BSE Sensex

Rupee Declines by 42 Paise to 81.82 Against Dollar on Spike in Crude Oil

Global oil benchmark Brent crude futures surged 4.12% to USD 88.65 per barrel.

Mumbai: The rupee fell by 42 paise to close at 81.82 against the US dollar on Monday, snapping its two-session gaining streak as heavy selling in domestic equities and a spike in crude oil prices weighed on the local unit.

Besides, a stronger greenback against key rivals and weak macro data put pressure on the domestic currency, forex dealers said.

At the interbank foreign exchange market, the local currency opened weak at 81.65, fell further to 81.98 against the American currency.

It finally ended at 81.82, down 42 paise over its previous close. In the previous session, the rupee settled at 81.40 against the greenback.

“The rupee weakened against the dollar on Monday amid weak risk sentiment and as oil importers picked up dollar expecting a big rise in crude prices as OPEC+ was considering slashing output to support a recent downturn in prices.

“Meanwhile, domestic equities fell as concerns rose around FPI outflows from equities and weighed on the local unit. In the overseas markets, the dollar index was rebounded while the Euro remained flat,” Sriram Iyer, Senior Research Analyst at Reliance Securities, said.

However, the Sterling rebounded after media reported that Britain’s government reversed the plan to cut the highest rate of income tax. The Yen weakened past 145 per dollar and for the first time since September 22 when authorities intervened to prop up the currency, Iyer added.

“Indian rupee depreciated by 0.51% today on weak domestic markets and surge in crude oil prices. Disappointing macroeconomic data also weighed on Rupee,” Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas, said.

India’s Manufacturing PMI slipped to 55.1 in September, trailing estimates of 55.80 and the previous month’s reading of 56.2.

The rupee started the month on the back foot following higher crude oil prices and sour risk sentiments. However, the volatility and volumes remained lower amid the holiday truncated week. In the near term, spot USD/INR is expected to trade in the range of 82.30 to 81.10 with bias remaining on the bullish side, Dilip Parmar, Research Analyst, HDFC Securities, said.

On the domestic equity market front, the 30-share BSE Sensex dropped 638.11 points or 1.11% to end at 56,788.81, while the broader NSE Nifty fell 207 points or 1.21% to 16,887.35.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, advanced 0.30% to 112.45.

Global oil benchmark Brent crude futures surged 4.12% to USD 88.65 per barrel.

Foreign institutional investors were net buyers in the capital market on Monday as they bought shares worth Rs 590.58 crore, as per exchange data.

After infusing funds in the last two months, foreign investors turned sellers again in September and pulled out Rs 7,600 crore from the Indian equity markets amid a hawkish stance by the US Fed and sharp depreciation in the rupee.

India Cuts Windfall Tax on Local Crude Sales, Fuel Exports

On July 1, India imposed the windfall tax on crude oil producers and levies on exports of gasoline, diesel and aviation fuel.

New Delhi: India has cut a windfall tax on oil producers and refiners and exempted gasoline from an export levy, less than three weeks after it imposed the two charges.

Shares in oil companies that will benefit from the move rose. Reliance Industries jumped 4.3%, Oil India 8.8%, Oil and Natural Gas Corp 6.8% and Vedanta 4.3%.The government said in a statement an export tax of Rs 6 a litre no longer applied to gasoline. It had also reduced duty on diesel and aviation-fuel exports by 2 rupees a litre to 10 rupees and 4 rupees a litre, respectively, it said.

A windfall tax on domestically produced crude oil was cut to Rs 17,000 a tonne from Rs 23,250.

Removal of the charge on gasoline will particularly benefit Reliance’s 704,000-barrel-per-day export-focused refinery at Jamnagar in Gujarat state.

All changes took effect on July 20.

On July 1, India imposed the windfall tax on crude oil producers and levies on exports of gasoline, diesel and aviation fuel after private refiners turned to overseas sales to gain from robust refining margins instead of selling at lower-than-market rates in the country.

Also read: Petrol Price to Drop by Rs 9.5 Per Litre, Diesel by Rs 7 After Centre Slashes Excise Duty

Global crude oil prices and refining margins for gasoline, gasoil and jet fuel have eased since imposition of the taxes.

As a result of this move, Indian shares rose more than 1% to a six-week high on Wednesday, July 20 as shares of oil producers and refiners surged.

The NSE Nifty 50 index gained 1.2% to 16,537, as of 0458 GMT, while the S&P BSE Sensex was up 1.3% at 55,459.14. Both the indexes hit their highest since June 6.

(Reuters)

Infosys Notes Sensex Gains Ahead of Release of Quarterly Figures

Market rallied tracking gains in global markets after US President Donald Trump offered an positive assessment of US-China trade talks, traders said.

Mumbai: Equity benchmark BSE Sensex jumped 247 points on Friday amid positive cues from global markets enthused by hopes of a trade truce between the US and China.

After swinging 608 points in a volatile session, the 30-share Sensex ended 246.68 points, or 0.65%, higher at 38,127.08. It hit an intra-day high of 38,345.41 and a low of 37,737.85.

The broader NSE Nifty too rose 70.50 points, or 0.63%, to close at 11,305.05.

Infosys was the top gainer in the Sensex pack, rallying 4.19%, ahead of its quarterly earnings.

Vedanta, Tata Motors, ONGC, Tata Steel, HUL, HCL Tech, Tech Mahindra and Bharti Airtel too rose up to 3.96 per cent.

On the other hand, Yes Bank, M&M, RIL, TCS, Hero MotoCorp, IndusInd Bank and NTPC declined up to 3.30 per cent.

Also Read: Shifting Fortunes Push All PSUs Out of India’s Top Ten Market Cap Club

Market rallied tracking gains in global markets after US President Donald Trump offered an positive assessment of US-China trade talks, traders said.

“We just completed a negotiation with China. We’re doing very well. We’re having another one tomorrow. I’m meeting with the Vice Premier over at the White House,” Trump told reporters at the White House on Thursday.

In Asia, Shanghai Composite Index, Hang Seng, Kospi and Nikkei settled significantly higher.

Equities in Europe were also trading on a positive note in their respective early sessions.

Meanwhile, the Indian rupee appreciated marginally to 71.03 against the US dollar intra-day.

Brent crude futures, the global oil benchmark, surged 1.79 per cent to $ 60.16 per barrel, after reports of missile strikes on an Iranian tanker in Saudi Arabia sparked fresh supply concerns.

Sensex Falls for Third Straight Day as Fuel Price Cut Spooks Investors

Shares in state-owned oil marketing companies slumped more than 20% to multi-year lows on Friday.

Reuters: Indian stocks fell for a third straight session on Friday, dragged by shares of energy companies such as Reliance Industries Ltd and oil marketers, a day after the government announced a cut in fuel prices.

The Reserve Bank of India’s (RBI) policy decision due later in the day also added to the cautious undertone, with the market expecting an interest rate hike to prop up the rupee, which has weakened 15.2% against the dollar this year and is trading near an all-time low of 73.82 touched on Thursday.

Over two-thirds of 61 economists said in a Reuters poll the RBI would lift the repo rate at least once by the end of 2018, with over half stating that there would be a 25 basis points rise in October.

“In general, what’s driving emerging market weakness is a stronger US economy … there is a lack of clarity on the effectiveness of rate hikes as a currency defence,” said Sunil Sharma, chief investment officer with Sanctum Wealth Management.

Shares in state-owned oil marketing companies slumped more than 20% to multi-year lows on Friday, after the government on Thursday announced a 2.50 rupees-per-litre cut in gasoline and diesel prices to reduce the burden on the Indian masses from all-time high prices at fuel pumps.

The price cut sparked fears of the country going back toward the regulated regime where the prices of diesel and petrol were controlled by the government. Petrol prices were regulated until 2012, while diesel prices remained so until 2014.

Shares of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd extended losses and were down as much as 24.38% to 27.96%.

Reliance Industries Ltd, down 3.35 %, contributed to almost a third of the broader NSE index’s losses. Oil and Natural Gas Corp Ltd was down 10.6%.

The broader NSE Nifty was down 1.38% at 10,452.9 as of 0616 GMT, while the benchmark BSE Sensex was 1.03% lower at 34,807.77.

Other index heavyweights such as ITC Ltd and Hindustan Unilever Ltd were also trading lower, down 1.8% and 2.4%, respectively.

However, IT stocks recovered after the sectoral index closed nearly 3% lower on Thursday. HCL Technologies Ltd and Infosys Ltd were up 0.9% and 0.7%, respectively.

($1 = 73.5800 Indian rupees)

(Reuters)

Rupee Slumps 16 Paise Against US Dollar, Hits New All Time Low of 71.37

At the Interbank Foreign Exchange, the rupee opened at a record low of 71.24 against the dollar and weakened further to trade at a fresh low of 71.37, down 16 paise due to an increased demand for the US currency.

Mumbai: The rupee slumped 16 paise against the dollar to trade at a life-time low of 71.37 on strong demand for the US currency, on Saturday.

At the Interbank Foreign Exchange, the local currency opened at a record low of 71.24 against a dollar, down from its previous close of 71.21, and weakened further to trade at a fresh low of 71.37, down 16 paise.

Forex dealers said that besides strong demand for the American currency from importers, capital outflows too weighed in on the domestic currency.

The dollar strengthened against some currencies overseas as investors bid up safe haven assets amid tensions over global trade and strains in emerging market currencies.

A sharp rally in global crude prices further dampened the overall trading sentiment.

Benchmark Brent crude oil was trading at $78.05 a barrel.

Yesterday, the rupee had lost 21 paise, to close at an all-time low of 71.21 against the US dollar.

Meanwhile, the BSE Sensex fell by 7.60 points, or 0.01%, to 38,304.92 points in early trade.

Foreign institutional investors sold shares worth a net of Rs 21.13 crore on Monday, as per provisional data.

Sensex Meltdown Continues For Second Day After Budget

All sectoral indices led by realty, metal, capital goods, healthcare and bankex were trading in the negative terrain, falling by up to 3.47%.

FILE PHOTO: A man ties a balloon to the horns of a bull statue at the entrance of the Bombay Stock Exchange (BSE) while celebrating the Sensex index rising to over 30,000, in Mumbai, India April 26, 2017. Credit: Reuters/Shailesh Andrade/File Photo

New Delhi: Indian stocks fell further on Monday, extending their Friday’s losses, as market concerns deepened over long-term capital gains tax (LTCG) and fiscal slippage. The BSE Sensex fell 0.88% to 34,757.16, while the broader NSE Nifty lost 0.87% to settle at 10,666.55.

The market continued its downward trend despite the finance ministry trying to calm the nerves. Subhash Chandra Garg, secretary, department of economic affairs (DEA), had said on Monday that the Centre might reduce its fiscal deficit to 3% by 2019-20, a year ahead of the goal announced in the Union budget presented last week.

“Fiscal Deficit at 3.3% for 2018-19, backed with statutory commitment to bring it down to 3% by 20-21 (might actually be achieved in 19-20) …” Garg said in a tweet.

Finance minister Arun Jaitley, in the Union budget 2018-19, has proposed to levy 10% LTCG on equity gains of over Rs 1 lakh. Jaitley also revised upwards fiscal deficit targets for 2017-18 and 2018-19 from 3.2% and 3% to 3.5% and 3.3% respectively.

LTCG was withdrawn in 2004. In its place, 15% securities transaction tax (STT) was brought in. Jaitley has retained the STT while bringing back the LTCG.

Imposition of LTCG and fiscal slippage have spooked investors, triggering heavy sell-offs.

On Friday, a day after the budget was presented in parliament, the Sensex and Nifty 50 lost over 2%, the biggest single-day loss since November 2016.

The weakness in global equities markets has also weighed on Indian stocks.

According to a Bloomberg report, global stocks extended the biggest selloff since 2016, with European and Asian equities slumping and futures pointing to another leg down for U.S. share at the open. Treasuries and the dollar stabilised while oil fell and gold rose. Japan bore the brunt of the declines, with Nikkei 225 Stock Average erasing this year’s gain, while a measure of its volatility surged to the highest since November. U.S. equity futures sank as much as 1.1% in Asia on Monday but by 7:35 a.m. in London March e-mini contracts on the S&P 500 Index had pared losses to 0.1%.

The MSCI Asia Pacific Index slid 1.4%, retreating from a rally that has sent equities to overbought levels for most of January.

Bearish sentiment wiped out the year-to-date gain of Japan’s Nikkei 225 Stock Average. The gauge retreated below a 76.4%-retracement point from a high in January 2018 to a low in April 2017. Its next key Fibonacci-retracement level stands at 21,873.76. The Nikkei closed 2.6% lower to 22,682.08, while the Topix declined 2.2 percent to 1,823.74.

This is the third time Jaitley has relaxed fiscal deficit target.

In 2015, while outlining NDA government’s fiscal consolidation strategy, Jaitley had promised to get back to the 3% fiscal deficit by 2017-18. As recently as November, Jaitley assured foreign investors in the US that the NDA government will stick to the committed fiscal deficit target. But he has again failed to keep his word.

Sensex Rises By 0.4% to Hit Record High, Rupee at 20-Month Peak

The rupee strengthened to as much as 63.93 per dollar, its highest since August 2015, compared to its close of 64.2650 on Tuesday.

Brokers react while trading at a stock brokerage firm in Mumbai September 2, 2008. Credit: Reuters/Arko Datta/Files

Mumbai: India’s benchmark BSE Sensex rose as much as 0.4% to hit a record high on Wednesday, surpassing its previous milestone hit in March 2015, while the rupee hit a 20-month high against the dollar.

The market rally comes after a string of solid domestic quarterly results, while hopes for additional foreign inflows to India have increased on renewed optimism about the US economy and after the first round of an election in France went to the market’s preferred candidate.

The Sensex rose to a high of 30,071.77 points, surpassing a record last hit in March 2015. The broader NSE Nifty rose as much as 0.4% to a record high of 9,343.15 points, its second consecutive all-time milestone.

The rupee strengthened to as much as 63.93 per dollar, its highest since August 2015, compared to its close of 64.2650 on Tuesday.

NDA Paying the Price for Pushing Aggressive Politics Instead of Economic Governance

The recent executive decisions announced on the economy did not need legislative support and Modi has only himself to blame for the delay in taking them.

The recent executive decisions announced on the economy did not need legislative support and Modi has only himself to blame for the delay in taking them

Finance Minister Arun Jaitley and BJP President Amit Shah after paying their last respects to former Vishwa Hindu Parishad president Ashok Singhal at the RSS office in New Delhi. Credit: PTO

Time to shelve Hindutva, confrontation and focus on the economy: Finance Minister Arun Jaitley and BJP President Amit Shah after paying their last respects to former Vishwa Hindu Parishad president Ashok Singhal at the RSS office in New Delhi. Credit: PTO

Almost as if to make up for lost time, the NDA government announced a series of economic measures just after the BJP’s humiliating defeat in the Bihar assembly elections.

Possibly, Prime Minister Modi wanted to signal that he had quickly moved on to economic governance at the Centre, leaving the Bihar debacle behind. Further relaxation of the foreign direct investment rules in several sectors, the promise of a bankruptcy law, and concessional credit to revive collapsing exports were some of the decisions announced. The pink papers described these economic measures as “big reforms”, starved as they are of any good news.

The stock markets are roughly at the same level today as they were when oil prices had just started to decline in the last quarter of 2014. In October 2014, when oil prices were on a downward trajectory but still around $90 per barrel, the BSE index was around 26,500. A full year on, despite the bonanza of oil prices having fallen to half of that level, the BSE index is somewhat lower than it was last October.

Experts are asking why the stock markets are not reflecting the “big advantage” India’s economy has got from the dramatic fall in oil prices. How can the stock index levels be more or less the same when oil prices have halved? Prime Minister Modi and finance minister Arun Jaitley need to reflect deeply on this signal from the markets. In January 2015, many foreign institutional investors were projecting that the BSE index would touch 33,000 by December. We are near December and the index is stagnating at less than 26,000. The answer to this puzzle has been given by none other than Narendra Modi in an article in The Economist.

For the first time, the Prime Minister has admitted in writing that there were “great expectations” from his government. “Inevitably, some of these expectations run ahead of us”, Modi confesses.

The admission by Modi that expectations have run ahead of the government partly explains the anxiety and urgency shown in the recent economic decisions. Though they have been described as “big reforms”, the decisions are simply incremental measures which Jaitley and his team could have taken a year ago. We all knew that exports were collapsing, not only in India but in other emerging markets too. October exports showed 17.5% negative growth. This is the 11th month of negative export growth. Why couldn’t the government announce concessional credit to exporters six months ago when the writing was clearly on the wall?

From Har Har Modi to Arhar Arhar Modi. Credit: Wicker Paradise/Flickr

Why did the government have to wait for the Bihar elections to come before announcing a higher minimum support price for the procurement of pulses? It should have known that the shortage of dal, the only source of protein for the poor, would be a major election issue in Bihar. The production of pulses has declined from a peak of 19 million tonnes in 2013 to about 17.5 million tones. The government knew this crisis was around the corner. Yet the NDA delayed taking a decision on raising the minimum support price for the pulse farmers.

Also, why should further relaxation of FDI norms come just after a defeat in the Bihar elections? The decision on investment liberalisation ought to have been taken within three months of coming to power. None of these needed legislative clearance and were purely in the domain of the executive.

The NDA spin doctors have for some time been blaming the opposition for blocking economic decisions which are largely non-legislative in nature. The flurry of announcements, post the Bihar setback, only confirms this. However, there is one big legislative item – the Goods and Services Tax (GST) – on which there is a broad consensus but it is stuck for both political and technical reasons.

The political reason is the overconfidence and even conceit shown by the Prime Minister, who refused to even show up in Parliament on the day the Lalit Modi issue was being discussed. If he continues to show such indifference to the opposition demand for a debate on the growing intolerance in various parts of the country triggered by the Hindutva elements , the GST bill could become a casualty again in the winter session of Parliament starting next week.

Jaitley has reached out to Congress leader Rahul Gandhi to help pass the GST bill in the Rajya Sabha, where the BJP does not have the required numbers. The government also needs to positively examine the changes proposed by the Congress party in the GST bill. The Congress has a valid argument when it says the dispute settlement authority should be independent of the GST council, which has states as members. If some half a dozen states get together to bring a tax dispute to the council, how can the disputants, or those against whom the dispute is targeted, sit in judgment over themselves? There is a clear conflict of interest in the current mechanism. An independent authority with retired Supreme Court judges and other constitutional/tax experts is necessary in such situations.The BJP should accept this if it wants a smooth passage for the bill.

The other contentious issue is the tax rate itself. Most experts believe that a GST rate of 22% to 24% is unsustainable and will not bring any great competitive advantage to the economy. In fact, a study by Goldman Sachs says a GST rate of 20% and above could even prove to be inflationary and would add about 1.5% points to the inflation rate within two years of implementation. Politically, this could be disastrous for the BJP as the inflationary impact of a high GST rate would show up closer to the 2019 general elections. It is in the NDA’s own interest to keep the GST rate as low as possible so that some real benefit accrues to the economy as well as the consumers.

Jaitley needs to show some political will and vision in this respect rather than just leave it to the chief ministers to decide. All this will require a serious consensus building effort. Narendra Modi has mostly wasted his first 18 months trying to aggressively consolidate political power in elections after election in the states, when he should have focused entirely on the national economy. First Delhi and now Bihar have given Modi and Amit Shah a reality check. They would do well to focus much more on economic governance – the promise of which got them into power in the first place. A lot of time has been lost. But there is still time to recover if the NDA puts its head down and walks its tall talk.

Bloodbath on Dalal Street Rattles Indian Investors

External factors like China’s currency devaluation have acted as triggers, but to stop this mayhem, India will have to get the reforms process moving fast

The Bombay Stock Exchange Building (Photo by Appiah)

The BSE Sensex plunged 5.9% on Monday (1,625 points), making it the largest single-day decline since January 7, 2009. The Sensex had gone on to shed 64% in just nine months during that period, and many stocks lost over 90% of their value. Monday’s bloodbath left investors poorer by over 7 lakh crore. Finance Minister Arun Jaitley sought to allay fears, promising that the markets would settle down and that the government and the Reserve Bank were watching the situation closely.

The Indian stock markets have been participating in the global rout that began at the end of last week. The global sell-off did not just include equities, but currencies and commodities as well.

The only recent negative news for India was a lowering of its growth forecast for 2015 from 7.5% to 7% by the rating agency Moody’s. This was unlikely to have contributed significantly to today’s crash, as the market was unaffected when it was announced last week.

Globally, the year has seen mixed economic signals, with the US economy recording a modest growth, and Europe also perking up before events in Greece dominated the news. The biggest concern had been the persistent decline in oil and other commodity prices, as they could be suggesting a fall in demand rather than an increase in supply.

Markets have largely reflected the global economic picture, with most (India’s included) remaining within a relatively narrow, sideways range before this crash. The only markets to decline sharply were those exporting oil and other commodities, including Australia, Canada, Brazil, Norway and the Middle East.

This equilibrium was disrupted by China, whose stock market unexpectedly went into a bubble at the beginning of the year. The bubble eventually burst in June, setting off a chain of event that is the most likely cause of the global mayhem now.

Yuan devaluation

Initially, the Chinese government took surprisingly dramatic measures to curb the decline, and appeared to have succeeded at first. Then it unexpectedly devalued the Yuan. That decision was ostensibly to pave the path for its currency’s inclusion in IMF’s SDR basket – by making the Yuan eventually market-driven. The more likely reason was that its economy badly needed an export boost.

Inevitably, other Emerging Markets – including India’s – brought their currencies down, too. The fall in currencies triggered off a decline in most EM stock markets, and the disequilibrium has led to the global rout.

The future is now quite uncertain, and will depend on whether economies continue to recover or whether the current turmoil in currencies and commodities would translate into downturns.

Markets had earlier shown considerable sensitivity to the suspense being created by the Fed over a rate hike, but this is almost certainly a secondary factor after the recent developments.

India is not immune to global downturns, as was made painfully evident back in 2008-09. Our government will urgently need to accelerate the pace of reforms if the stock market is to stabilize without too much further damage.

As far as the Indian markets are concerned, they are in a downtrend now, with the Sensex’s closing high dating back to January 29 at 29,682. And if Moody’s forecast for India’s growth turns out to be accurate, there is no immediate positive trigger for stocks, either. It is too soon to estimate the extent of a decline, which will depend on global economic growth and Indian economic reforms.

Is the ‘Modi Premium’ Wearing Off in the Stock Markets?

Market participants have already watered down their expectations and moderated their hopes about a magical, almost fantastical, turn-around in the economy

The Bombay Stock Exchange.

As Prime Minister Narendra Modi completes one year in office, a sense of despondency pervades the customary reviews that ritually accompany such an event. Rumblings of discontent have emerged from various stakeholders, including Corporate India. But it is the stock markets that seem to have taken the lead in signalling disappointment with his performance.

The bellwether index S&P BSE Sensex, comprising 30 stocks, has witnessed a major erosion in values over the past few weeks. From its all-time peak of 29,681.77 points achieved on January 29, 2015, the Sensex hit a low of 26,599.11 on May 7: a sharp drop of 3082.66 points (or 10.38%) in slightly over three months.

The capital market’s rebuff is symbolic: it tries to aggregate what’s going on in different parts of the economy and transmits its sentiment through one single number. And going by its recent behaviour, there seems to be plenty that is wrong, or perceived to be wrong.

Foreign portfolio investors, an influential investor segment in the capital markets, are a visibly disgruntled lot and they have been letting off steam by selling en masse. In the first 10 trading days in May (till May 18), FPIs were net sellers to the extent of $2.306 billion. FPIs enjoy disproportionate influence over Indian capital markets, primarily because they bring larger volumes to bear than domestic institutions. Low retail participation in the capital markets — either directly or indirectly — also keeps Indian markets shallow.

Tax uncertainties

These FPIs decided to head for the exit because of continuing tax uncertainty. Finance minister Arun Jaitley’s 2015-16 Budget had unequivocally clarified that tax will not be levied on the capital gains of FPIs in the current year. But, unfortunately, there was no assurance that past cases won’t be re-assessed. And, true to form, tax authorities sent notices to various FPIs to pay up for past gains. That precipitated widespread resentment, with some FPIs even going to court and, of course, venting their spleen by selling Indian stocks.

The minister, presumably rattled by the exodus and the bad publicity all this was generating, has gone out of his way to placate FPIs. Apart from putting all reviews and fresh cases on hold, he resorted to the time-tested stalling tactic: he appointed a committee. In effect, he has kicked the can down the road and bought some time. This incident also illustrates how FPIs have emerged as a crucial constituency, with an uneven share-of-voice.

Unsatisfactory corporate results is the other reason why Sensex is volatile. Many companies — especially in the mid-cap segment — have reported disappointing results for 2014-15, signifying that demand for goods and services continues to remain weak. A report in Mint has highlighted how Q4FY15 sales of 142 companies included in BSE-500 (and for which results were available) has grown at the slowest pace in 16 quarters since Q1FY11.

This is evidence that the economy is still far from recovery. The Index for Industrial Production has grown by only 2.8% during 2014-15. Consumer durables manufacturing contracted by 12.5% during the year, compared with 2013-14, signifying the lack of purchasing power in the economy.

Matters have been made worse by the unseasonal rain in many parts of the country this year, destroying hectares of standing crop, which typically comes to the farm markets in April. This is likely to further dampen demand for consumer goods in the rural areas. The stock markets are also trying to capture this trend.

Oil prices fall opportunity lost

One can argue that this is sheer bad luck and the government cannot be held responsible for this catastrophe. While that is true, it is also a fact that the government didn’t rush to reap the dividends of fortuitously low oil prices when it came to power. Since then oil prices have climbed 50%, spooked by the continuing West Asian crisis and some shale oil wells in USA shutting down.

There could be another charitable explanation for the unusually turbulent Sensex: that expectations from PM Modi might have raced way ahead of reality, especially after the depressing paralysis that gripped the economy in UPA-II’s second term. The common beef (pun intended) is that even the current BJP-led government has plumped for incrementalism, rather than bold policy measures they had promised.

There are two sides to this debate and both can be deemed valid. But, what is undeniably true is that the stock market has already started discounting PM Modi’s premium, even before he completes a full year in office. And, though the Sensex is still up 14.78% from where it was a year ago — it closed at 27,687 on May 18, 2015, compared with 24,121.74 on May 16, 2014 — it seems that market participants have already watered down their expectations and moderated their hopes about a magical, almost fantastical, turn-around in the economy.

Rajrishi Singhal is a Senior Fellow with Mumbai-based think tank Gateway House.