Expect A Gap Down Opening

Global equity markets remained highly volatile in the preceding week and Indian equities were no exception. The factors like expected interest rate hike in US markets and possible fears about the slowdown in European economy. What added to the woes was some macroeconomic data from Chinese markets which indicated towards some amount of slower than expected GDP growth. Rather even the international monetary fund (IMF) reduced the global GDP growth target for 2014. All the factors made sure that the leading equity indices witness a significant decline. All in all the indices remained highly volatile with negative bias.

Amid this volatility there was positive news as Fed published its FOMC meet minutes. One positive factor that emerged from the same was Fed seems not as hawkish as it sounded at the time if FOMC meet. Now there is possibility that the rates would remain low for considerable time. As a result there was some positive move seen on the global canvas on Thursday. However the joy was short lived as the next day itself indices witnessed a decline and wipes out most of the gains. As a result the benchmark indices were lower by more than a per cent even on Friday. Even the mid cap and small cap indices declined more than one per cent. While the Sensex closed at 26,297 Nifty closed at 7860.

In the preceding week Infosys also announced its results which were above the street estimates. As a result the IT pack seems quite up beat on the street. However the IIP growth figures are quite disappointing where for the month of August the IIP growth stood only at 0.40%. We feel the impact of poor IIP numbers would be seen today also. Going ahead the quarterly results are likely to guide the markets going ahead.

Another trigger for the markets would be assembly poll results for Maharashtra where the elections would be held on October 15.We are of the opinion that if BJP fails the get a clear majority on its own, markets may witness some more decline going ahead.

Another noticeable factor for the markets is selling by FIIs. With uncertainty hovering over the global markets, we expect some more selling happening in current week. But the domestic funds are likely to put in a chunk of funds. Reliance Industries will announce its quarterly results. Street estimates suggest that the Net profit is likely to witness some amount of decline. IndusInd Bank is also announcing quarterly results today.

As regards the US markets, on Friday NASDAQ was down 102 points closing at 4276 and S&P 500 was down by 22 points (down 1.15%). DJIA was down 115 points (down 0.65). Even the Asian indices are trading in red with deep cuts. The Nikkei is down 1.17% and due to below expected trade data in china the Shanghai Composite is also trading with a decline of more than 1.06%. Hang Seng is down 0.66 per cent. Worst affected is Taiwan which is down more than 2 %. SGX Nifty is also trading in red with loss of 0.70% (down 54 points). We are expecting another negative opening for the Indian equities.