Geopolitical Situation Will Determine Market Direction

Geopolitical Situation Will Determine Market Direction 

Equity markets worldwide got spooked last week owing to geopolitical tensions. The sentiment in global equity markets turned negative, even as SEBI’s action to halt trading in equities of certain listed companies suspected of illegal activities took Indian markets by surprise.

The markets have corrected nearly 4.75 per cent from the top. The Sensex made record highs on August 2 by touching the level of 32,686 on the day of RBI’s announcement on interest rates, while the correction in stock prices took the benchmark index to 31128 level. Indian equity markets seem to be taking support at the crucial 31000 level of Sensex. It will be interesting to see if the level remains intact. 

The past two weeks saw FIIs selling in the markets even as the DIIs increased their equity holdings. The FIIs sold to the tune of Rs 6976.63 crore, while the DIIs bought equities worth Rs 10096.16 crore. The benchmarks Sensex and Nifty were down by 2.66 per cent and 2.20 per cent, respectively. Mid-cap index outperformed the major benchmark indices as the index slipped by 1.55 per cent. Small-cap index dropped the most by shedding 4.12 per cent in the last couple of weeks. Among the sectoral indices, BSE Metal index surprised with its outperformance by gaining 4 per cent, even as all the other major sectoral indices recorded losses. 

BSE Realty index dropped by 4.23 per cent in past two weeks and was the biggest sectoral loser, followed by the BSE FMCG index which was down by 4 per cent. BSE Auto, BSE Bankex, BSE IT and BSE Power slipped by 3.03 per cent, 2.83 per cent, 1.45 per cent and 1.29 per cent, respectively. 

Asian markets underperformed during the last couple of weeks, with Nikkie 225 slipping 1 per cent and Shanghai composite down by 0.06 per cent. 

The US markets were mixed over the past couple of weeks with Dow Jones index recording gains of over 0.77 per cent and S&P 500 index slipping by 0.30 per cent and NASDAQ closing down by 0.65 per cent. European markets closed on a mildly bullish note with FTSE 100, DAX and CAC 40 closing higher by 0.21 per cent, 0.12 per cent and 0.17 per cent, respectively. 

The earnings season ended this week and the results were mixed this season, with pharma companies in general not posting impressive results. The capital goods companies saw increase in revenue in general, but saw some margin pressures. 

The banking space continued to see some decline in asset quality, even as Eicher Motors in the auto space impressed with its results. 

Markets will take cues from global markets in the coming weeks and the developments on the global geopolitical situation will decide the direction the market takes in the near term. 

The markets cheered Cochin Shipyard IPO as the stock saw an impressive listing on bourses on a very tough market day. Cochin Shipyard closed at Rs 522 on the day of listing, thus recording a 20 per cent gains over the issue price of Rs 432. The success of the Cochin Shipyard IPO reflects investors’ appetite for the defence sector.