Global Markets Drag Sentiment Low

The Indian markets have been trading in a tightly bound range of approximately 65 points for the Sensex. The markets opened lower because of an overall negative sentiment among investors worldwide, and were dragged lower by a weak European opening. Trading has been lacklustre. The Sensex is currently lower by 151.83 points or 0.80% at 18786.63 and Nifty is lower by 50.80 points or 0.88% at 5696.15.

Globally, there was some positivity seen after the key jobs data from the US came in as expected. However, this soon faded away and the market direction was reversed when the World Bank cut China’s 2012 growth estimate from 8.2% to 7.7%. The World Bank said that this revision in outlook was due to the weakening global demand and slowing investment. This has dragged the overall estimate for East Asia, including India and Japan from 8.3% to 7.2% in 2011. This is the slowest pace since 2001, according to the World Bank. This trend could be reversed using monetary policy to revive the economy, but at the moment, what stands is a growth rate cut. It has dragged the Hang Seng and Shanghai Composite lower, which are down by 0.55% and 0.82% respectively. The Japanese markets are closed today on account of a holiday.

The European markets too were dragged lower due to several factors, a major one also being the concerns over China. The FTSE, DAX and CAC opened lower by 0.6%, 0.8% and 0.8% respectively today.

On the domestic front, though the index constituents have been trading lower, the midcap is flat at -0.09%. There are gains seen in smallcaps to the extent of 0.18%. Only 2 of the 13 sectoral though are trading in the green. There is significant movement being seen in the defensives all over again after the recent profit booking on Friday, Oct 5. This has resulted in Healthcare and FMCG seeing gains of 1.44% and 0.30% respectively.

Among the highest losers are Realty, Oil & Gas and Capital Goods, trading lower by 2.63%, 1.92% and 1.63% respectively. In these sectors, DLF and Reliance have been massively down by 6.31% and 3.41% respectively. The top gainers at the moment include Sun Pharma and Cairn India, up by 3.88% and 1.98% respectively.

We expect the markets to remain subdued due to an overall negative sentiment worldwide contributed to by growing concerns over China and weak European markets. These factors are likely to weigh on the Indian markets and keep them under pressure throughout the day.