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Analysis

Global cues weigh heavy on equity indices; breaks winning streak – Market Review

The equity market had begun the week on a positive note led by a strong rupee backed by narrowing trade deficit and inflow of foreign funds.

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BSE

Mumbai, Dec 22 : Global cues such as US interest rate hike, along with concerns over slowdown in global growth and threat of a partial US government shutdown, dragged the key domestic equity indices into the red during the just concluded week.

The massive selling on Friday was triggered by a downturn in global markets and profit booking in the financials, IT and auto stocks. It came a day after major domestic indices snapped its seven-consecutive sessions’ winning streak.

The equity market had begun the week on a positive note led by a strong rupee backed by narrowing trade deficit and inflow of foreign funds.

“Markets ended with losses this week after a sharp fall on Friday which wiped out the gains seen during the early part of the week,” said Deepak Jasani, HDFC Securities’ Retail Research Head.

Consequently, the S&P BSE Sensex lost 220.86 points, or 0.61 per cent, to close at 35,742.07, whereas the 50-share Nifty of the NSE declined 51.45 points, or 0.47 per cent, to settle at 10,754.

“Drop in oil prices, strengthening rupee and pick-up in domestic macros provided positive momentum to the market. However, concerns over global economy growth and threat of partial US government shutdown triggered sell-off in global market,” Geojit Financial Services Head of Research Vinod Nair said.

“Global market was influenced by FOMC downward revision in US GDP growth to 2.3 per cent from 2.5 per cent in 2019. US Fed slashed the interest rate hike trajectory for CY19 to two from four in 2018, which is positive for emerging market.”

Besides indices, the local currency followed a similar trajectory in the past week, nonetheless, it strengthened by 1.75 to 70.15 against the US dollar from its previous week’s close of 71.90.

“Indian markets started the week on a positive note due to gains from declining oil prices, increased open market operations by RBI to improve liquidity in the system and government measures to recapitalize public sector banks,” said Essel Mutual Fund CIO Viral Berawala.

The government on Thursday had announced fund infusion of Rs 83,000 crore in PSBs by March 2019, which pushed the PSU Bank Nifty index into the green during the initial trading session.

However, the sector-based index ended in the red — down 0.52 per cent — as it succumbed to the overall negative trend in the market.

In terms of investments, foreign institutional investors (FIIs) were net buyers during the week under review as they bought a total of Rs 1,040.72 crore worth of shares, whereas domestic institutional investors (DIIs) off-loaded scrip worth Rs 1,141.49 crore, provisional data from the BSE showed.

“Nifty ended with W-o-W losses of 0.48 per cent. Market breadth was positive in four out of the five trading sessions of the week. Among sectors, power, PSU, oil and gas and
metals were major gainers while IT and consumer durables were large losers,” Jasani said.

The top gainers on the BSE and the NSE were Power Grid which gained 6.15 per cent and Tata Motors which was up by 5.39 per cent. NTPC, Tata Motors(DVR), Asian Paints and Mahindra and Mahindra gained in the range in 3 to 5 per cent.

In contrast, export oriented IT stocks lost the most, owing to the weakness in the US dollar after the Fed rate hike. Infosys lost 8.48 per cent followed by TCS which declined by 4.62 per cent and Wipro a little over 4.10 per cent.

Other major losers were Bharti Airtel, Hindustan Uniliver and Adani Ports — all in the range of 2 to 4 per cent.

(Ravi Dutta Mishra can be reached at [email protected] and Rohit Vaid at [email protected])

Analysis

Eliminated JeM leadership within 100 hrs of Pulwama attack: Army

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Dantewada Attack

Srinagar, Feb 19 (IANS) The Indian Army on Tuesday said within 100 hours of the February 14 Pulwama attack on a CRPF convoy that left 40 troopers dead, it eliminated the Jaish-e-Mohammad (JeM) leadership in the valley that planned and executed the deadly carnage.

This was stated by Lt Gen K.S. Dhillon of the 15 Corps Commander, at a joint press briefing here in Jammu and Kashmir, along with officials state police and the Central Reserve Police Force (CRPF).

He also made it clear that the Pulwama attack was carried out by the JeM, which is based in Pakistan, with active support of the Inter-Services Intelligence (ISI) and the Pakistan Army.

“Within 100 hours of the Pulwama terror attack, we hit the JeM in the Kashmir Valley which was being handled by the Pakistan-based JeM,” Dhillon said.

He also added that the details of the two terrorists and one local conduit who were killed in the operation was shared on Monday.

“The local commanders, most of them Pakistanis, who were in-charge of controlling, coordinating, fabricating and executing the attack on Thursday, were the top leadership of the JeM in the valley,” Dhillon said.

Since the JeM leadership was already being tracked, the Indian operation was launched on Sunday night on specific information of the module.

Giving a stern warning to sympathisers of the terror movement in the state, he said: “Anyone who picks up a gun in Kashmir will be eliminated, unless the person surrenders.”

“I would also like to tell one thing to the parents of the Kasmhiri youths, especially the mothers, as I understand that they have a key role. Through you, I request the sons to surrender and join the main stream,” the officer said.

In the biggest crackdown after the February 14 attack by a suicide bomber that left 40 CRPF troopers dead in Pulwama district, the security forces ringed a militant hideout in Pinglena village, just 10 km from the Thursday’s terror attack site, triggering a gun battle Sunday overnight that continued intermittently till Monday evening.

They killed three militants of the Pakistan-backed JeM, two of them Pakistani nationals identified as Kamran and Abdul Rashid alias Ghazi Umar. Besides, a Major, three soldiers and a civilian were also killed in the initial burst of gunfire by the militants.

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Analysis

Dealings of European missile manufacture under scanner

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Rafale Fighter Jet

New Delhi, Feb 17 (IANS) A leading European arms manufacturer MBDA, which supplies missiles for the Rafale jets, has come under the scanner of probe agencies here for its suspected links with lobbyist Deepak Talwar, who was extradited from Dubai last month.

The country head of MBDA, Loic Piedevache, has been summoned by the Enforcement Directorate to appear before it on Monday in connection with the probe relating to the company’s links to Talwar, who is believed to have steered several deals with Airbus, which holds a stake in MBDA, during the UPA regime, according to sources.

Infrastructure major Larsen & Toubro had entered into a joint venture with MBDA to supply missiles and missile systems to the Indian armed forces.

L&T holds 51 per cent stake in the joint venture, L&T MBDA Missile Systems, and had identified defence as one of the key drivers for achieving growth in the sector.

The sources claimed that apart from questions on the company’s engagement with the Indian forces, Piedevache would also be questioned on the alleged payments to Talwar’s NGO. Advantage India, to the tune of Rs 88 crore between 2012 and 2015, from MBDA and Airbus.

Later, the entire money was said to have been withdrawn in cash by using “fake purchases”, the sources said.

Analysts said this was probably a rare occasion when the India head of a leading international firm was being summoned by a probe agency.

Piedevache has been heading the company’s operations in India for a decade. The Mirage upgrade programme and Rafale were signed during Piedevache’s tenure in India and he could be privy to information, the sources said.

“If required, the probe agency may also summon group export director Jean-Luc Lamothe. First of all, Piedevache would be asked to explain the company’s payments to Talwar’s NGO,” the sources said.

Piedevache could not be reached for his comments. An MBDA spokesperson said the company would support the authorities in their probe. It maintained that it had supported social development initiatives in India as part of corporate social responsibility, which included some payments to the NGO.

The company is involved in the Rs 30,000 crore offset programme associated with the 36 war planes.

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Analysis

Rupee weakened against $ in choppy weekly trade

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India Rupee

Mumbai, Feb 17 (IANS) In a choppy week’s trade, the Indian currency weakened against the US dollar to close above the 71 a dollar mark on Friday, owing to a sharp rise in crude oil prices, turmoil in the equity markets and uncertainty around the US-China trade relations.

In what could translate into further trouble for the domestic currency, analysts see an upward move of 6 to 7 per cent in the Brent crude prices in the coming week.

The rupee lost heavily towards the end of the week – over 70 paise in the last three trading session – as traders reacted to the sanction on Venezuela and production cut by OPEC and Saudi Arabia.

Sajal Gupta, Head Fx & Rates Edelweiss, said “technically … crude now looks set for another 6-7 per cent rise” which would mean that the rupee was likely to depreciate further in the coming sessions. “And if Rs 71.80 per dollar is broken, we can head towards Rs 72.50 mark.”

Among other factors impacting the currency, Gupta said, with crude and dollar index giving breakout, rupee would remain under pressure. Trade deficit data released on Friday post market was also not very encouraging with monthly deficit touching almost 15 billion dollars.

“Political tensions would also remain heightened with key leaders vowing strong retaliation in wake of the biggest terror attack in the Kashmir valley.”

Explaining the factors which has caused volatility, Anindya Banerjee of Kotak said the currency markets largely depend on the capital flows … and right now the fear of a possible retaliation by the government in response to the Pulwama attack is having an affect.

“The context of the whole event is also important because (Lok Sabha) elections are around the corner,” Banerjee said.

Also, the currency losing against the dollar and rising crude oil prices was a double whammy for the bond markets, he added.

On the global front, discussing the factors affecting the currency, Banerjee said, the Chinese economy was very fragile right now and moreover investors were looking for developments in the US-China trade talks.

However, Gurang Somaiya, currency analyst, Motilal Oswal, felt that the rupee was protected from any major weakness as “Foreign Institutional Investment (FII’s) came around good”, especially in February.

According to data from the bourses, FII has seen inflows worth Rs 1,096 crore in February.

India on Friday revoked the Most Favoured Nation Status (MNS) of Pakistan and has warned that more stern actions will follow the attack in Pulwama. Additionally, equity markets have declined for 6 straight sessions showing weak investor sentiments.

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