Persistent financial jitters across Europe and US may force Indian stock market to remain volatile this week.
Besides, turbulent global markets, expiry of derivative contracts for September, the depreciating rupee and fears of weak Q2 results will also add to investor woes.
Volatility is expected to rise as traders roll over positions in the futures & options (F&O) segment from the near-month September 2011 series to October 2011 contracts. The September 2011 derivatives contracts expire on Thursday, 29 September 2011.
Earlier the BSE Sensex succumbed to selling pressure and fell almost 772 points to end the week at 16,162.06 amid grim prospects of global economic growth.
The broad 50 share index Nifty corrected to nearly 4,800 levels taking year to date losses to 20 percent.
According to experts, markets sentiment was mainly dominated by the falling rupee and ‘operation twist’ by the US Federal Reserve.
Sentiments were also worsened by the reports that nearly a quarter of the top 100 companies have paid lower advance tax in the second quarter of financial year 2011-12, highlighting slowdown in growth and margin pressure due to higher input costs and interest burden.
The advance tax payment by top 100 companies rose a modest 9.9 percent in Q2 September 2011 from a year ago against 19 percent growth in Q1 June 2011, suggesting corporate profit growth is likely to be muted in the second quarter.
The Federal Reserve said at the end of a two-day policy meeting on 21 September 2011 that it will buy USD 400 billion in longer-dated securities in the period until mid-2012 through the selling of shorter-term securities.
US Fed also remained downbeat on the economic situation and refrained from introducing further quantitative easing at this stage by saying that there are significant downside risks to the US economic outlook and also noted strain in global financial markets.
This in turn triggered a sharp depreciation in risk appetite which pushed the dollar sharply higher. The rupee was subjected to further selling pressure during the week and dipped to 28-month lows to 49.90.
Upcoming Q2 results will also remain in focus, says analyst. Investors are now waiting for the management commentary at the time of announcement of Q2 September 2011 results, which will provide cues on futures earnings outlook, adds analyst.
Infosys will kickstart the Q2 September 2011 earnings season on 12 October 2011. Housing finance major HDFC will announce Q2 results on 17 October 2011.
Though the near-term situation seems bleak, investors willing to commit their capital for a longer term can look upon the current crisis as an opportunity to buy good quality stocks at bargain prices.