Market sentiment may also take a hit in view of terror attacks in Paris Friday night, say experts. (Express photo by Heena Khandelwal)

Downward momentum in the stock market is likely to continue for some more time and trading sentiment would be further guided by announcement of wholesale inflation data tomorrow, say experts.

Market sentiment may also take a hit in view of terror attacks in Paris Friday night, they added.

“Markets to look out for external cues as the domestic result season is over for now. Hopes of a liftoff in the US interest rates and the after effects will make markets oscillate with a downward bias.

“How the government steers ahead with its reform agenda and its implementation thereof will be the key triggers for the bulls to re-enter the markets,” said Jimeet Modi, CEO, SAMCO Securities.

Markets last week came under heavy selling pressure due to dismal performance of NDA in Bihar elections. FIIs were in wait and watch mode prior to the elections and are still staying on the sidelines waiting for the magic wand of the economic reforms, he said.

“The downward momentum in the market is likely to continue for some more time,” Modi added.

Marketmen said that fears of a rate hike by the Fed next month may continue to hamper investor sentiment.

Earlier this month, US Fed Chair Janet Yellen had signalled that a December rate hike is very much on the table as the economy has performed well.

“Market movement may depend upon trend in global markets, investment by foreign investors, movement of rupee against the dollar and WPI data to be announced on November 16. Fed’s decision on interest rate will act as major trigger for the Indian market,” said Vivek Gupta, CMT – Director Research, CapitalVia Global Research Limited.

Indian economy is still not out of the woods as industrial production slackened to a four-month low of 3.6 per cent while retail inflation inched up to 5 per cent.

Markets ended in the red for the third consecutive week, where the Sensex slipped below the psychological 26,000-mark to close at 25,610.53, a loss of 654.71 or 2.49 per cent.

“This week will not have many economic data and traders will be taking cues mainly from the global markets. After the disappointing IIP and CPI data, traders will now be eyeing the wholesale price index (WPI) data for October to be announced on November 16 for further cues on economy,” said Jayant Manglik, President, Retail Distribution, Religare Securities.

Traders will also be eyeing political development as the Winter Session of Parliament is set to begin on November 26.

Undoubtedly, the recent fall in index has pushed the index majors in oversold zone but there is no sign of reversal yet, Manglik added.

Overseas investors have pulled out more than Rs 2,800 crore from Indian capital markets in the last two weeks due to subdued quarterly earnings and fears of a possible rate hike by the US Federal Reserve.

Overseas investors have pulled out more than Rs 2,800 crore from Indian capital markets in the last two weeks due to subdued quarterly earnings and fears of a possible rate hike by the US Federal Reserve.

The sell-off came after Foreign Portfolio Investor (FPI) inflow had hit a seven-month high in October.

As per data compiled by the depositories, net outflow in equities stood at Rs 2,505 crore between November 2-13, while it was Rs 313 crore from debt, translating into a total of Rs 2,819 crore (USD 433 million).

Earlier, FPIs had made a net investment of Rs 22,350 crore last month, making it the highest investment by investors since March, when they had poured in Rs 20,723 crore into the Indian market.

The huge inflows during October also reversed the outflows seen during the last two months. FPIs pulled out over Rs 23,000 crore from the capital markets (equities and debt) in the past two months (August-September) on fears of an economic slowdown in China, which triggered a global sell-off.

Earlier this month, US Fed Chair Janet Yellen had signaled that a December rate hike is very much on the table as the economy has performed well, which prompted investors to withdraw money.

Investor mood remained fragile because of disappointing quarterly earnings by blue-chips.

Further, macroeconomic data also impacted investor sentiment. Industrial production slackened to a four-month low of 3.6 per cent in September, while retail inflation inched up to 5 per cent in October, as per the latest data released on Friday.

“Bears continue to tighten grip in line with poor global cues, and overseas investors withdrew money on fears of a rate hike by Fed next month,” Hem Securities Director Gaurav Jain said.

Since the beginning of the year, overseas investors have made a net investment of Rs 25,191 crore in equities and Rs 54,783 crore in debt market.

The equity mutual funds on an average have generated good returns as compared to their benchmark indices in the ongoing calendar year 2015, said brokerage house SMC Investment and Advisors.

Mutual funds like Birla Sun Life MNC fund, SBI Magnum Midcap fund, Motilal Oswal MOST Focused Midcap Fund and Reliance Small Cap Fund gave return of 29.65 per cent, 16.94 per cent, 21.71 per cent and 13.65 per cent in the past one year till November 10, 2015. During the period, indices such as BSE Sensex and BSE Smallcap declined 7.65 per cent and 0.78 per cent at 25,743.26 and 11,047.71, respectively. On the other hand, the BSE Midcap index jumped 6.75 per cent during the same period.

The equity mutual funds on an average have generated good returns as compared to their benchmark indices in the ongoing calendar year 2015, said brokerage house SMC Investment and Advisors.

Market experts are bullish on Indian equity market in the coming months as India still seems to be best promising emerging market in current global environment and the market valuations are attractively placed now. Hence, the performance of equity mutual funds would also reflect the same.

DK Aggarwal, chairman and managing director, SMC Investments and Advisors, said, “Domestic equity markets are expected to provide best returns among all assets classes on multiyear time frame and trigger will be healthy corporate earnings growth on the back of right policy announcements, quick implementation by the government, relatively stronger currency among emerging markets, lower current account deficit, industrial growth gaining momentum resulting into higher foreign portfolios inflows and return of more domestic investors.”

However, risk to inflation, declining exports, and higher interest rates will remain a concern besides global volatility on the back of expected interest rates hike by US FED during 2015 and uncertainty in China and Euro Zone.

Saibal Ghosh, chief investment and business development officer, AEGON Religare Life Insurance, said, “In the present market scenario, one has to be overweight on the sectors and stocks that will be most benefiting from turning around of the economy. My advice would be to go overweight on demand aggregators like banks, cement and auto companies, especially commercial vehicles. However I must warn here that the market will be extremely volatile going forward till we see traction in the earnings. Therefore, one has to be careful in allocating his/her fund in equity. If one has identified the fund that he or she will not require in next 3-5 years then only that much fund should be invested in equity market. But once such fund is committed then one has to be patient through the volatility.”

With the help of some brokerage houses we have identified five mutual funds which could give you good return in the long run.

Mirae Asset India Opportunities
Recommended By: Vidya Bala, head of mutual fund research, FundsIndia.com
Why Buy: An equity diversified fund with a trait of being highly consistent across market phases. The fund has a large-cap bias with limited exposure to mid-caps. It has consistently beaten its benchmark on a rolling return basis over the past 3 and 5 years. The fund seeks to stay invested in equities across market phases, including down markets. That way it is among the first to capitalise when markets move up post a downturn. Mirae Asset India Opportunities can be called all-seasons fund as a result of its above traits. Vidya Bala, head of mutual fund research, FundsIndia.com, said,” This fund is suitable for investors whose risk appetite is not high. You may consider the fund to be one notch higher than large-cap funds in terms of its risk-return profile, and lower than other opportunity funds.”

Franklin India Bluechip
Recommended By: FundsIndia.com
Why Buy: Franklin India Bluechip is a true-blue large-cap fund; a large-cap fund that does not deviate from its mandate of being invested in large caps at all times. It is not one of those funds that is meant to deliver flashy returns; nor does it promise to generate superior returns in every bull market. The fund is suitable for any long-term portfolio, where the primary aim of the investor is to build wealth with limited volatility. First-time equity investors and investors who are building a portfolio of funds can hold this fund for limited volatility and add other marginally high beta funds to such a portfolio. Given that large-cap stocks have correctly quite a bit in 2015, a large-cap fund addition, at this stage may also deliver well.

ICICI Pru Value Discovery
Recommended By: FundsIndia.com
Why Buy: ICICI Pru Value Discovery will be a contrarian call at this stage as the funds take a value approach in investing. This fund cannot be called a true mid-cap fund but has a mid-cap bias with a value focus. As a value fund, this fund may shy away from high premium stocks especially in a rallying market. As a result, short-term underperformance is possible in up markets. However, the fund has demonstrated its ability to buy and hold contrarian stocks and generate returns over the long term. It also holds a sound record of containing declines well during volatile market phases. This fund can be part of one’s mid-cap exposure in a long – term portfolio.

SBI Magnum Midcap Fund & Tata Pure Equity Fund
Recommended By: SMC Investments and Advisors
Why Buy: On a year-to-date basis, SBI Magnum Midcap Fund gave return of 8.82 per cent till November 10. The benchmark index BSE Mid Cap index jumped 5.47 per cent during the same period. A monthly SIP of Rs 1,000 started in December 2012 (1,000 X 36) turned Rs 59,000 till November 2015.

Tata Pure Equity Fund declined marginally 0.14 per cent on a year-to-date basis till November 10. The benchmark Sensex slid 6.39 per cent during the same period. The present value of a monthly SIP of Rs 1,000 started in December 2012 is now at Rs 43,919 till November 10, 2015.

Aggarwal of SMC Investments and Advisors, said, “Both of these funds are the star performers in their respective categories. These funds have generated above average returns for their investors across all time frame while maintaining the risk ratios under control, hence one can invest in any of these funds with the longer investment horizon.”

Maintain hold on Rural Electrification Corp (REC) with a September-2016 target price of Rs 290 per share. We do not expect power sector dynamics to improve materially in the near term and this will continue to weigh on REC’s performance. The company’s credit costs are likely to remain high in FY16/FY17 as asset quality pressures continue in the near term. Current ROEs do not adequately reflect the true position as credit cost and NPAs are substantially low due to regulatory forbearance. Even if SEBs were able to improve their financials, we believe challenges to loan growth and margins will linger.

REC’s Q2FY16 PAT grew 8% y-o-y to Rs 1,620 crore, ahead of our estimates.

REC’s GNPA ratio increased by 22 bps q-o-q to 1.1% in Q2 as a loan account worth Rs 510 crore (Facor Power) slipped into NPA and incremental provisioning of 10% was created on this  account – unduly low in our view.

The restructured pool increased by 3% q-o-q to R19,300 crore or 10% of total loans – very high in our view.

Restructuring of both private sector as well as public sector loans rose 3% q-o-q to Rs 123 billion and Rs 71 billion,
respectively.

Essar Ports on Friday informed the stock exchanges that the company has discovered the exit price for its voluntary delisting at Rs 133 per share, taking into account the shares tendered by public shareholders through the reverse book building (RBB) process.

“The discovered pursuant to tendering in the reverse book building process in terms of the delisting regulations is R133 per equity share (“exit price”). The promoter has accepted the exit price as the final price for the delisting offer. The company had set a floor price of Rs 93.66 per share to acquire shares from public shareholders,” the company said in a stock exchange filing.

Essar Ports closed at Rs 128.65 per share, up Rs 1 or 0.78% from the previous close. In contrast, the Sensex ended down 256.42 points or 1% at 25610.53.

The promoters holding in the company stood at 74.97%, while institutions and non-institutions held 11.79% and 13.24%, respectively. In the past one year, shares of Essar Ports have jumped 27%, while the Sensex dipped 7.35% during the same period.

Sebi amended delisting regulations in March 2015, including reducing overall timeline for a delisting offer, allowing significant acquirers to make a consolidated delisting-cum-takeover offer, and revising the price discovery mechanism. This reflects a more market friendly approach towards delisting offers, which is a marked shift from 2009 (when the delisting regulations come into force).

Another group company, Essar Oil, has proposed to delist shares from the stock exchanges. Last week, market regulator Securities and Exchange Board of India (Sebi) asked Essar Group’s Ruias to raise the delisting price for Essar Oil’s shareholders, in line the valuations that Russian oil giant Roseneft has offered to pay the promoters to buy a stake in the company.

In July, Shashi and Ravi Ruia agreed to sell 49% stake in Essar Oil to Roseneft for a price that valued the company at $7-8 billion (Rs 42,000-48,000 crore), according to reports. Then, the market value of Essar Oil was close to Rs 26,000 crore. On Friday, Essar Oil was valued at Rs 26,827 crore.

The capital markets regulator, in an order late on Friday, said it has directed Essar Oil to increase the delisting price after it received complaints from shareholders. This is a  rare instance where Sebi has asked company promoters to revise the delisting offer based on a deal.

The Essar promoters have, however, given an undertaking to Sebi that they would match the price once the deal is concluded, the regulator said in the order.