Profit Booking To Continue- Expect Another Negative Opening

Indian equity market took a breather yesterday as the leading indices witnessed a good amount of selling towards the fag end of trading session. We feel a good amount of profit booking combined with some depreciation in INR resulted in equity indices witnessing a selloff in the markets. Apart from that the market players remained cautious ahead of the US Federal Open Market Committee meeting.

And we feel the cautiousness of the Indian investors was good as even the FOMC has also indicated towards trimming the pace of stimulus in coming months. Central bank policy makers generally expected that the data would prove consistent with the committee’s outlook for ongoing improvement in labor-market conditions and would thus warrant trimming the pace of purchases in coming months.

The reports also suggested that The European Central Bank is considering a smaller-than-normal cut in the deposit rate if officials decide to take it negative for the first time. Policy makers would reduce the rate for commercial lenders who park excess cash at the ECB to minus 0.1 percent from zero.

Both the developments resulted in respective equity indices witnessing southward movement. While Dow closed in red losing 0.42 %, S&P 500 closed in red by around 0.36%. In the European markets, FTSE was down marginally (0.25%).

As regards the Asian markets, equity indices excluding Japan witnessed a fall after minutes from the U.S. Federal Reserve’s last meeting signaled U.S. stimulus may be reduced in coming months. Japanese stocks rose as the yen dropped and the exporters stocks rallied significantly. Shanghai, Taiwan and Hang Seng are all trading in red. The noticeable factor is even the better HSBC PMI data for the October that arrived at 50.40 as against the 50.90 in the preceding month could not help the markets to revive. Shanghai is down 0.85%, Hang Seng is down 0.45% and KOSPI is down 0.94%. Only Nikkei is up by 1.51%. As regards the SGX Nifty, it is trading in red with loss of 30 points.

Considering all the factors we expect that the profit booking would continue in the markets leading to southward movement for the Indian equity indices. We expect another negative opening for the Indian equities today.