Brief Summary
This episode of Market Mantra provides a comprehensive update on the economic, business, and stock market news. It covers the stock market's third consecutive week of losses, with the Sensex and Nifty both declining. The episode also discusses Prime Minister Modi's inauguration of development projects in Bihar and West Bengal, and the impact of new European Union sanctions against Russia on oil prices. Additionally, the panel discusses factors influencing market trends, including first-quarter earnings, FII activity, and global cues, as well as updates on Asian and European markets, US stocks, and cryptocurrency regulation.
- Stock market indices declined for the third consecutive week due to IT sector selling and cautious investor sentiment.
- Prime Minister Modi inaugurated development projects in Bihar and West Bengal.
- Oil prices increased due to new EU sanctions against Russia.
- First-quarter earnings, FII activity, and global cues are influencing market trends.
- US stocks advanced due to strong corporate earnings and economic data.
Market Performance and Key Economic Indicators
The Indian stock market experienced its third consecutive week of decline, with the Sensex dropping over 500 points to close at 81,757 and the Nifty falling by 143 points to 24,968. This downturn was primarily attributed to heavy selling in the IT sector and investor caution ahead of trade talks between the US and India. Broader market indices like BSE Midcap and Smallcap also declined by 0.6%. Of the companies listed on the Sensex, 23 out of 30 closed with losses, with Axis Bank, B Electronics, and B Airtel experiencing the most significant drops.
Sectoral Performance and Rupee Status
Among sectoral indices at the BSE, 18 out of 21 sectors ended in the red, with Capital Goods, Bankex, and Industrials being the top laggards. Metals, IT, and Services were among the few gainers. The overall market breadth at the BSE was negative, with more companies declining than advancing. The rupee fell by 7 paise to close at ₹86.15 against the US dollar, while the dollar index was trading at 98.32.
Factors Influencing Market Decline
The recent market decline is attributed to several factors, including discouraging first-quarter earnings figures, particularly in the IT sector, and continuous selling pressure from Foreign Institutional Investors (FIIs). FIIs have been net sellers in July, with selling worth approximately ₹17,000 crore. Global factors, such as the US Fed Reserve's upcoming meeting and the lack of positive cues from the American market, also contribute to the negative sentiment. The valuation of the Nifty, with a PE index around 22.6, is another factor to watch, especially with FIIs being net sellers.
Demand, Inflation, and Cyclical Market Trends
The fall in demand, despite low inflation, is discussed in the context of urban versus rural trends, with rural areas showing slightly lower inflation figures. The experts suggest that the current situation is cyclical, with improvements expected in the demand segment. The first-quarter earnings are not necessarily negative but are not meeting the high expectations set by the previous financial year's growth. FII activity is also cyclical, with periods of net selling followed by net buying, and vice versa.
Sectoral Analysis and Global Factors
The decline in sectors like capital goods and industrials is compared to data from the first quarter of the previous year, indicating a similar trend. The market sentiments reflect sectoral earnings, especially those of big players. Global sentiments can overshadow these figures when positive cues emerge. The experts anticipate potential positive cues from RBI's monetary policy, which could lead to a market boom. Global factors often override domestic factors, making it challenging for central banks to balance inflation control and growth encouragement.
Asian, European, and US Market Performance
Asian markets showed a mixed trend, with Hong Kong's Hang Seng closing higher while Japan's Nikkei and South Korea's Kospi fell. European markets showed slight movement in early trading. US stocks advanced due to strong corporate earnings and economic data, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all rising.
US-India Trade Deal and US Economic Outlook
The US-India trade deal is described as a tug of war with global implications, potentially setting a roadmap for dealing with Trump tariffs. The US economy faces challenges from Trump tariffs, the Israel-Iran conflict, and the Ukraine-Russia conflict. Despite concerns about the US Fed, US markets are seeing gains due to positive first-quarter earnings data. A mix of domestic and global factors influences the US economy, requiring careful navigation by policymakers.
Cryptocurrency Regulation and Market Trends
The US House of Representatives passed the Guiding and Establishing National Innovation for US Stable Coins and Genius Act to regulate US dollar-pegged stable coins. Bitcoin surged past $12,000 amid growing optimism surrounding crypto regulation.
Development Projects in Bihar and West Bengal
Prime Minister Narendra Modi laid the foundation stone and inaugurated development projects worth over ₹12,400 crore in Bihar and West Bengal. These projects are related to rail, road, rural development, fisheries, electronics, and IT sectors. The initiatives aim to improve regional connectivity and promote a gas-based economy in West Bengal. The development of Bihar is considered necessary for the progress of Eastern India, with a focus on providing employment opportunities for the youth within the state.
Government Initiatives and Capital Expenditure
The government's commitment to capital expenditure is highlighted, with increasing allocations in successive budgets. The money allocated is being spent on infrastructure and social sector projects, including housing under the PM Awas Yojana, rail and road infrastructure, and electronics and IT hubs. Continuity in government policies and spending is crucial for achieving positive results in infrastructure development and economic improvement.
Commerce and Trade, Foreign Exchange Reserves, and Oil Prices
The Union Minister of Commerce and Industry interacted with heads of commercial wings in Indian Missions abroad to strengthen India's global trade strategy. India's foreign exchange reserves declined for the second consecutive week, decreasing by $3.06 billion to $696.67 billion. Oil prices edged higher due to new European Union sanctions against Russia, with Brent crude trading at $70.04 per barrel and WTI crude at $68.19 per barrel.
Gold and Silver Market Trends
In the Indian bullion market, 24-carat gold was trading higher at ₹98,420 per 10 grams, and silver was also up at ₹13,600 per kilogram. On the Multi Commodity Exchange, gold for August was up at ₹98,814 per 10 grams, and silver for September was up at ₹13,400 per kg. Silver is seen as a potential "new gold" due to its rising demand in various sectors, including defense.
