Political Uncertainty Pulls Markets Downward

After the markets having cheered about reforms taking place, it is now time for the markets to be less impulsive and gauge the situation better. Though the long awaited retail FDI norms marked a big step in terms of getting rid of the ‘policy paralysis’, fact remains that the announcement brought in more applaud than deserved. So far only 9 states and 2 union territories are welcoming FDI in retail in a scenario where it is necessary for companies to get state approval before approaching the FIPB (Foreign Investment Promotion Board). That apart, opposing this move, Trinamool Congress announced it would stick to the decision of pulling out from the UPA government and that has resulted in a rather negative, dry and range-bound trading session so far. Currently the Sensex is trading lower by 64.95 points at 18431.06, down by 0.35% and the Nifty is trading lower by 21.75 points at 5578.3, down by 0.39%.

Nothing has changed in the direction of trading in the Asian markets except the fact that they’ve dropped further down. Asia is being heavily weighed down by energy companies, HSBC’s preliminary reading of the Purchasing Managers’ Index (PMI) for China for the month of September and Japan’s widened trade deficit. A severe drop in oil prices yesterday (3.5%) over comments from an unnamed Saudi Arabian official and U.S. inventory data showing supplies that are larger than expected, has been causing energy stocks to drop. The HSBC Chinese flash PMI data for August came in a while ago and the reading suggests a slight improvement in the figure that has risen from 47.6 in August to 47.8 in September. Japanese trade data too turned investors ignoramus over stimulus announced a day earlier and erased all of those gains.

On the domestic front, technology stocks have been leading the bourses with a gain of 0.72% for Teck and 0.69% for IT stocks. Defensives are also seen coming back into buyers’ eyes with FMCG and Healthcare gaining 0.23% and 0.10% respectively. All of the sectors apart from those mentioned above are trading in the red. Weakness is quite uniform today with the Sensex, midcaps and smallcaps all trading lower in the range of 0.53% and 0.59%. MphasiS, HCL Tech, Hexaware Tech, Tata Communications, Wipro have been leading the charts.

We expect the markets to remain low today pressured by the political scenario and the lack of positive global cues.