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November 2018 India Market Overview

Market sentiments continued to remain weak
14 November 2018
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    arket sentiments continued to remain weak

    Equity markets traded weak for the second consecutive month as concerns of liquidity issues in the NBFC space continued to linger, adversely impacting investor sentiments. Additionally, global cues were also not supportive during the month. However on the positive side, larger macro concerns for India are showing signs of receding. Global oil prices after surging through the year, dropped ~8.8 per cent during October to about USD 75 / barrel. India’s monthly trade deficit figure has also moderated after moving up in the recent past while inflation print continues to remain benign.

    Market indices BSE Sensex and NSE CNX Nifty were down 4.8 per cent and 4.9 per cent respectively while after undergoing sharp underperformance through the year, the broader market indices fell lower than market indices during October. BSE Midcap and Smallcap indices were down 1.0 per cent and 1.6 per cent respectively during month. Despite seeing a recovery in the global crude oil prices, the INR depreciated by another 2 per cent during the month versus the USD.

    The RBI in its bi-monthly policy kept the rates unchanged contrary to market expectations of a 25 bps cut in repo rate and also changed its policy stance from ‘neutral’ to ‘calibrated tightening’. Even as inflation forecast was lowered, the Monetary Policy Committee referred to risks to the forecast on account of higher oil prices, depreciation in INR and the current output gap dynamics.

    The liquidity issue that has impacted the sentiments adversely in the NBFC space moderated a bit as the RBI announced more measures to improve the liquidity situation. RBI indicated an additional liquidity infusion of about Rs. 400 billion in November through OMOs, which is in addition to Rs. 360 billion worth of OMOs conducted during October. The Central Bank also temporarily eased the liquidity requirement for banks in terms of lending to NBFCs and Housing Finance Companies. These included easing Liquidity Coverage Ratio (LCR) and also enhancing the single borrower exposure limits for NBFCs by 5 per cent to 15 per cent.

    The 2QFY19 results season is trending broadly in line with expectations though there have seen some earnings downgrades at an aggregate level. With respect to the Nifty universe, for the 28 companies that have declared results so far, the aggregate Revenues / adjusted EBITDA / adjusted PAT growth YoY stood at 27 per cent / 14 per cent / 6 per cent (data as on 31 Oct 2018).