Consolidation To Continue

Indian equities finally witnessed some amount of consolidation yesterday as Sensex snap the continuous rally witnessed in the last six trading sessions. The way Indian equities traded yesterday, it seem that the equity benchmarks lost zeal to rally further as investors preferred profit-taking after six-day gains.

While day before yesterday it was the oil & gas companies that helped the indices move northwards, yesterday the Oil and gas, banking and FMCG stocks dragged the market. It was due to some grace from healthcare companies that the fall did not look a severe one. The Sensex declined 106.38 points to 26314.29 and the 50-share NSE Nifty fell 22.20 points to 7875.30 after rallying more than 4 percent in past six consecutive sessions.

In investors could recollect we had categorically stated that, while the benchmark market may consolidate the mid cap and small cap indices may put up a better show. As expected the broader markets outperformed benchmarks with the BSE Midcap and Smallcap gaining 0.06 percent and 0.93 percent, respectively.

We are of the opinion that the weakness witnessed in the market yesterday was just a profit booking amid consolidation and that may continue for rest of the week. Rather we are of the opinion that when the markets are actually trading near all Time high levels, such consolidation is a considered healthy. As for market expectations going ahead, experts suggest that they remain positive on the market and recommend buying large cap quality stocks on any weakness.

As for the global markets, US markets gained for a third day, sending the Standard & Poor’s 500 Index to within two points of a record, as minutes indicated the Federal Reserve will continue to support the economy amid uneven gains in the labor market. The S&P 500 added 0.3 % to 1986.51. The gauge touched 1988.57, briefly surpassing a closing high of 1,987.98 reached July 24, before pulling back. The Dow Jones Industrial Average rose 59.54 points, or 0.4 %, to 16979.13. Experts suggested that, if data points move toward their objectives faster than expected Fed will raise rates sooner than expected. We feel the optimism is keeping the indices afloat.

As regards Asian indices, there are a mixed signals. While the positive data from the US markets is providing some positivity, the HSBC Manufacturing PMI for China stood at three month low. As a result, though Nikkei is trading with gains of 0.80%, Shanghai Composite is trading with loss of 0.39%. Even Hang Seng is trading with loss of 0.66%. After witnessing consolidation the SGX Nifty is trading with marginal gains of 0.06%. Today we expect Indian equities open on a flat note and remain in positive zone in early hours of trade.