Indian equity markets extended their losing streak and Nifty slipped below the much-feared 8000 levels this week. While benchmark indices fared comparatively better on Friday than others, the week ended in the red for a third consecutive time. This week at Dalal Street has been a disappointing one, more so for retail investors. Fears of a sub-par monsoon, a weak rupee (against the USD) and lack of cheerful corporate earnings are among the main reasons for the loss at the markets.
The 30-scrip benchmark index, S&P BSE Sensex closed the week that ended on 12 June at 26,425.30 points – a decline of 343.19 points or 1.28 per cent over last weekly closing at 26,768.49 points. The other key index, NSE’s 50-scrip CNX Nifty also closed the week in the red at 7,982.90 points a decline of 131.8 points or 1.62 per cent from last week’s closing at 8,114.70 points. The Nifty and the Bank Nifty performed dismally this week and the indices lost between 4 to 6.5 per cent. Despite a 25 bps cut in repo rates initiated by the RBI, the markets did not look cheery. ICICI Bank, Bajaj Auto, Tata Power, GAIL, BHEL and Axis Bank were among the top Nifty gainers this week.
To arrest the downtrend, it is important that key indices retain some stability this week. Nifty must regain 8000-8100 levels and some of the major companies that have lost a lot of ground in the past few weeks, such as ITC, must come up with strategies to win back investors’ confidence. Market watchers feel that the lack of any major triggers is likely to keep Indian equity markets choppy for the next few months. Investors are advised to exercise caution.
TCS and Infosys Caught in H-1B Row
According to reports from the American media, the US Department of Labor has initiated an investigation against Indian tech majors Infosys and Tata Consultancy Services for “possible violations of rules for visas for foreign technology workers under contracts they held with an electric utility Southern California Edison”. H1-B is a temporary work visa issued to immigrants for short-term work in the US. Shares of TCS fell by up to 2 per cent and Infosys shares fell by 1.2 per cent following the news report. NASSCOM President Mr. R Chandrasekhar, however, said that Indian IT companies have remained fully compliant with US Visa regulations and continue to extend full cooperation with US authorities in the course of the probe. The industry body also suggested that the probe may be an attempt to discredit and discourage Indian IT companies. A few days ago, news reports in the US said that the entertainment major, Walt Disney, had laid off hundreds of its regular employees and replaced them with H1-B visa holding Indians.
April IIP at 4.1%; May CPI at 5.01%
India’s factory output for the month of April is heartening – a reversal of trend from March when it reached a five-month low. The Index of Industrial Production (IIP) growth rose by about 4.1 per cent for the month of April vis-à-vis a 2.5 percent rise in March and well beyond market predictions. A sharp increase in manufacturing production has been the main cause for the accelerated IIP growth. The output of the manufacturing sector rose by about 5.1 per cent versus a 3 per cent year-on-year growth. Machinery and equipment led the sixteen industry groups that recorded a positive growth in the manufacturing sector for the month of April.
Consumer Price Index (CPI) inflation for the month of May was recorded at 5.01 per cent versus 4.87 per cent in April, according to data released this week. In May 2015, Consumer Food Price Index was recorded at 4.80 per cent, a downslide of about 0.31 percentage points from the 5.11 per cent levels recorded in April 2015. In rural and urban regions, the CPI was recorded at 5.52 per cent and 4.41 per cent respectively. Inflation of food and beverages prices was pegged at 5.16 per cent, while fuel and light inflation increased by about 7.41 per cent.
Telangana to Get INR 8000 crore Investment From ITC
The Chairman of ITC group, Mr. YC Deveshwar announced that the group will invest INR 8000 crore in the newly formed state of Telangana. He said, “As a commitment from ITC we assure you that we will be investing Rs 8000 crore in the state of Telangana. We will expand our paper plant capacity and set up a new hotel in Hyderabad”. The announcement came at a ceremony where the Telangana Chief Minister K Chandrasekhar Rao unveiled the state’s new industrial policy. The policy centred on deadlines for approvals to set up projects in the state. Mega projects are likely to receive all necessary approvals within a fortnight, said the CM.
Maggi to be Recalled; Nestle Loses Appeal Against Ban
The Food Safety and Standards Authority of India (FSSAI) issued an instruction to Nestle to halt the production of Maggi instant noodles and asked the company to recall all the stocks in the market. Nestle had appealed against the stay on production and distribution but has lost the appeal. Nestle argued that the testing process was flawed and contended that it did not use MSG in the product. It also said that of the nine variants of Maggi in the market only three had been tested by the government. The next hearing on the fate of what has been India’s favorite ramen brand for decades now, is to be decided by Mumbai High Court on 30 June.