Domestic equity indices CNX Nifty and S&P BSE Sensex fell nearly 2% in November due to weak domestic and global cues. Discouraging domestic cues came in the form of warning by Standard & Poor’s (S&P) that it may lower the rating to speculative grade next year from ‘BBB-‘ rating if the new government does not appear capable of reversing India's low economic growth. Depreciation of the Indian rupee and rise in domestic inflation (retail and wholesale) also pulled down the markets during the month. In terms of weak international cues, minutes from the US Federal Reserve’s (Fed’s) October meeting indicating scaling back of its stimulus program at one of its next meetings weighed on the markets.
The markets were, however, able to cap losses helped by sustained foreign institutional investor (FII) buying for the third consecutive month in November. FIIs net bought Rs 7,079 cr in November as compared to buying of Rs 18,013 cr in October. Markets were also supported by the positive remarks from Reserve Bank of India (RBI) Governor Raghuram Rajan which helped the rupee erase some losses against the dollar. Mr Rajan said that the RBI would not rush to roll back the dollar swap window for oil companies. Assurance from the Fed chief nominee Janet Yellen that the central bank has "more work to do" to help an economy and a labour market, which are still under performing, also helped to cap the losses.
The S&P BSE sectoral indices ended mixed in November. The S&P BSE Consumer Durable index was the biggest loser, down 8.90% due to profit booking. The S&P BSE Capital Goods index led the gainers, up 7.26% due to stock-specific buying. The S&P Midcap and Smallcap indices gained 3.57% and 3.45%, respectively, amidst bargain buying by investors.
The domestic equity market in December is expected to be guided by the FII flows and global cues, mainly the Fed’s monetary stance. Further, the results of state elections would provide some clarity and guidance about the central elections due for the next year, and might influence the market. The market would continue to be impacted by domestic macro-economic data.