Markets To Take A Breather

It was a highly volatile trading session for the Indian equities yesterday. Ahead of the swearing ceremony today and announcement of the cabinet it was expected to remain range bound. However the Indian equity indices opened in green with significant gains. The Sensex was once again trading above the 25000 mark. But while everything was going smoothly, suddenly a large amount of selling occurred in the markets. Around Rs 700 crore worth of nifty got sold-off at around 1:41 p.m.

Rumors suggested that, because of this margin call got triggered in stocks. Another factor was while the Nifty was scaling new highs in morning, some private banking stocks were down. The problem in terms of margins was sensed in the morning also as few of the online broking firms sent a massage about trading lines being down.

The margin call probably results in markets witnessing a decline and then even entering the negative zone. Some buying at the lower levels helped the Sensex and Nifty to recover and close in green with marginal gains. As a result of this the Sensex closed at 24716 (Up 24 points) and Nifty closed in red at 7359 points (Down 8 points).

The important part was the formation of Cabinet which happened in the evening. There were hardly any surprises with expected lot forming the part of lean cabinet. As expected Arun Jaitley is being given the Finance portfolio with Additional charge of defense. Sushma Swaraj is being rewarded with Ministry of external Affairs. Nitin Gadkari has been given the road transport and shipping while Rajnath Singh got the Home Ministry.  We feel the portfolios have been given with a sorted mind and hence would be able to achieve the desired goals.

However we need to wait and watch the actions from Sadanand Gowda who has been given Railways. With many big plans in Railways already being stated in the agenda, we feel his performance needs to be seen closely. Further the Stance of Radha Mohan Singh in Agriculture ministry would be watched for as the food inflation would be the major worrisome factor for the Government.  

Amid all this there was one positive news for the Indian markets. India’s current account deficit (CAD) narrowed sharply to USD 1.2 billion (0.2 % of GDP) in Q4 of 2013-14 from USD 18.1 billion (3.6 % of GDP) in Q4 of 2012-13 which was also lower than USD 4.2 billion (0.9 %of GDP) in Q3 of 2013-14. The lower CAD was primarily on account of a decline in the trade deficit as decline in imports was sharper than that in exports, a RBI release said on Monday.

As for the global equities, the US markets were closed yesterday on account of Memorial Day. U.S. markets resume after a holiday today, with data on durable goods orders and house prices due along with the Richmond Federal Reserve’s manufacturing index and a gauge of consumer confidence. However the overall optimism in the US markets is playing well for the Asian equities. The Nikkei is continuing its run and added another 0.66% gains. Hang Seng and Straits Times are also up with miniscule gains. Shanghai Composite is however in Red with losses of 0.19%.

SGX Nifty is trading in red with losses of 13.50 points (0.18%). We expect the Indian equity indices to open in red with marginal losses. However we feel, it is a sign of healthier market that profit booking in happening. This would only create a base for another round of rally going ahead.