Sensex Lower But PSU Banks Ace

The Indian markets today closed marginally negatively after having traded in a tight range until the CPI data was released. At 10.03%, the CPI figure for Aug 2012 was higher as compared to 9.68% in Jul. Investors reacted somewhat negatively to this, and the markets closed lower. With the forces of consolidation in play for today, the Sensex ended the day lower by 43.3 points or 0.25% at 18496.01 and Nifty closed lower by 9.95 points or 0.18% at 5600.05.

The peer Asian markets too ended the day negative on rising anti-Japanese protests in China. This has led to several companies shutting operations and commercial developments in China. An increasing number of Japanese companies have also halted production in China. China is Japan’s single largest trading partner, and the two highly inter-linked economies have been drastically affected by protests arising on the day that marks the anniversary of the Japanese invasion of a part in northern China in 1931.

Historically, these disputes have been highly short-lived and their impact has not lasted for more than a couple of months. Regardless of the short shelf life of this situation, it has come at a time when the outlook on China has not been so favourable. With this, the Asian markets were lower and the Hang Seng, Nikkei and Shanghai Composite were trading lower by 0.27%, 0.39% and 0.89% respectively.

European markets have been trading in the red today after seeing a dramatic downfall of oil in yesterday’s trading. While investors are yet speculating the causes of this major decline, the stocks are being weighed down heavily by oil firms, banks and resource companies. The FTSE, DAX and CAC are trading lower by 0.86%, 1.01% and 1.26% respectively.

On the domestic front, the Sensex was lower by 0.25% today. However, considerable strength was seen in midcaps and smallcaps, which ended the day up by 0.88% and 0.73% respectively. This shows inherent buying in the markets, though the overall breadth may be negative.

Of the sectors, PSUs were the top gainers, up by 1.58%. These were majorly led by the state-owned banks that have been rallying since the RBI announced a cut in the CRR by 25 basis points. The top gainers in this sector were Allahabad Bank (6.80%), Andhra Bank (6.65%), Canara Bank (9.18%), Central Bank (6.85%), Oriental Bank (12.97%), PNB (7.25%), State Bank of Mysore (7.30%), Union Bank (10.04%) and United Bank (7.80%). Among other gainers were Capital Goods, Power and Banking. The top losers were Oil & Gas and IT, down 1.13% and 0.54% respectively.

How the global cues will pan out tomorrow would help decide the market direction when the markets reopen on Thursday. Important global factors that could mould the international scenario over tomorrow include the developments in the anti-Japanese protests in China, Bank of Japan's press conference on the monetary policy, the release of the Monetary Policy Meeting Minutes of the Bank of England, the existing home sales figures in the US, HSBC’s preliminary reading of the manufacturing PMI in China and Japanese the trade balance.