Global Canvas Is Red – Expect A Gap Down Opening

It was another volatile day for the Indian equity markets. Though the markets remained range bound in the first half after opening gap up, towards the end it witnessed a sharp selling. Earlier the rumors suggested that it was a basket selling by the two larger FIIs as there were rumors of Indian PM stepping down from his post.

As a result the Sensex rallied about 280 points in intraday trade and then fell 485 points from its day's high to close at 20,888.33, down 252.12 points. The Nifty ended at 6,221.15, down 80.50 points. Few of the experts suggested that, there was obviously some kind of basket selling thanks to the return of the FIIs after a holiday season.

Markets slipped for the second consecutive day with the benchmark indices losing over 1% each in the second half of the trading session. Even the broader markets buckled under the selling pressure. The midcap index lost 1.8% and the smallcap index dropped 2% after a stellar run over the last few trading sessions.

The downward spiral come in the wake of news that India's manufacturing sector ended the year 2013 on a bit of pessimistic note as growth fell in December against the previous month, showed the widely-tracked HSBC purchasing managers' index (PMI). However, consumer segment of the manufacturing, which had faced the heat of slow down, showed some signs of uptick. The PMI was down at 50.7 points in December from 51.3 in the previous month. This is the second month in a row when manufacturing activities registered a growth after falling since August. A reading above 50 points shows a growth, while the one below is a contraction.

However amid all this positive news was, the FM Chidambaram is confident containing the fiscal deficit to 4.8 %. However we are still skeptical about the same. We feel, as the Government has already hit the 945 of the deficit in the first eight months it would be difficult for the Government to contain the deficit.

While this was on the domestic front the even the UK macro data came in bit poor. The UK manufacturing PMI stood at 57.3 in December 2013. It was below the street expectations of more than 58. As a result the European equity indices also closed in red with CAC and DAX also losing more than 1.60%.

US equity Indices also witnessed a good amount of pressure in the early hours of trade and remained under pressure through out the session. The Dow closed down by 0.82% and Nasdaq closed down by 0.81%. A good amount of profit booking was the major reason behind the decline in indices. Even S &P witnessed a decline. This was the first time in last five years that the S&P has opened lower at the start of a year.

Even the Asian equity indices are trading in red taking the cue from the US markets. All the Asian Markets are trading in red, with Hang Seng being the highest loser. Hang Seng is down by 1.49%. Even Shanghai Composite is down by 0.37%. Here the New agency stated that Chinese data was quite disappointing. China’s purchasing managers’ index for the non-manufacturing sector came in at 54.6, down from 56 in November and the lowest reading since August. Data as on Jan. 1st showed the official gauge for factory output fell more than economists projected, also to a four-month low. A HSBC Holdings Plc and Markit Economics Ltd. index of Chinese manufacturing published yesterday slipped to 50.5 from 50.8 in November, matching the median estimate in a Bloomberg survey.

As for the Indian Markets, taking the cues from other global markets the SGX Nifty is trading in red with loss of 0.81%. With no major positive triggers on the domestic front, we expect the Indian equities to follow the global peers. With global canvass being red, Indian equities are likely to open gap down.