Indices Likely To Witness Profit Booking

Positivity on the Dalal Street is here to stay. At least the way Indian equity markets are trading at current juncture, it seems so. After remaining under some pressure in the first half of preceding month on account of weak global cues and uncertainty on domestic front, the indices bounced back smartly as scenario improved on both parameters. As the scenario improved on global as well as domestic grounds, the FIIs have started to flock back to Indian equities. In preceding month the FIIs were missing on the street and hence most of the indices remained range bound. However liquidity increased as FIIs returned to the scene. Noticeable factor is the FIIs have taken exposure not only large as well as mid cap companies exposure seems to have increased to small cap companies as well.

No wonder the indices are hovering near the all time high levels. While Sensex closed at 27915 (up 55 points) the Nifty closed at 8338 (up 14 points). As expected, the mid cap and small cap indices were seen outperforming the benchmark indices.

As we move ahead we are of the opinion that the indices are likely to keep the momentum alive and move northwards. The global cues are positive with US as well as European markets closing with significant gains on the back of strong macroeconomic data.

US indices witnessed a smart up-move and helped the benchmark index to Close at record high levels. It was mainly supported by the European Central Bank that vowed to increase stimulus efforts if needed. Further the drop in American jobless claims bolstered optimism in the economy. The S&P 500 Index increased 0.4 % to 2031 and the Dow added another 68.98 points (0.4 %) to close at 17553.51. Bloomberg suggested that, the policy and macro news were both positive, and that is giving the market something of a positive bias as we go through the day. Experts further added that outside of the US, other major economies are also taking aggressive policy steps to stabilize and re-accelerate growth. This is providing a much needed positive impetus to the equities all over the globe.

Positive news came in From European markets as well as European Central Bank kept the interest rates unchanged at 0.05%. Mario Draghi in his comment stated that “heightened unemployment would dampen the euro area’s economic recovery and that the unstable geopolitical situation would also weigh - particularly on investment”.

Impact of the positive news is also clearly been seen Nikkei also as it is trading with gains of 103 points (up 0.61%). Hang Seng however is trading with some decline of 0.60% also with Shanghai Composite trading in red at 2424 (Down 0.06%). SGX Nifty is also trading with decline of around 15 points.

We are of the opinion that while the long term scenario is still positive, Indian equities today are likely to open in red. The indices are witnessed a smart move in past few trading sessions and hence profit booking is anyway expected on the street. However, we feel the undertone is quite positive and hence as the trading session progresses, one can expect indices to recover with buying seen in large Cap counters. Mid cap and small cap indices are likely to outperform the benchmark indices today also.