Positive Global Cues- Indian Indices Likely To Recover
Indian Benchmark share indices ended at their lowest level in over two weeks as investors booked profits ahead of the two-day US Fed meet which could provide cues of an interest rate hike in the US. Further, selling by foreign funds in the previous session also weighed on market sentiment. In cash markets FIIs sold Rs 829 Crore worth of shares. No wonder the 30-share Sensex ended down 324 points at 26493 and the Nifty closed 109 points lower at 7933.
However, the broader markets witnessed a sell-off after recent gains underperforming the benchmark indices. The BSE Mid-cap and Small-cap indices ended down over 3% each. In the month to September 15, the small-cap and mid-cap index had gained 10% and 8%, respectively. On the currency front, the INR was trading higher at Rs 61.07 against the USD compared to Monday's close of 61.13 tracking Asian currencies which are trading mostly stronger versus the dollar. All other sectoral indices ended in the red. BSE Realty index was the top loser down 3.2% followed by Power, Capital Goods, Consumer Durables, Oil and Gas indices among others.
If we take a look at the reasons why the selling continued, the results of by-polls announced yesterday was another major reason. Here the results showed that the BJP has been on a losing streak in majority of the seats. With major states going for elections, waning Modi wave might be a bad news for markets as well. Simple reason being, win at state elections by BJP would have made the matter easy in terms of rolling out GST. Though the BJP Government has actually indicated towards rolling out GST by FY16, there is no clear Road map provided by the Government. As regards the other data points to look at today, the FOMC would announce the policy today. Announcement would be made after the Indian equity markets are closed.
On global canvas, US markets had been drifting lower over the last few days in anticipation of a more hawkish outcome from the Federal Reserve's latest two-day policy meeting, due to wrap up on Wednesday. Given the robust performance of the economy over the summer, investors are preparing for the Fed to confirm this by ending the QE3 bond-buying program in October and moving forward the timing of its first short-term interest rates hike since 2006 into the middle of 2015.This was a change from the September 2015 timing that Wall Street analysts had penciled in. So the dialogue was all about the end of the steady flow of cheap-money stimulus. That changed yesterday, sending the Dow Jones Industrial Average (Up 0.59%) to record intraday highs. However the Standard & Poor's 500 Index (0.75%) couldn't close above the 2000 level once again.
Asian Indices are also witnessing some traction taking cues from US Markets. Nikkei is trading with gains of 0.11% and Straits Times is up by 0.64%. The biggest gainers are Hang Seng and Taiwan which are up by more than 1%. Shanghai Composite is also up by 0.18%.
SGX Nifty is also trading in green with gains of 0.60%. We feel today is going to be the real test of Indian markets. If Indian markets manage to sustain the support levels, it will help the Indices consolidate. As for today we expect the Indian markets to open on a positive note. However then one can expect some range bound activity.