Markets Lower On Weak Global Cues

There has been nothing different happening in other Asian markets since opening today. The Hang Seng is closed for trading on account of Chung Yeung Day. Earnings are about to kick off for major Asian steelmakers. There seems to be pessimism ahead of these quarterly result announcements. There has been an overall consensus about these results being weak due to a sluggish demand in China and on account of a heavy pricing pressure. This has resulted in further dampening of the sentiment, pushing markets lower with the Shanghai Composite trading further down by 0.83 per cent. Japanese stocks however continue to trade flat on expectations of an easing programme by the Bank of Japan.

European markets opened positive, though gains have been tepid. They are likely to weaken and move downwards as the euro zone’s 500 billion euro bailout fund enters a questionable zone. A Luxembourg-based EU Court of Justice hearing a complaint by Thomas Pringle has been claiming that the fund violates the EU law and should be banned. The court has the power to topple the European Stability Mechanism. The hearing is scheduled for today with a probable ruling by the end of the year.

On the domestic front the markets have been quite volatile particularly because the markets are likely to remain closed tomorrow on account of a holiday and this will be followed by expiry of October derivatives contracts on Thursday. As said earlier, RIL, Infosys and ITC have been adding to the downward pressure significantly. They are currently trading lower by 0.61 per cent, 0.95 per cent and 1.38 per cent respectively. Also trading lower considerably is Hero Motorcorp, down by 1.70 per cent, ahead of its Q2FY13 result announcement which are about to happen.

While the broader indices are trading lower, mid and small caps are now trading flat to positive, having gained 0.07 per cent and 0.19 per cent respectively. The overall market breadth also seems to be flat with 677 scrips advancing against 736 declines.

Among gainers, Yes Bank is trading higher by over 2 per cent as its Q2FY13 results have been in line with street expectations. It reported a YoY net profit growth of 30 per cent, Net Interest Income stood at Rs.530 crore (up 37 per cent on a YoY basis), CASA (Current and Savings Account) deposits grew by 86.7 per cent YoY and the NIM expanded by 10 basis points QoQ. Adding to the positivity of the results is the gross NPAs during the September quarter which came in at 0.24 per cent as compared to 0.28 per cent in the previous quarter. Other gainers include Larsen & Toubro, Siemens and Lupin which are trading higher by 1.57 per cent, 1.48 per cent and 1.05 per cent respectively.

We expect the markets to go further down on account of weak global cues and an expected decline in European stocks. The probability of heavy selling on European bourses is expected to dampen trading further and there is no uptick expected in domestic markets for the rest of the day.