Expect A Range Bound Trade With Positive Bias

It was expected ahead of the poll result and after a sharp rally and it happened also. The Indian equity markets took a breather after breaking records for three consecutive sessions. While the Nifty ended the session flat at 7109, the Sensex closed in red with marginal losses of 56 points. This is the first time since June 2005 and only the fifth time in history that the Nifty has closed unchanged.

While the leading two indices were range bound, the highlight of the day was Midcap and Small cap indices which closed with over 1 percent gains, outperforming the benchmark indices by a huge margin. On the sectoral front Metals and Realty indices gained the most with 3 percent and 4 percent respectively. Even the PSU Banks were among the top gainers yesterday.

Now the important question is why suddenly there is a caution on the street. The analysts are wary of election outcome and warn that any un-favorable results may drag the market massively. It is been stated by the analysts that, macroeconomic factors would guide the markets and not the outcome of poll results. Hence it is been Advised to invest based on the fundamentals of the counter than the putting money into the market based on the number of possible seats the BJP might get on Friday May 16, 2014.

There were few positives emerging on the street. The FIIs are back with a bang and almost invested a USD 1 billion in the past few trading sessions. A few treading session back we had stated that the quantum of investment is reduced from FIIs. However the FII inflow has been strong and is likely to remain strong in short term.  

While this was the scenario on domestic front, the Global indices also took a breather. U.S. stocks fell on Wednesday, with the Dow and S&P 500 retreating from recent record highs, as small caps resumed their sell-off and consumer discretionary shares lagged. The Dow Jones industrial average fell 101.47 points, or 0.61 percent, to 16,613.97, the S&P 500 lost 8.92 points, or 0.47 percent, to 1,888.53, and the Nasdaq Composite dropped 29.54 points, or 0.72 percent, to 4,100.63. On the sectoral front, the S&P consumer discretionary index was down 1.1 percent and led the decline on the S&P 500. The S&P retail index lost 1.1 percent. Macy's shares dipped 0.2 percent to $57.83 after the department store operator reported sales that missed expectations. Some analysts are concerned that persistent weakness in small-caps could spread throughout the market. Apart from that while the situation in Ukraine has not been a primary market mover this week; investors continue to watch it closely.

As for the Asian markets, Japanese Yen again appreciated against the USD and hence Nikkei is trading in red with loss of More than 100 points (Down 0.72%). Even the Shanghai Composite followed the suit and is down 0.51 % as the macro economic data was disappointing.  Hang Seng however is trading in green with 0.71% gains.

The SGX Nifty is trading in green with 17 points gains (Up 0.24%). We expect the indices to open in green with Marginal gains. However expect a range bound trade ahead of the poll results tomorrow.