Expect A Gap Down Opening
Geo Political factors took the centre stage yesterday as US made the Airstrikes against the ISIS in Syria. No wonder the equity market responded with every index closing in red. What added to the worries was weak macro data from European markets and China figures also disappointed. While the Indian benchmark indices opened in green, there was broad based selling in the markets. The Sensex closed at 26775 (Down 431 points) and Nifty declined 129 points to close at 8017. There was heavy selling seen in the other broader indices like Mid Cap and Small Cap. While the Mid Cap was down 1.91%, the Small Cap Index also declined 2.48%.
As we move ahead we expect the volatility to persist ahead of few important developments. First and the foremost would be the Supreme Court announcing decision on the de-allocation of coal blocks awarded to private companies. If the complete de-allocation happens, the leading benchmark indices are likely to witness another severe decline.
Apart from that the decision would also be coming on the FDI Regulations in the construction and contracting segment. As stated yesterday, relaxation of regulation on FDI front would be beneficial for the cash strapped construction companies.
As regards the global equities, it was another nasty day for the market, with the major averages slammed into the closing bell to finish on the lows as the correction entered the third day. The Dow Jones industrial average fell 116.81 points, or 0.68 percent, to 17,055.87, the S&P 500 lost 11.52 points, or 0.58 %, to 1,982.77 and the Nasdaq Composite dropped 19.00 points, or 0.42 %, to 4,508.69. While the geo-political issues related to Syria was one factor, the poor macro Data from Euro Zone added to the worries. The Composite output index for the month of September 2014 was at 52.30 from the levels of 52.50 in earlier month. It was no wonder the Euro Zone equity indices also faltered.
The Asian markets have also opened on the weak note taking cues from US markets. Nikkei is trading in red down 0.19%. Even Hang Seng is down 0.16%. Shanghai Composite however managed to continue its outperformance against the other Asian peers. We feel, the better than expected macro data seems to be a factor helping China markets. SGX Nifty is trading in red with loss of 0.11%.
With Indian equities witnessing selling from FIIs the markets are likely to open weak. Rather we would not be surprised to see the indices opening gap down. However the indices are likely to remain range bound ahead of the hearing on coal blocks. Further the under performance of Mid Cap and Small Cap may continue even today.