Nifty ends below 6000 again, analysts expect big rally only after May elections

Indian markets closed flat after a massive two-day sell off.While BSE Sensex closed 0.06 percent lower at 20217, NSE Nifty closed 0.06 percent down at 5995.

The rupee was last trading at 62.91-92 versus Thursday’s close of 62.93-94 after earlier in the session weakening to as much as 63.0850 per dollar. The RBI was suspected to have sold dollars via state-run banks starting at around 62.93 rupee levels in a bid to support the local currency, three dealers said, reports Reuters.

Auto stocks were under heavy selling pressure, led by Tata Motors and Bajaj Auto. Other losers in the Sensex are Sesa Sterlite (down 3 percent), Hindalco and ITC .

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[caption id=“attachment_1168099” align=“alignleft” width=“380”]  Nifty ends below 6000[/caption]

State elections are irrelevant for markets, national elections is what will drive markets if you are looking for a Diwali-like rally, said technical analyst Sudarshan Sukhani in an interview with CNBC-TV18.

He advised investors to not part with defensive stocks at least till December.

Also, Asia-Pacific focused brokerage CLSA seems to have placed its bets on a Narendra Modi win in the national elections due by May. The brokerage has said the BJP leader’s best chance is to “tap pro-growth aspirations of young first time voters” in 2014.

However, CLSA’s Christopher Wood also wrote in his latest blog that “the big unknown is the attitude of rural voters who benefit from Congress policies,” like food security and other social schemes.

He reckons that India’s electorate is “pining for a change and, in particular, the return of a government focused on a growth mandate rather than a mandate based on the promise of more handouts on the ‘alleviation of poverty’ theme.”

Meanwhile, Goldman Sachs has said thatemerging economies in Asia such as China and Korea are poised for solid growth in 2014, but India is likely to miss the bus. India is likely to grow at 4.3 percent in fiscal year 2013-14 and at below consensus 5.5 per cent in fiscal year 2014-15, Goldman Sachs estimated.

Foreign institutional investors (FIIs) sold shares worth of Rs 60 crore on Thursday to snap their 32-day buying streak totalling Rs 23884 crore exchange and regulatory data shows.

Waning risk appetite from foreign investors is reviving concerns about India’s vulnerability when the Federal Reserve begins to taper its monetary stimulus given the country’s dependence on overseas flows to bridge its current account deficit.

Also, they sold index futures worth Rs 1189 crore on Thursday and stock futures worth Rs 919 crore over the previous three sessions.

Some traders also cited heavy basket selling by foreign investors in the Nifty, meaning sales of entire batches of shares by investors over the last two sessions, in which the index fell 3.3 percent, marking its lowest close in a week.

FIIs have pumped a net $6 billion into cash shares since late August, helping the Sensex hit a record high on November 3.

With inputs from Reuters