The US markets finished lower in the month of June, posting their first monthly drop in the current year. Despite closing the month on a negative note, it has been a good year for the US stock markets. Dow has surged more than 14 percent so far this year. This is the strongest first half performance by Dow since 1999. All the major indices had a third consecutive winning quarter. The steady rise of the US equity markets in this year was hit by the Fed statement on stimulus packages. Fed is expected to start the roll of back its $85 billion per month bond purchases in the coming two quarters. The markets which were driving on sentiments and highly dependent on the monetary policy changes for further direction, reacted negatively to the news.
The equity markets across the globe ended the month of June in negative after a relatively better performance in this year. While Europe posted largest loses among developed markets, Brazil and Peru were top losers among emerging markets. Faced with an economic contraction for seventh quarter in a row, Italian markets posted highest loss among the Euro nations. Japan was the lone ranger among the developed markets, outperforming the peers. Nikkei rose on the back of positive economic data and optimism on the continuation of stimulus program by BOJ. Among the Emerging markets of Asia, South Korea and Philippines posted substantial loses. Weak industrial growth sparked a fall of market in South Korea. With a possibility of stimulus program in US ending soon and current Chinese situation, the export oriented industry of South Korea is expected to take a further hit.
The US stimulus news had a larger impact on Emerging markets than the US markets. The fastest growing economy of Asia, Philippines, faced a market correction on the back of raising concerns over china’s credit crunch and the prospects of rising interest rates in US. Thailand and Indonesia also followed the suit of Philippines and posted substantial loses. Over the past few years, investors found Thailand, Indonesia and Philippines as safer bets against the US markets. The heightened inflow activity of FII’s in the past few years was an evidence of investor’s confidence in these markets. However, these markets were under pressure in May since Fed revealed its plans to reduce its bond buying. As per latest developments, the US bonds started posting higher yields which made the FIIs rebalance their portfolios and decrease their exposure in emerging markets.
Indian markets ended the month of June on a negative note. Apart from the global cues, depreciation of Indian Rupee against US dollar continued to weigh down heavily on the Indian Markets. Increased activity in the capital out flows also delivered a major blow for the markets. Indian markets started month under huge sell off pressure. BSE Sensex fell by around 330 points and Nifty 50 fell by more than 100 points. The markets continued their downward movement even in the second and third weeks posting substantial loses in the second week. With the rupee hitting new record lows, the concerns over increased outflow by FII increased. However, the Indian markets regained most of the losses incurred in the last week of the month. The recovery of Rupee and gas and energy reforms by Indian government aided the rally of stocks. Over the last few quarters, the equity markets in India were well supported by the Foreign Inflows. With the Foreign investors changing their stance to net sellers from net buyers, the Indian markets are expected to be range bound in the coming months.