Markets Extend Losses, Capital Goods Continue Upward Move

The Indian markets have extended some of their morning losses following the negative opening in Europe. The global markets have been playing a strong role over the last few days, which is providing direction to the market. The Sensex and Nifty are both down by 0.25%.

Among the BSE sectoral indices, Capital Goods has continued with its momentum and is leading with gains of 1.28%. This is mainly on the back of news that the government has proposed to increase the overall import duty on foreign power equipment by 21%. This, in turn, will benefit more domestic companies. The Power index is also up by 0.56% on news that the government has allocated 116 new coal blocks to Coal India. In the losers pack, the IT and Oil & Gas indices are down by nearly 1.21% and 1.41% respectively.

The peer Asian markets are mostly trading in the negative territory after the series of bad news that hit the global markets. First, the Fed disappointed the market, and now China's industrial growth has slowed down, as per the latest data released by HSBC. The world's largest consumer of metals saw its factory sector contracting for the 8th straight month in Jun 2012. The Hang Seng and Shanghai are down by 0.83% and 1.42% respectively, while Nikkei is 0.81% up.

The European markets have opened on a negative note today. Investors seem disappointed with the Fed's moves of merely extending the bond programme to bring down the long-term borrowing costs and stimulating growth, as opposed to expectations that it would announce a new set of stimulus measures. The major indices, FTSE, CAC and DAX, were down by 0.51%, 0.32% and 0.43% respectively in the opening trades.

Back home, among the Sensex shares, BHEL and L&T are up by 2.33% and 1.51% respectively on news of the imposition of duty on foreign power equipment. Hero MotoCorp, ONGC, Sterlite Industries and Tata Power are up with leading gains of 1.49%, 0.95%, 0.93% and 1.46% respectively.

Of the major losers, IT stocks such as Infosys, TCS and Wipro are down by 0.395, 2.90% and 0.47% respectively. Index heavyweight Reliance is down by 3.39% after Niko resources cut the gas reserves by 51% on lower D6 reserves. Cement stocks continue to remain under pressure.

The market breadth, which indicates the overall health of the market, remains positive as of now. On the BSE, 1217 shares rose and 1194 shares fell. 120 shares are unchanged.

We expect that the markets will remain volatile with a negative bias for rest of the day on the back of weak global markets and persistent domestic issues.