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Indian stock market volatility set to continue this quarter

Indian stock market volatility set to continue this quarter

A combination of anxiety over the outcome of the upcoming elections in three major north Indian states, fear of continued slide in rupee exchange value vis-à-vis USD and persistent rise of crude prices globally are expected to further rock the Indian bourses in the coming weeks, with the S&P BSE flagship index Sensex seen likely to end sub-30,000 level by end 2018, according to leading stock market analysts, bankers and economists.

The S&P BSE Sensex ended at 34,376 and NSE Nifty at 10,316 on Friday, the last trading session, down from their all time peaks of 38,694 and 11,691 respectively.

“The Indian market will continue to see heightened volatility in the current quarter because of a host of expected negative factors, with the Sensex likely to come down to 30,000 level by the year end,” Vijay Kedia, MD of Kedia Stock and Commodity Research, told Arabian Business.

However, he said according to his technical analysis, the BSE Sensex could be in the range of 31,000-32,000 and Nifty in the range of 9,800 – 10,400 level by the end of the year.

Several fund houses, institutional investors and HNIs spread across the Middle East are among the major investors in Indian stock market.

Thousands of Indian expats working in the UAE have their savings in stocks in India mainly through Mutual Funds.

India’s Election Commission on Saturday announced poll dates for elections in 5 states, including 3 BJP-ruled states of Madhya Pradesh, Rajasthan and Chhattisgarh, spreading over November-December 2018.

The outcome of election results in these states, especially in the 3 north Indian states, will have a major bearing on the prospects for BJP in the general election slated for April-May 2019.

Speaking to Arabian Business, Madan Sabnavis, Chief Economist at credit rating agency CARE, said concerns over some of the macro-economic factors such as widening trade account deficit, weakening rupee and likely impacts of rising crude prices on retail inflation will weigh heavy on Indian markets in the coming weeks, dragging down the indices further.

He sees the Sensex plunging below 30,000 levels by the end of the year.

The slide in rupee exchange value against the Greenback continued throughout last week, with the Indian currency ending at 74.15 on Friday, while market anxiety has been building up over the proposed US sanctions against Iran, kicking in from November, which will determine whether there will be further spurt in crude prices or not.

“In the first place, there were no reasons for the market to reach where it had reached – to go so high, this year. Stock market movements are supposed to be a reflection of the corporate sector performance and the performance of the Indian corporate sector this year did not warrant any such exuberance on the stock market,” Sabnavis said.

Bank of America Merrill Lynch, in a report has said uncertainties related to oil prices and next year’s general elections may keep domestic sentiment and equity flows in check in the Indian market. It has, however, set a year-end target of 32,000 for the S&P BSE Sensex.

Paul Abraham, chief operating officer (COO) of private sector IndusInd Bank, told Arabian Business the decision to hold the lending rates by RBI on Friday, coupled with the rising concerns over liquidity following the IL&FS payment crisis could further spoil the market sentiment in India.

However, he refused to take a guess on the likely level of Indian flagship indices by 2018 end.

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