Indian Stock Markets in May 2018. UI 44 Average Underperformed Other Major Indices

Oil prices, tumbling rupee (INR) and political choppiness in Karnataka and other constituencies went for by-polls confined equity markets in a rangebound territory in May 2018.

Resurgence in the Indian equity markets, in Apr-18, marred by a series of uncertainties in the domestic markets and international trades amid increasing geopolitical pull. Results of assembly polls in Karnataka state has aided additional support to the sellers to dump shares for moving back to safe heaven. India’s gross domestic product grew 7.7% in the quarter ended Mar 2018, the government said, making India the fastest growing major economy in the world. Yet, this buoyancy has failed to revive the market sentiment.

UI 44 Ordinaries in May 2018
UI 44 Ordinaries in May 2018

 

UI 44 Average traded in the negative territory throughout the month while the BSE Sensex 30 and NSE Nifty 50 outperformed marginally. HDFC Bank and HDFC, which are not the UI 44 constituent, significantly rose during the month, pushed the benchmark indices of stock exchanges higher. However, UI 44 Average, an index which shows sentiment of the Indian market, relatively exhibiting the weakness in the coming weeks.

Major Benchmark Indices in May 2018
Major Benchmark Indices in May 2018
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Stock Market Update: UI 44 Average Equity Index Surged Past 1,000 in Apr’18.

Stock Markets in April 2018 had a spectacular performance backed by IT, Financial, Material and Consumer Staple sector. UI 44 Ordinaries surged past 1,000 for the first time after 1 Feb 2018.

Performance of global stock markets in Apr 2018 was spectacular. India’s most diversified benchmark equity index – UI 44 Average – had a stellar run in April backed by IT, Financial, Material and Consumer Staple sector.

Apr-18 was a breathtaking month for the Indian stock markets. Last two months of FY17-18 had a lackluster performance backed by new legislation in General Budget and introduction of Long-term Capital Gains Tax (LGCT) among other local and international factors. UI 44 in Apr-18 (see Graph-1) started its journey from around 940 levels on 02 Apr’18 and continued it to reclaim its starting point of 1,000.

UI 44 Performance in Apr-18
Graph 1: UI 44 Performance in Apr-18

Outstanding quarterly performances of TCS, YES Bank and other companies have fueled the rally further in the last week of the month.

A steller rally in the Indian stock market among other markets was supported by the leading factors as assessed below:

  • Stable economic growth and robust outlook for the first quarter of FY18-19. Other emerging economies are also witnessing a rise in economic activity, prompting investors to pump in more funds in the emerging markets.
  • Obliterating the risk of trade-war sparked by US and China.
  • New friendship engagement in the Korean peninsula has also resulted in a continuing rally.
  • Retail inflation looks stable due to decline in inflation in food and fuel prices. However, risk of rising commodity prices, including oil prices, are still hovering on the outlook of May-18.
  • Monsoon projections published by the Meteorological Department, New Delhi is giving an edge to the market for an impressive economic outlook this year.

 

Benchmark Performance in Apr-18
Graph 2: Benchmark Performance in Apr-18

Let’s discuss the comparison of performance between the three benchmark indices. UI 44 has outperformed the other leading major benchmark – BSE Sensex and NSE Nifty – last month. The above graph depicts the outstanding performance of UI 44 Average, which is up by more than 8 per cent after a two consecutive months of sharp declines, hitting a lifetime low of 918.96 on 23 Mar’18.