Geopo­lit­i­cal Sit­u­a­tion Will De­ter­mine Mar­ket Di­rec­tion

Dalal Street Investment Journal - - MARKET WATCH -

Eq­uity mar­kets world­wide got spooked last week ow­ing to geopo­lit­i­cal ten­sions. The sen­ti­ment in global eq­uity mar­kets turned neg­a­tive, even as SEBI’S ac­tion to halt trad­ing in eq­ui­ties of cer­tain listed com­pa­nies sus­pected of il­le­gal ac­tiv­i­ties took In­dian mar­kets by sur­prise.

The mar­kets have cor­rected nearly 4.75 per cent from the top. The Sen­sex made record highs on Au­gust 2 by touch­ing the level of 32,686 on the day of RBI’S an­nounce­ment on in­ter­est rates, while the cor­rec­tion in stock prices took the bench­mark in­dex to 31128 level. In­dian eq­uity mar­kets seem to be tak­ing sup­port at the cru­cial 31000 level of Sen­sex. It will be in­ter­est­ing to see if the level re­mains in­tact.

The past two weeks saw FIIS sell­ing in the mar­kets even as the DIIS in­creased their eq­uity hold­ings. The FIIS sold to the tune of Rs 6976.63 crore, while the DIIS bought eq­ui­ties worth Rs 10096.16 crore. The bench­marks Sen­sex and Nifty were down by 2.66 per cent and 2.20 per cent, re­spec­tively. Mid-cap in­dex out­per­formed the ma­jor bench­mark in­dices as the in­dex slipped by 1.55 per cent. Small-cap in­dex dropped the most by shed­ding 4.12 per cent in the last cou­ple of weeks. Among the sec­toral in­dices, BSE Me­tal in­dex sur­prised with its out­per­for­mance by gain­ing 4 per cent, even as all the other ma­jor sec­toral in­dices recorded losses. BSE Realty in­dex dropped by 4.23 per cent in past two weeks and was the big­gest sec­toral loser, fol­lowed by the BSE FMCG in­dex which was down by 4 per cent. BSE Auto, BSE Bankex, BSE IT and BSE Power slipped by 3.03 per cent, 2.83 per cent, 1.45 per cent and 1.29 per cent, re­spec­tively.

Asian mar­kets un­der­per­formed dur­ing the last cou­ple of weeks, with Nikkie 225 slip­ping 1 per cent and Shang­hai com­pos­ite down by 0.06 per cent.

The US mar­kets were mixed over the past cou­ple of weeks with Dow Jones in­dex record­ing gains of over 0.77 per cent and S&P 500 in­dex slip­ping by 0.30 per cent and NAS­DAQ clos­ing down by 0.65 per cent. Euro­pean mar­kets closed on a mildly bullish note with FTSE 100, DAX and CAC 40 clos­ing higher by 0.21 per cent, 0.12 per cent and 0.17 per cent, re­spec­tively. The earn­ings sea­son ended this week and the re­sults were mixed this sea­son, with pharma com­pa­nies in gen­eral not post­ing im­pres­sive re­sults. The cap­i­tal goods com­pa­nies saw in­crease in rev­enue in gen­eral, but saw some mar­gin pres­sures.

The bank­ing space con­tin­ued to see some de­cline in as­set qual­ity, even as Eicher Mo­tors in the auto space im­pressed with its re­sults.

Mar­kets will take cues from global mar­kets in the com­ing weeks and the de­vel­op­ments on the global geopo­lit­i­cal sit­u­a­tion will de­cide the di­rec­tion the mar­ket takes in the near term.

The mar­kets cheered Cochin Ship­yard IPO as the stock saw an im­pres­sive list­ing on bourses on a very tough mar­ket day. Cochin Ship­yard closed at Rs 522 on the day of list­ing, thus record­ing a 20 per cent gains over the is­sue price of Rs 432. The suc­cess of the Cochin Ship­yard IPO re­flects in­vestors’ ap­petite for the de­fence sec­tor.

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