
They don't call it Manic Monday for nothing. Seven of the 10 biggest single-day falls on Dalal Street have taken place on a Monday. This is true for both intra-day crashes as well as sensex closing levels.The second highest closing fall of 1,408 points was also on Monday, January 21, 2008.
Monsoons and the market: the correlation
2009, 2011: no correlation
Apr 24 2015
Although Dalal Street is feeling the jitters of a below-normal monsoon prediction by the Indian Meteorological Department, data show no correlation between Met's predictions, actual rains and the overall market trend. For example, 2009 saw the worst drought in recent times with the country witnessing 77% of the long period average (LPA) rainfall during monsoon.However, that year the sensex rallied 76% between April, when Met's initial monsoon estimates are published, and September, when the monsoon officially ends. On the other hand, the sensex fell over 20% in 2011, the year that saw one of the best monsoons in over a decade
Muhurat day trading
Samvat 2061-71 (2005-15)
Amit Mudgill, ECONOMICTIMES.COM Nov 9, 2015
Samvat 2071 3rd worst for Sensex in a decade
(Data compiled from the BSE…)
It was the third worst Samvat in a decade for BSE benchmark Sensex, as a less-than-expected pace of earnings revival, fading hopes of big-bang reforms and high volatility in equity markets globally had a bearing on the domestic market.
With just one day left for investors to participate in the auspicious muhurat trading, investors would not hope to see a repeat of Samvat 2071, during which the BSE Sensex shed some 2 per cent. The fall, though minuscule, has ended a long winning streak for the BSE benchmark in three consecutive Samvats. The Hindu Samvat runs from Diwali to Diwali. Data compiled from the BSE website showed the 30-pack index rose 26.42 per cent in Samvat 2070, 14.70 per cent in Samvat 2069 and 7.69 per cent in Samvat 2068. (See table)
The equity benchmark has given negative returns in only three Samvats in last one decade. Besides the Samvat that is ending on Tuesday, Samvat 2070 (2010-11) witnessed a 17.69 per cent fall in the Sensex while Samvat 2067 (year 2007-2008) saw the index lose 52 per cent.
Calendar 2011 had witnessed the downgrading of the US to AA+ from AAA rating by rating agency Standard & Poor's for the first time in history, triggering weakness in equities across the globe. During 2007-2008, markets crashed globally after the collapse of Lehman Brothers, as many other US financial institutions, such as Freddie Mae and Fannie Mac, faced trouble, triggering a chain reaction, what is now known as the global financial crisis.
However, Samvat 2071 was different in the sense that global markets fell this time on concerns over a slowing Chinese economy and the strengthening of the US economy, which has made a liftoff imminent after eight years of near-zero interest rate regime.
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Back home, a delay in delivery on reforms by the NDA government weighed on the market sentiment through the Samvat.
"The May 2014 election result was a landmark in Indian politics, as the Modi-led NDA coalition won an outright majority in the Lok Sabha. The fact that a single party crossed the halfway mark on its own for the first time in 30 years raised hopes that the long-awaited economic reforms will be out on fast track. However, things have not gone smoothly, largely due to the BJP's lack of a majority in the Rajya Sabha. As a result, reforms that require legislative approvals -- notably the emblematic and key land acquisition and GST reforms bills -- are stuck in a parliamentary logjam," Vivek R Mishra, Asia Equity Strategist, Societe Generale, said in a note.
"Our sense is that there is a serious structural change that has taken place globally between emerging and developed markets," said Jahangir Aziz, JPMorgan.
In an interview with ET Now, Aziz said: "If you look at global trade, it has flatlined both in terms of US dollar and as a percentage of global GDP since 2010. If you look at what drove the fortunes of emerging markets, including India, prior to the crisis or through the recovery phase, it was this massive increase in global trade. It is not a six-month or 12-month phenomena, it has been happening since 2010."
"In addition, the kind of impact that growth in developed markets used to have on emerging markets has been more or less absent in last five years. So if you look at the last five years, developed markets have actually increased growth rates from, say, minus half a per cent during the crisis period to about one-and-a-half per cent. But emerging markets have more or less lost about 350 to 400 basis points in average growth rate. The old model has come to its end," he said.
2014: rises marginally
Sensex rises marginally in Muhurat trading
The Times of India Oct 25 2014
At any gathering of brokers, analysts and investors, a major part of the conversation currently revolves around the new government and its policies. Thursday evening's Muhurat trading session at P J Towers, the headquarters of BSE in south Mumbai, which saw the sensex closing 64 points higher at 26,851, was no different. Top brokers and independent money managers shared their views on almost every decision of the Narendra Modi government and its impact on the market, and there were enough number of willing listeners as the one-and-halfhour long special trading session continued at the exchange's Convention Hall.
During the session, which was to mark the start of Samvat Year 2071 -the New Year for the trading community on Dalal Street dominated by the Gujaratis -the sensex's gains were backed mainly by index heavyweights like Reliance Industries, TCS and ITC. Nifty closed 19 points higher at 8,015.
Usually, the indices close higher after the Muhurat session as traders do not sell shares during this session that is preceded by a puja of God dess Lakshmi, who symbolizes wealth and prosperity .
The day's session at BSE started with felicitation of some of the top brokers on the exchange during the past one year, and then the opening bell ringing ceremony . This year, Bollywood actor Kajal Aggarwal, of “Singham“ fame, rang the opening bell. In Samvat 2070, the sensex had gained 26%.
There was a bullish undertone in what the brokers, money managers and analysts had to say as they have huge expectations from the Modi government. However, there were some notes of caution as well.
Samvat 2070-74; 2074 was among most volatile
As the Samvat year 2074 ended with a 41-point sensex gain, it brought to an end one of the most volatile years in the last decade: The index rallied from a little over 32k to an all-time high of almost 39k, only to fall sharply to about 33k before finally settling at nearly 35k.
The Samvat, a traditional Hindu calendar year, will be remembered for the sensex outperforming most of the other broader indices as large-cap stocks rallied, while some of the small- and mid-cap stocks were hammered ruthlessly on Dalal Street.
As a result, despite the 8.3% rise in the sensex, the BSE’s mid-cap index lost 8%, while the small-cap index lost over 15% during the year. The sharper losses in mid- and small-cap stocks also led to a dip in investors’ wealth by Rs 3.9 lakh crore with the BSE’s market capitalisation now at Rs 140.4 lakh crore.
The year also recorded one of the sharpest outflows by foreign funds, mainly because of rising crude oil prices, that led to some sharp weakness in the rupee, which nearly touched 75 to a dollar in mid-October before ending the Samvat at 73 — a depreciation of over 12% during the year. Official data shows that FPIs have started taking money out of India at an increasing rate in the last few months with a nearly Rs 40,000-crore net outflow from stocks since September itself. However, the net inflow figures of the initial months have given the data some respectability with the net outflow at Rs 21,343 crore.
Foreign funds also sold in the debt segment with the net outflow figure at almost Rs 47,000 crore. This huge selling also had an impact on the yields in the bond market with the 10-year benchmark yield hardening by more than one percentage point to over 8.2% in early October, but ended the year at 7.8% on the back of a liquidity infusion by the RBI.
The year also witnessed emergence of domestic mutual funds as the counter-balance to foreign funds, with systematic investment plans (SIPs) rising to become a game changer in the stock market. With inflows of about Rs 7,500 crore (that’s around $1 billion) each month flowing into mutual funds and not much option to buy stocks outside India, domestic money managers cushioned sharp selling by foreign funds, industry players said.
2014-15/ Samvat 2071: Worst in four years
The Times of India, November 11, 2015
Samvat 2071 in the traditional calender of the trading community on Dalal Street, has turned out to be the worst year for the sensex in terms of returns in the last four years. The benchmark index lost 4% even as investors waited for the 18-monthsold Narendra Modi government to deliver on its promises of faster economic growth and development. In terms of investors' wealth, however, the year saw about Rs 2 lakh crore being added to BSE's market capitalization at Rs 96.1lakh crore, reflecting smarter gains for nonsensex stocks. Newly listed stocks like Interglobe Aviation (IndiGo airlines) and Coffee Day Enterprise (Cafe Coffee Day), which together have contributed about Rs 35,000 crore worth of market value, also contributed to investors' wealth during Samvat 2071, exchange data showed.
The year, which started strong, ended on a cautious note for investors on the back of the Bihar drubbing suffered by the Modi-led NDA. However, the go od sign for Dalal Street is that two days after the elections results were out, the government liberalized foreign investment rules in 15 sectors, including manufacturing, defence, banking and agriculture through executive orders. This was “reflective of the government's commitment to boost investment as well as improve the ease of doing business“, said a note from Radhika Jain, partner, Walker Chandiok & Co LLP , an management consultancy and advisory firm.
Market players said it was a good sign that the poll drubbing is not forcing the government to take the populist route and dump the economic reforms process for growth and development. Some analysts said the poll debacle may turn out to be a blessing in disguise for the government and the economy . Others feel the Modi government would be less effective to take the legislative route to reforms given its minority position in the Rajya Sabha and therefore will depend more on executive decisions to get the reforms process moving forward. In such a situation, investors willing to stay invested for the long run will benefit.
“It will be a tough year for the market, especially considering the pipeline of primary issues and government divestments,“ said Arun Kejriwal, director, KRIS. “Making money will entail discipline and skill sets. Reforms will galore over the next 2-3 quarters. However, it will take longer for tangible results to be seen,“ Kejriwal said.
2017: biggest ever fall on Muhurat day
How the Sensex closed on Muhurat day, compared to the previous day, Samvat 2064-2074 (A.D. 2007-2017)
2015/ Samvat 2072: Best gains in 7 years
The Times of India, Nov 12 2015
Sensex's best Muhurat gains in 7 yrs
Rises 124 points on 1st day of samvat 2072 trading on govt's FDI move
The Muhurat day trading for Vikram Samvat year 2072, the new year for the Hindu lunar calendar, ended on a strong note, thanks mainly to the government's late Tuesday announcement allowing easier foreign investment in 15 sectors, with the sensex ending 124 points higher, its best Diwali day closing in seven years. Although the mood among those present at BSE's Convention Hall was downbeat compared to last year when the Modi-led government was just a few months old, veterans at Dalal Street said the Centre was working hard and its decisions relating to the economic reforms process is expected to start showing results soon.
On Diwali day , brokers worship Lakshmi, the Godess of wealth and prosperity at BSE's Convention Hall which used to be the trading rink till computers replaced the open outcry system of trading. Brokers, along with their family members, trade on terminals set up temporarily for the Muhurat session at the same hall. According to another official at a broking house, the government's attempts to bo ost investment in the economy is bearing results, albeit slowly , and some private sector companies are also starting to invest in building capacities.
The gains on Diwali day's one-and-half hours special trading session was led by Axis Bank, Sun Pharma and L&T, while Hero MotoCorp and ITC were the top laggards. The session also added nearly Rs 63,500 crore to investors' wealth with the BSE's market capitalisation now at Rs 96.78 lakh crore. Institutional participation was minimal as it was a banking holiday . Extending its gains for the third straight day, gold prices advanced by Rs 15 to Rs 26,250 per ten grams in muhurat trading at the bullion market on increased buying by jewellers, driven by the ongoing festive season.
Token buying activity on the auspicious occasion of Diwalialso supported the upside, traders said. Silver also edged up by Rs 25 to Rs 34,900 per kg. AGENCIES
NSE vis-à-vis the Sensex
As in 2015
NSE top bourse, but sensex bigger brand
Partha Sinha The Times of India Mar 05 2015
A little more than two decades ago, the National Stock Exchange (NSE) -currently the largest bourse in India in terms of turnover -was created by the government to compete with and break the monopoly of the Bombay Stock Exchange. BSE then was a cosy brokers' club with a complete dominance over the stock trading in the country . To counter trading by a limited number of brokers, the gov ernment created an exchange that was the country's first computer-driven online stock exchange, promoted by some of the leading institutions of that time.
In its initial days, NSE enjoyed the monopoly of setting up trading terminals across the country , while its main rival BSE was not allowed to do so. It was only after NSE captured a large chunk of share trading across the country and also dominated regional stock exchanges that BSE got the permission to go pan-In dia. That, too, after a huge struggle by BSE brokers.
What helped NSE to outwit BSE and grow rapidly was the savvy use of technology . The launch and spread of online trading, which also created several jobs among the youth, was a big differentiator. According to one institutional dealer, in mid-1990s, he got his first job with a family-run broking firm simply because he had very basic knowledge of computers. “My employer would treat me with a lot of respect and would often brag to fellow brokers that he had someone who knew computers,“ the dealer said.
Along with computerized trading, NSE also led the automation and paperless trading in the Indian market. NSDL, the first depository in the country is a subsidiary of NSE that led the demat revolution in India. Also, it was the first exchange to have a clearing corporation, an independent third party that facilitated settlement and helped low er trading and settlement risks in the market.
Despite the dramatic rise and rise of NSE, at least on one count it still falls behind BSE: The Brand. Sensex as a brand that punches way above its weight compared with NSE's nifty. “Although most of the brokers look at nifty to gauge investor sentiment, outside of this community , among the general mass, sensex still remains the primary gauge for the robustness of the market and the economy ,“ said a former exchange official.
Prime Ministers and the Sensex
1999- 2019, May
The performance of the Sensex under the Prime Minister Atal Bihari Vajpayee, 1999- May 2004
The performance of the Sensex under two Prime Ministers Manmohan Singh and Narendra Modi, 2004- May 2019
Union Budget, annual: impact of
2017> 2016: Sensex gains 30% on retail push
Between Jan 31 2017 and Jan 31 2018, Sensex touched new highs 70 times
MFs Pump ₹1.2L Cr Into Stocks, Foreign Investors Only ₹15K Cr
If one looks at the performance of sensex, Nifty and top stocks on Dalal Street since the last Budget exactly a year ago, the numbers will surely impress. The sensex is up around 30% since then to a record high of around 36k, it has hit new highs on more than 70 occasions, and investors are richer by nearly Rs 45 lakh crore (or about $700 billion) with BSE’s market capitalisation now at nearly Rs 160 lakh crore, also an all-time peak.
What could impress more and also give a lot of comfort to the government and policymakers is the fact that this smart rally came mainly on the back of strong buying by retail investors through domestic mutual funds. Since the last Budget, mutual funds have pumped close to Rs 1.2 lakh crore into stocks — almost three times the corresponding number over the 13-month period between Budget 2016-17 and Budget 2017-18 (for FY17, the Budget was presented on February 29, while since then the date has been advanced to February 1). In comparison, net fund infusion by foreign investors — who were the most dominant investor group in India for nearly a quarter of a century — was just a trickle at nearly Rs 15,000 crore (or $2.3 billion).
With retail investors lapping up the systematic investment plan (SIP) in mutual fund schemes as their preferred route to invest in the stock market, fund managers and brokers believe that India’s longcherished dream of having a credible counter-balance to foreign funds is firmly in place.
Investors are putting over Rs 6,200 crore into mutual funds through SIPs every month and industry estimates say 95% of this is intended for investing in equities.
If the current trend is maintained, very soon Indian investors will be investing over $1billion (Rs 6,500 crore) in stocks every month, which could rise to over Rs 10,000 crore in about two years, A Balasubramanian, chairman of industry trade body AMFI, told TOI recently. In January 2017, this number was at Rs 4,095 crore, thus recording a growth rate of over 50% since finance minister Arun Jaitley’s last Budget.
One of the main reasons for this huge growth in SIP inflows is what market players describe as the ‘financialisation of savings and investments’ due to demonetisation, which is getting a further boost by introduction of GST.
These two reform-oriented moves by the government are prompting investors to shift from buying gold and real estate to investing in mutual funds, stocks and other financial products.
Dalal Street veterans now expect the FM to give a further boost to financial savings by putting more money into the hands of salaried people and also plugging loopholes which could turn the stock and commodity markets into a much safer place to invest and trade.
Union Budget, annual: Reaction to
2016: Highest rise ever
The Times of India, Mar 02, 2016
Top 5 day-after surges post budget, till 2016
Slide and surge, sensex, intra-day; Top sensex losers; Gaining currency, rupee-dollar and Finance Minister and change in points: till 2016
Swinging Sensex on Budget day, 2008-2017
Changes in the stock market on the Budget Day, February 1, 2017
7th heaven: Sensex flies 777, highest rise in 7 yrs
Investors on Dalal Street lif ted the sensex by a record 777 points-its biggest single-session gain on the day after the Budget.Investor wealth rose by Rs 2.5 lakh crore overall. The jump of 3.4% to 23,779 was also the biggest singleday gain in nearly seven ye ars since the sensex shot up 2,111 points on May 18, 2009, the day Congress-led UPA government returned to office.
Investors were enthused by finance minister Arun Jaitley's resolve to stick to the fiscal deficit target of 3.5% of GDP and proposed investments aimed at boosting the rural economy as well as India's infrastructure. Hopes of a rate cut by RBI also propelled the sensex. Foreign investors bought net stocks worth Rs 1,761 crore during the day, a sig nificant reversal from a net nificant reversal from a net outflow of Rs 2,100 crore on the Budget day . Twenty-seven of the top 30 BSE companies closed higher with ITC, ICICI Bank and Maruti leading the surge. The day's strong buying also lifted investors' wealth measured in terms of BSE's market capitalisation, to Rs 88.17 lakh crore from Rs 85.67 lakh crore on Monday .
According to Amar Amba ni, head of research, IIFL, sev eral measures, announced in disparate areas, promise posi tive yield in the medium to long term. “Farmers and budding entrepreneurs have handsome takeaways, so does the bottomend of the salaried class.
The rural and farm sector allocations including MGNREGA, irrigation, electrification, crop insurance, interest subvention and cooking gas subsidies are laudable as they would make a difference to countless BPL families across the length and breadth of the country ,“ he said. “The silver lining, however, was that the fiscal deficit target of 3.9% (of GDP) was met and target of 3.5% has been maintained for fiscal 2017. This raises expectations of a rate cut from the RBI,“ Ambani said. The FM's decision to not raise fiscal deficit for next fiscal had also started a rally in the bond market on Monday which continued on Tuesday , although it was slightly muted with the yield on the benchmark 10-year government security softening by 3 basis points (100 basis points =1percentage point) to close at 7.60%. In the last three sessions yield has softened 16 basis points as bond prices rallied (bond prices and yields are inversely related).
“There is a high chance of a rate cut by the RBI, but may not come immediately ...that could come in RBI's April 5 policy meeting,“ a bond dealer said.
2017: an even higher rise
In the biggest points gain for the sen sex on a Budget day ever, the index jumped 486 points (1.8%) on Tuesday , riding on the government's resolve for fiscal discipline and economic reforms and the relief announced for taxpayers. The sensex ended the day at 28,142 -a three-month high. Foreign investors, however, were muted in their response to the Budget. Their net buying of stocks was worth Rs 93 crore, while bullish domestic funds recorded anet inflow figure of Rs 1,134 crore. The day's rally was led by auto and banking & financial sector stocks, while IT and pharma continued to witness selling pressure due to emerging business hurdles in the US, the largest export market for these companies.
The day's gains, which made investors richer by over Rs 1.7 lakh crore with BSE's current market capitalisation now at nearly Rs114 lakh crore, were also boosted by short covering by speculators who had gone short, anticipating a tough Budget for the market in particular.
Brokers said some of the FM's proposals signalled that India is open for business. “The Budget affirms India's commitment to globalisation and an open market against a global trend of protectionism. The abolition of FIPB is a strong signal towards the same, as is the clarification on tax on indirect transfer,“ said Leo Puri, MD, UTIMF .
Brokers also feel that the tax proposals are a long-term positive. “The proposed reduction in tax will be constructive for improving overall compliance and collection efficiency . This will also be positive for greater flow of savings to formal channels,“ said Shilpa Kumar, MD & CEO, ICICI Securities.
2018: 2nd biggest post-budget loss, 9th worst in single session
The reaction of India’s stock markets to the union budget of 2018
The Day After: Details Of Govt’s Mega Schemes Emerge And Markets Take A Beating
Yields On Bonds Move Up, Rupee Falls Against $
The reintroduction of long-term capital gains (LTCG) tax sent Dalal Street on a selling spree on Friday, as the sensex crashed 840 points (2.3%), its secondsharpest post-Budget day fall ever by points, and closed just a tad above 35K.
Bond yields rose on fears that the government might not be able to manage the fiscal deficit target, which also affected investor sentiment on the stock market.
After plunging to a low of 35,006 points in late trades, the sensex closed at 35,067 while the Nifty lost 256 points to close at 10,761. The day’s session left investors poorer by Rs 4.6 lakh crore, with BSE’s market capitalisation now at Rs 153.7 lakh crore. In terms of market cap loss, it was the fifth-worst day for Indian investors.
In addition to LTCG tax and rising bond yields, lack of clarity about the applicability of LTCG tax and its grandfathering clause in case of foreign investors also led to strong selling.
In a post-market conference, the government, however, clarified that all LTCG tax-related rules would apply to foreign funds also.
A section of the market said the sell-off is expected to continue in the coming week as well. “The worst is not behind us yet. Markets need to stabilise after such a major shakeout,” said Arun Kejriwal, director of investment advisory firm KRIS. “It will not only take some time, but also some more value erosion,” he added.
Several foreign portfolio managers said they were taking a close look at the possible impact of LTCG tax on their India investments. These fund managers have in recent times banked on a stable rupee. But the burden of an extra tax could now force them to rethink their investment models, which may lead to some selling in the coming weeks, market players said.
Interestingly, though, in Friday’s session, foreign funds clocked a net inflow of Rs 950 crore, compared with Rs 509 crore net selling by domestic funds. There are additional concerns that some of the foreign players may shift part of their portfolio to Singapore, where the exchange is planning to launch derivative contracts on the 50 stocks that constitute NSE’s Nifty index.
Rising bond yields fuel global mkt volatility
The yield on the benchmark 10-year government securities rose to a high of 7.68%, from 7.17% when it was introduced on January 5. A rising gilt yield puts pressure on banks to hike their lending and deposit rates. “Global market volatility led by rising bond yields, profit-booking (Indian markets had posted a strong monthly gain before the Budget) and concerns on deteriorating macro-economic conditions were the probable reasons for the market fall,” said Sandeep Chordia, EVP strategy, Kotak Securities.
During the day, the sell-off in the stock market also caused the rupee to weaken. It closed at 64.06 to the dollar, more than a month-low figure.
2018: Worst ever 4-day post-budget fall
The worst ever 4-day post-budget fall of the Sensex after a union budget took place in 2018, but was aggravated by international problems as well
2019: fall is second-worst in 11 years
Investors Lose ₹3.2 Lakh Cr As BSE Index Plunges 793 Pts
Equity investors lost close to Rs 3.2 lakh crore on Monday after the sensex dropped 793 points—the sharpest fall since October 2018. The index also recorded its secondworst post-budget performance in a decade as markets expressed their disappointment with the government’s decision to tax buyback of equity by companies.
Foreign portfolio investors turned net sellers over concerns that a tax on the rich would also apply to FPIs since they invest under the trust route. Besides the tax on buybacks and general negativity over the government decision to increase taxes on the rich, global markets were affected after stronger US jobs data reduced chances of a rate cut by the US Federal Reserve. Emerging markets sentiment also dimmed after Turkish markets crashed following the sacking of its central bank governor.
The 30-share sensex tanked 907 points in the intra-day trade before settling at 38,720.6 points, showing a sharp loss of 792.8 points or over 2%. The broader Nifty of the NSE tanked 252.6 points, or 2.1%, to close at 11,558.6 points. The biggest post-Budget decline by the sensex in the last decade was in February 2018, when the benchmark index closed 840 points lower.
According to analysts, the tax on share buybacks will discourage companies from announcing buying back their equities. They said buybacks act both as a safety net for shares and add liquidity.
The selloff in equities and fears of fewer rate reductions by US Fed, resulted in the rupee losing its three-day gaining streak. The domestic currency declined by 24 paise to close at 68.66 against the US dollar.
Among Indian stocks, public sector banks were hit after Punjab National Bank classified Bhushan Power and Steel as a fraud. PNB’s shares closed 11% down after it accused a defaulting borrower Bhushan Power and Steel of a Rs 3,800 crore fraud. HDFC Bank shares closed nearly 3% down over concerns of a slowdown in lending, particularly in consumption segment. Bajaj Finserv shares fell 10% after Sanjiv Bajaj warned that demand was easing with TV sales not picking up despite the cricket World Cup.
In the last two sessions, the total erosion in market cap has been over Rs 5 lakh crore. The government’s proposal to get companies to increase public holding to at least 35% of their capital (from 25%) has raised the spectre of equity dilution.
“The market fall today was because of concerns over future fund flow into the secondary market and scam revelations at PNB. Hike in surcharge in the Budget will have an adverse impact on high-end consumption, as well as reduce the investible surplus of highincome individuals, whose money was the mainstay of mutual funds, PMSes and the midcap segment. Fears of prolonged slowdown in consumption also caused sell-off in autos and NBFCs linked to the consumption story,” said Amar Ambani, president & research head, YES Securities.
Changes in market capitalisation under the NDA government, 2014>2019
Changes in market capitalisation, FY 2015>2019
2019 FY: Foreign funds drive Sensex up 17%
Institutional Investors Lap Up Blue Chips, Midcaps And Smallcaps Lag Index Rise
Fiscal year 2019 will be remembered as the year when large institutional investors concentrated their buying in blue chips, leaving aside midcap and smallcaps for others. Consider this: The sensex gained a little over 17% during the year, while the smallcap index on the BSE closed 11% lower and the midcap index was down 3%. The Nifty has gained a little over 14% during the year.
FY19’s 17% rise in the sensex was also the best in the last four years. In FY16, the index had seen a 9.4% loss after rising nearly 25% in FY15, data showed. While the sensex had witnessed a loss in FY16, the BSE had recorded a Rs 25.8-lakh crore jump in market capitalisation, indicating a rally in midcap and smallcap stocks and also several new listings in the market that year.
Foreign funds are driving the current stock market rally with the sensex and Nifty expected to scale fresh all-time highs soon while bank Nifty is already at a new peak. Arun Kejriwal, director, KRIS, an investment advisory firm, said: “We are on track to hit new highs in the sensex and Nifty. Bank Nifty is already at a new high. The interests of FPIs in India has picked up considerable steam and about Rs 45,000 crore was invested in the last few weeks in equities. With election results still eight weeks away, markets will have a free run for at least a fortnight,” he said.
On the sectoral front, banking, energy and IT have outperformed with FMCG and pharma also recording good gains.
Going ahead, after the Lok Sabha elections are over, there could be some profit taking as concerns about a slowdown in the global economy and the US-China trade war-related issues could again come to the forefront. In times of profit-taking or selloff, usually, small and midcap stocks suffer the most.
The year also saw the rupee slide to a new all-time low level against the dollar, trading near the 75-level. However, the recent strong inflow of foreign funds has brought the Indian currency around the 69-per-dollar level.
Gold, one of the most popular assets for Indians, saw some volatility but is now trading at the Rs 32,500-per 10-gram level, a gain of about 4% in the last one year, which is just about matching the rate of inflation in the economy. Although globally gold is considered a natural hedge against inflation, in India it is a popular asset.
On the global front, US President Donald Trump said trade talks with China are progressing “very well”, as top negotiators from the two countries on Thursday began another round of meetings to resolve their tariff dispute.
Elsewhere in Asia, Hang Seng rose 0.96%, Shanghai Composite soared 3.2%, and Nikkei ended 0.82% higher on Friday. Global oil benchmark Brent crude futures rose 0.44% to $68 per barrel.