Asian Markets Trading Weak- India Likely To Follow

Indian equity indices are close to making new high and yesterday it was only a striking distance away from it. Yesterday, Indian markets took a cue from positive Chinese PMI and hence started with a bang. However as we had stated the profit booking occurred in the second half of trading session eroding all gains. We had categorically stated that profit booking will keep the indices under check.

Now we take a look at global markets, it seems that profit booking may continue to happen on the street taking the indices southwards. All the Asian equity Indices are trading in red with Nikkei losing more than 1%. The reason being, forecasts on earnings front from Canon Inc and Posco disappointed the investors. Posco, South Korea’s biggest steelmaker sank 1.4 percent in Seoul after cutting its 2013 sales forecast. LG Electronics Inc. (066570) lost 2.6 percent after its third-quarter operating profit and sales missed estimates. Canon retreated 1.3 percent in Tokyo as the camera maker trimmed its earnings forecast.

With these majors cutting earning guidance the impact is seen on most of the Asian indices trading weak. Hang Seng is down by 0.30% and Straits Times is also down with miniscule losses. However Shanghai initially managed to put in positive start with marginal gains of 0.26 %. However the profit booking has resulted in Shanghai index also slipping into red.

As regards the US markets, the equity indices closed in green with Dow closing up by 0.62%. The positive data from Chinese markets and some positive updates on quarterly earnings front helped the index move northwards. Similar was the Story for European markets. While it took some positive cues from the Asian markets, positive news flow on the macro front also helped the index sustain its early gains.

As for the Indian markets, the results season has been better than the expectations with most of the large cap companies beating the street estimates. In addition to that there is another positive factor. To help the markets in terms of liquidity, the SEBI and the government are working on sweeping changes to the policy on mutual funds that could see them gain access to a substantial amount of money from the state-administered provident fund and other retirement programmes, a move that could lift the fortunes of the asset management industry. Reports suggested that, the long-term mutual fund policy will also feature proposals on tax breaks and incentives besides obliging asset managers to reach out to investors in the hinterland in an attempt to increase the industry's asset base and attract higher investments. This would help the Indian markets in long term.

As for today, we expect the profit booking to continue on the street taking the Indices southwards. The SGX Nifty is also trading in red at 6138 (down 51 points). We expect a gap down opening for the markets. However we feel the markets may recover as the session progresses.