Poor Global Sentiments Drag Markets Down

After opening on a flat, negative note today, the Indian markets extended their losses in the afternoon session and closed with heavy losses, with the Sensex and Nifty each down by 0.79%. Weak trades in the Asian markets and later, the negative opening in the European markets kept the mood quite bearish. There are no major growth triggers expected from the earnings season either, and therefore the markets will see some pressure from the global front.

We, at DSIJ, believe that the Indian markets will see weakness in the near term on the back of the various concerns looming in the economy. High rupee depreciation, the economic slowdown, the high fiscal deficit and high inflation figures have not been fully discounted. Further, the global markets are looking very uncertain. Ratings agency, Fitch, also downgraded the economy's outlook to negative, and further downgraded SBI and 8 other Indian banks citing higher exposure to sovereign debts.

The Asian markets also closed on a strongly negative note on the back of news of the Chinese Premier, Wen Jiabao's statement that real estate market curbs to discourage speculation would be a long-term policy. The comments have hit the property sector in Hong Kong. The nervous trades are also owing to the disappointing US data on Friday.

The European markets continue to trade in the negative territory. Weak global markets and the persisting debt crisis in the Euro zone continues to weigh down the investor’s sentiments. However, there is some buying seen at the lower levels due to the attractive valuations. Softer-than-expected Chinese inflation, along with weak numbers from Japan's services and manufacturing sectors led the economic concerns, following a disappointingly weak US jobs report on Friday.

Dow Jones Futures is currently trading 50 points or 0.40% down at 12677, indicating a negative sentiment in the US markets.

Back home, all the BSE sectoral indices closed negative in the range of 0.07%-1.55%. Among the major losers, Metals, Power and Capital Goods were down by 1.55%, 1.54% and 1.25% respectively. The IT index was marginally down by 0.07%.

Among the Sensex shares, except for Dr Reddy's Labs (up by 0.82%) and TCS (up by 0.95%), all the other scrips closed in the negative zone. Of the major losers, Bajaj Auto, Hero MotoCorp, Maruti Suzuki, Jindal Steel and Tata Steel were all down by nearly 2%.

The market breadth, which indicates the overall health of the market, was negative for today. Out of the 3301 stocks traded on the BSE, 2066 declined, 1128 advanced and 107 remained unchanged.

We expect the markets to remain negative for tomorrow. Slowing growth will continue to keep the market's sentiments down. This may continue until we see any major reforms or rate cuts in the future.