INDIAN EQUITY MARKET OUTLOOK - 20 JUN 2016

Indian markets Rajan’s exit, Brexit worries set to hit Dalal Street

Indian Indices:

Indian benchmark are likely to open on a bearish note as the global cues look subdued with SGX Nifty trading 58.50 points lower.

The Indian equity benchmarks may witness a gap down opening on Monday as Raghuram Rajan’s abrupt decision to step down as the RBI governor following the end of his term in September may sour risk taking appetite.

Rajan, who was instrumental in helping tame down inflation and restoring macroeconomic stability, said that he won’t seek an extension to his term and will be returning back to academics. Rajan’s exit could spell volatility for equities and the rupee which may also take a hit from heightened global economic uncertainty amidst fears that a potential exit of the UK from the European Union may weaken the global economy.

The Brexit referendum slated on June 23, 2016 will decide whether the UK will break away from the European Union, an event which could hurt capital flows to emerging markets.

Global Market:

Asian stocks were trading mostly higher with focus firmly on Brexit referendum in the UK. A latest poll showed a swing in favour of Britain remaining in the EU, as campaigning resumed after the murder of opposition lawmaker Jo Cox.

China’s Shanghai Composite logged modest losses, Hang Seng rose and Japan’s Nikkei 225 surged by over 2 per cent as the yen declined after the country’s exports suffered an eighth straight drop in May.

On Friday, Wall Street succumbed to a renewed slide with benchmark S&P 500 marking its second weekly decline and the biggest since April as concerns over the world economy amidst Brexit fears and soft housing data hit sentiment.

US housing starts fell 0.3 per cent to a 1.16 million annualized rate in May, signaling a cooling housing market in the world’s biggest economy.

European shares rose on Friday, helped by a rebound in the battered banking sector, with investors attributing the rebound partly to the suspension of campaigning for Britain's EU referendum following the shooting of a lawmaker.

Major Headlines of the day:

·  RBI Governor Raghuram Rajan decides not to seek reappointment

·  Cipla in pact with Russian firm for HIV, Hepatitis C drugs.

·  Max Life and HDFC Standard life begin due diligence for merger.

 Trend in FII flows: The FIIs were net buyers of Rs 31.96 Cr in the cash segment on FRIDAY while the DIIs were net sellers of Rs -26.21 Cr, as per the provisional figures.

                             

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