Profit Booking To Continue

As expected Indian equities yesterday remained under pressure as Geo- political issues affected the global equities. However the selling pressure increased towards the fag end of trading session taking the indices southwards. Benchmark share indices ended nearly 1% lower with bank shares leading the decline after valuations of their bond portfolios took a hit as bond prices eased following RBI's status-quo on key policy rates. Global cues such as the emerging tensions between Russia and Ukraine also dampened the investor sentiment. The Sensex dipped nearly 1% or 242.74 points at 25665.27 and the 50-share CNX Nifty shed also shed nearly 1% or 74.50 at 7,672.05. The BSE Small-cap slipped 1.5% but outperformed major benchmark share indices while the Mid-cap index ended 0.7% lower.

Another noticeable factor was depreciating INR against the USD. The INR fell to 61.44/45 weaker than its 60.8450/8550 close on Tuesday. Good dollar buying was seen from foreign banks likely on behalf of clients looking to exit their equity and debt investments in India.

While the Indian equities witnessed a decline the other global equities also witnessed similar trend. Gold rallied with the yen as escalating tension between Russia and western nations over Ukraine damped demand for riskier assets. U.S. stocks were little changed near a two-month low. The Standard & Poor’s 500 Index rose less than one point to 1,920.23. The Dow closed in green with marginal gains of 0.08%. The gauge climbed as much as 0.4 percent after sinking 0.5 percent earlier in the session. The yen rose the most in four months against the dollar and gold had its best gain in six weeks.

NATO said there’s a risk of Russia sending troops into Ukraine after President Vladimir Putin massed troops on his country’s western border. Putin ordered restrictions on food imports to strike back at countries that have imposed sanctions on Russia. Experts opine that, there are geopolitical concerns in the backdrop. We might slip back to flush out the remaining weak hands, but we are recommending buying this dip”.

While the US markets were short changed, Asian equities are likely to witness another decline today. Nikkei is trading in red with loss of 0.22% and Hang Seng is down 0.45%. Shanghai Composite is also trading in red with loss of 0.27%. As for Indian equities, despite some positive moves like cabinet nod for FDI in Railways and Defence, equity indices are likely to open in negative zone.  

We expect profit booking to continue taking the benchmark indices southwards. Even the other broader indices like Small cap and Midcap are expected to under-perform. SGX Nifty is trading in red with loss of 24 points (down 0.31%).