Market descends on global worries
The Sensex tanked 350.17 points to settle at 31922.44 while the Nifty closed at 9964.40 losing 121 points for the week ending Friday, 22 September 2017.
On macro-economic data, India’s April-June 2017 current account deficit (CAD) widened to its highest in four years as imports surged but strong capital inflows comfortably financed the gap. Exports grew 10.29%, the highest in the last four months, to $23.81 billion in August 2017. CAD widened to 2.4% of the country’s GDP or $14.3 billion as imports pushed the trade deficit to $41.2 billion from $23.8 billion in the previous corresponding period. Despite a wider current account gap, the balance of payments surplus was $11.4 billion in April-June 2017 v/s $6.97 billion a year ago, helped by strong dollar inflows that boosted the rupee 0.43% during the quarter. India’s capital surplus, which includes FDI and portfolio inflows, stood at $25.4 billion v/s $7.18 billion surplus a year ago.
India’s gold imports recorded a three-fold jump to $15.24 billion during April-August 2017. In August 2017, gold imports rose to $1.88 billion from $1.11 billion in August 2016. The surge in gold imports last month contributed to the widening of trade deficit to $11.64 billion as against $7.7 billion in August 2016. India’s forex reserves surged by $2.604 billion to reach an all-time high of $400.726 billion in the week ended 8 September 2017. Foreign currency assets (FCAs), a major component of the overall reserves, grew $2.568 billion to $376.209 billion last week.
Gold reserves remained unchanged at $20.691 billion. The special drawing rights (SDRs) with the International Monetary Fund (IMF) rose by $14.2 million to $1.520 billion. The country’s reserve position with the IMF also rose by $21.4 million to $2.304 billion. According to HSBC, India is likely to overtake Japan and Germany to become the third largest economy in the next
10 years in nominal dollar terms and the transition will happen even earlier on a PPP (purchasing power parity) basis. But it needs to be consistent in the reforms and focus more on the social sector.
“Social capital is insufficient in the country and spending on aspects like health and education is not just desirable for India’s own sake but is also central to economic growth and political stability”, it said.
Its estimates show India will be a $7 trillion economy in 2028 as compared to less than $6 trillion and $5 trillion for Germany and Japan, respectively. Currently, India’s GDP is around $2.3 trillion (FY17). It stands at the fifth spot in global rankings. It said that the growth rate which will be lower in FY18 as compared to 7.1% in FY17 due to the introduction of GST but will recover from next year in a sustainable fashion.
India will continue to be a services-oriented economy but needs to pay extra attention to manufacturing and farm sectors as well, it said adding that it would be desirable to maintain the contribution of manufacturing, agriculture and services at the current levels.
On the US front, the US Federal concluded its two-day monetary policy meet on Wednesday, 20 September 2017, and kept the interest rates unchanged. The Fed stated that it will begin rolling off its $4.5 trillion balance sheet most of which consists of the Treasuries and mortgage-backed securities in October 2017. Higher US interest rates will attract foreign investments from emerging markets to USA.
Key index advanced on Monday, 18 September 2017, on buying by traders. The Sensex was up 151.15 points (+0.47%) to close at 32423.76.
Key index climbed on Tuesday, 19 September 2017, on extended buying. The Sensex was up 21.39 points (+0.07%) to settle at 32402.37.
Key index edged lower on Wednesday, 20 September 2017. The Sensex was down 1.86 points (-0.01%) to close at 32400.51.
Key index fell on Thursday, 21 September 2017, on selling. The Sensex was down 30.47 points (-0.09) to close at 32370.04.
Key index tumbled on Friday, 22 September 2017, on correction. The Sensex plunged 447.60 points (-1.38%) to close at 31.922.44.
Events like national and global macro-economic figures will dictate the movement of the global markets and influence investor sentiment in the near future.
The September 2017 F&O contracts expire on Thursday, 28 September 2017.
On the US front, US Q2 GDP data is scheduled for release on Thursday, 28 September 2017.
On the China front, China’s Manufacturing PMI data for September 2017 is scheduled to be out on Friday, 29 September 2017.