DSIJ Mindshare

Another Day Of Consolidation

It was a day of consolidation for the Indian equity markets as Benchmark Indices witnessed declined yesterday. While the Sensex closed 54 points down at 27265, the Nifty closed at 8153 (Down 21 points). However as we had suggested earlier the mid cap and small cap segment managed to move northwards witnessing gains of 0.51% and 0.31% respectively.

If we look at the sectors that pulled the markets down were Banking, Realty and IT. While the Banking was under pressure on account of expected rise in NPAs of Rs 2.5 lakh Crore from Coal scam impacted companies, expected new norms of willful defaulters impacted the realty companies. The strengthening INR probably affected the IT companies.

If we look at the movement of Indian equities in the past few days, it was easily visible that there was enthusiasm and hence the market was only discounting good news. Rather it was ignoring the bad news altogether. However some amount of consolidation yesterday surely seems to have considered the regulation from SEBI about wilful defaulters tag. The regulation suggested that the group companies that have failed to honour guarantees provided to the defaulting companies would also be tagged as a wilful defaulter.

Going ahead there are few factors like macro economic data (IIP and CPI) which are likely to guide the markets ahead. On Friday September 12 IIP and CPI Numbers would be announced. In the past month the IIP has managed to witness some traction. However the Inflation is still above the comfort levels of RBI. We expect some amount of improvement on IIP front as manufacturing activity is improved. Inflation however is likely to remain sticky.

As for the global markets, Hype met reality yesterday and the results weren't pretty. Investors were not impressed with the new product debuts from Apple, including the iPhone 6 (in two sizes!) and the Apple Watch (with a scroll knob!). Not even a live performance from U2 could save the day. As result, the Standard & Poor's 500 Index lost 0.7 percent, dropped below the all-important 2,000 level, and suffered its worst two-day selloff since early August. Expected increase in rates also affected the US markets.

Taking cues from the US markets, where the Dow closed at 17013 (Down 98 points) the S&P 500 closed at 1988 (Down 13 points), the Asian indices are also trading in red. While Nikkei is trading with loss of 0.40% the Hang Seng is also down by 1.49%. Shanghai composite is also trading in red with loss of 0.51%. As expected the SGX Nifty is trading at 8140 with loss of 0.46% or 38 points.  

It seems that the Indian equities are likely to face another day of consolidation. We expect the leading benchmark indices to open in red. Along with Benchmark indices, today we expect the mid cap and Small Cap index also to take some amount of breather.

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