Markets To Consolidate Further

Indian equity benchmarks have started off the week on a sluggish note with the leading indices falling marginally yesterday despite better inflation data, weighed down by FMCG and select banks & technology stocks. However, rally in metals and capital goods capped the downside. The Sensex managed to hold the 25000 level, down 17.37 points to close at 25006.98 while the 50-share NSE Nifty declined 5.45 points to 7454.15 despite positive global cues.

The market consolidated yesterday after falling more than 900 points (Sensex) in previous four sessions and that volatility was attributed to concerns over GAAR issue. Further the experts have suggested that if the market corrects then that should be bought into. We have been also advising the people to buy good quality stocks when markets witness a decline.

Coming back to the data points, yesterday the inflation figures arrived better than expected. The data shows that the WPI for the month of June at 5.43% is at four months low levels. Investors would be surprised why the indices have not reacted to such positive news. Reason is quite simple; it is due to the base effect that technically the inflation seems to be under check. Otherwise the price levels are still higher and with delayed monsoon the food inflation likely to remain higher only.

We are of the opinion that, going ahead Indian equities are likely to take cues from the quarterly results and monsoon advancement. We feel, June 2014 quarter Results are expected to be a tad better than June 2013 and even March 2014.

While this was on the domestic front, the global picture is totally different. US equity indices ended higher yesterday, with the Dow Jones industrial average hitting an intraday record, lifted by Citigroup's better-than-expected earnings and more deals in the healthcare space. The Dow Jones industrial average rose 111.61 points or 0.66 percent, to end at 17,055.42. The S&P 500 gained 9.53 points or 0.48 percent, to 1,977.10. The Nasdaq Composite added 24.93 points or 0.56 percent, to 4,440.42. Earnings season will pick up speed this week, with 59 S&P 500 components scheduled to report. We feel, with improvement in Economy the results are likely to be good.

Asian Indices are also showing positive signs with Nikkei trading with gains of 0.79% and Hang Seng trading with gains of 0.50%. Shanghai Composite is however in red with marginal loss of 0.12%. The SGX Nifty is trading with gains of 0.30%.

The global scenario is looking positive; however we feel the Indian markets had already witnessed a strong up-move ahead of budget. Hence we expect some amount of profit booking to take place. However as we move ahead the markets are likely to consolidate which will [provide a good buying opportunity at lower levels. Hence rather than getting worried about the fall in equity indices, one should consider it as a good buying opportunity. Today we expect the indices to open in green and remain range bound.