Global Equities Nose-Dive. India Also To Open Gap Down
DSIJ Intelligence / 04 Feb 2014
It seems that the sentiments are changing too fast for the global equity markets. A few days back the things were looking good as the US and European markets were recovering. However since the US Fed has announced the cut in bond buying owing to the recovery in the US economy, the emerging markets have started to show some amount of weakness. While yesterday the global equity indices were in the red zone (led by the emerging markets), today the markets are seen extending losses.
It seems that the sentiments are changing too fast for the global equity markets. A few days back the things were looking good as the US and European markets were recovering. However since the US Fed has announced the cut in bond buying owing to the recovery in the US economy, the emerging markets have started to show some amount of weakness. While yesterday the global equity indices were in the red zone (led by the emerging markets), today the markets are seen extending losses. Not only Asian equity indices are weak but the US as well as European markets were in red with deep cuts.
The primary reason for the US markets to witness such a deep cut as the manufacturing data for US was lower than the estimates. To put the figures in the perspective, according the institute of supply management (ISM) the factory index decreased to 51.3 from 56.5. As for the expectations the median forecast of 85 economists surveyed by Bloomberg called for a decrease to 56. It was no wonder that with largest economy witnessing steep contraction, the equity indices declined significantly. While the Dow closed in red with losses of more than 2.12 % the S&P 500 declined 2.34%. The European markets had also witnessed weakness as the manufacturing data here also disappointed the investors. As a result with the CAC40 and DAX witnessed more than 1% decline.
The scenario for the Asian markets is not any different with Nikkei trading in red with loss of 2.63 %. Even Hang Seng after remaining close for holiday season has opened down by more than 2.30%. There are few of the concerns on the Chinese economy as the manufacturing data showed some amount of weakness. Hence coupled with U.S. stimulus cuts and unrest in emerging markets from Thailand to the Ukraine this year, the equities are now witnessing pressure.
Hence we are expecting the Indian markets also to witness a gap down opening and the SGX Nifty is also indicating towards the same. The SGX Nifty is down by 70 points (Down 1.17%).
While the global data has been disappointing, there are few positive takeaways from the domestic markets. The 2G auction has churned out to be a good event from the Government perspective. The Government mopped up around Rs 13000 core on the day one. Apart from that the Finance minister has indicated towards some Changes in the tax rates for the revival of the economy. Though he has not mentioned exactly what changes would be made, we feel it is a positive indication.However it is a positive in the long term and in short term we expect the volatility to persist. As for today we expect the Indian equity markets to open gap down along with the Asian peers.
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