Profit Booking To Continue

Consolidation would be the buzz word going ahead and some indications are visible from the kind of movement equity indices witnessed yesterday. Indian equity indices ended lower yesterday after earlier hitting record highs for the fourth straight session on profit taking with oil shares leading the decline. Sensex ended down 110 points at 25,474 after hitting a record high of 25,736 and the Nifty ended down 30 points at 7,627 after touching a record high of 7,700.

Some of the important announcements were made yesterday. The data points suggested that exports grew by a six-month high of 12.40% at $27.9 billion in May this year against $24.91 billion in the same a year ago. The outbound shipment was driven by 28.7 per cent increase in petroleum products and 22.09% in engineering goods, showed official figures released yesterday.

Imports, on the other hand, contracted 11.41% at $39.23 billion in May against $44.28 a year ago. This was partly reflective of 72% decline in gold imports. As such, trade deficit declined by 42.01% at $11.23 billion in May against $19.37 billion in the same month of 2013-14. Yesterday the Indian rupee firmed up against the US dollar was trading higher at 59.24 compared to its close of 59.29 on Tuesday.

While profit booking occurred yesterday, there was much to cheer about on the political front. The speech by Prime Minister was full of enthusiasm and provided a road map on how the Government would change the Image of India to ‘Skill India’ from ‘Scam India’.  In the speech, focus was given on agricultural sector and even the power sector. He focused on technology to be used for better harvest. All in all the Government looks all set to achieve the targets it has planned for the next five years.

As for triggers for trading today, IIP and Inflation numbers would be announced today. As for the expectations, not much improvement is expected in the IIP numbers. IIP is likely to remain almost flat. However there are going to be positive surprises in the consumer goods segment.

As for the global markets, US stocks fell the most in three weeks, with the Dow Jones Industrial Average halting a five-day rally, as the World Bank cut its forecast for global growth. The Standard & Poor’s 500 Index (SPX -0.35%) declined 0.4 percent to 1943.89 at 4 p.m. in New York, the most since May 20. The Dow average retreated 102.04 points, or 0.6 percent, to 16843.88, ending a streak that pushed it to an all-time high.

Taking cues from US markets, Asian markets are also trading on a negative note. While the Nikkei is trading in red with loss of 147 points (Down 1%), Hang Seng is trading in red with loss of half a percentage point. Shanghai composite is also trading in red with marginal losses. SGX Nifty however is trading on a positive note with gains of 7 points trading at 7635.

Considering weak global cues, we feel Indian markets are also likely to open in red. Profit booking is likely to continue taking the indices southward. But investors should take it as an opportunity to buy. It is still a buy on dips market.