Markets May Open Negative Today

The Indian markets yesterday saw a mildly positive opening after which the markets crawled upwards. The Sensex was seen inching towards 18,000, constantly hovering above 17,900. This was later seen moderating and all the gains got eroded towards the end of the second half of the trading session. By then, the global sentiment had shifted from positive to negative due to the poor numbers coming in from the HSBC Flash PMI for manufacturing and services in the euro zone. With this the Sensex and Nifty closed flat at 17,850.22 and 5,415 respectively. The Nifty managed to hold the crucial level of 5,400 regardless of the downfall.

The global cues have been overpowering the way the Indian markets have been functioning. After yesterday’s positive sentiment over hope for reforms from the U.S. and China, the global markets were seen trading in the green. The release of the HSBC Flash PMI for manufacturing in China showed the largest contraction in nine months. This added to investors’ speculation over Chinese officials taking drastic steps to aid the economy to come up with a strong stimulus plan for the second half of the year. This was shortly erased on the release of the European PMI data which indicated a contraction in manufacturing and services for the seventh consecutive month.

The U.S. markets closed negative with the Dow Jones, S&P500 and Nasdaq closing lower by 0.88 per cent, 0.81 per cent and 0.66 per cent. This sharp fall was seen after a Federal Reserve official erased the hopes of investors about another round of quantitative easing being on its way. The official told the media that QE3 wasn’t a possibility any time around September and October. This reversed the run we had been seeing in the U.S. markets.

The European stocks took a major hit and were heavily weighed down because of the PMI data. These losses were seen extending with the disappointment over QE3 coming in from the U.S. It spoilt the mood for investors, leading the FTSE flat by 0.04 per cent and DAX and CAC lower by 0.97 per cent and 0.84 per cent respectively. With this the Asian markets too have opened negative with the commodity and technology stocks being the most affected. The Hang Seng, Nikkei and Shanghai Composite are all trading lower in the range of 0.25 per cent and 1.12 per cent.

Oil had witnessed swings in both directions yesterday. After the release of the Chinese PMI data, global stocks rallied due to hopes of increased stimulus, Brent crude went to highs of above USD 116 per barrel. Soon after that, on the news over no QE3 from the U.S., crude fell to USD 114.6 per barrel.

On the domestic front, the IT sector gained considerably yesterday. TCS, Infosys and Wipro saw healthy gains with stock prices up by 2.25 per cent, 1.73 per cent and 2.61 per cent respectively. Due to this upswing seen in TCS and due to a downfall of 1.68 per cent in the stock price of Reliance Industries, TCS managed to push RIL behind and became the largest company in terms of market capitalization. TCS currently has a market capitalization of Rs 2,58,578.25 crore while that of RIL stands at Rs 2,57,598.37 crore.

Due to the gravity of the negative global cues, we expect the Indian markets to open negative today. There was downward pressure seen in the markets at the end of yesterday’s trading and that is expected to impact today’s session as well.