Indian markets may look to global markets overnight for cues as markets worldwide continue to be roiled by concerns that the credit crisis will impact earnings growth. However, they are likely to remain range-bound over the next couple of weeks, feel market analysts.
On Wednesday, the Bombay Stock Exchange (BSE) benchmark index closed at 9536.33 points, down 3.08 per cent or 303.36 points. While the Indian markets were closed for trading on Thursday, global markets fell sharply. Stocks in Asia fell steeply after Wall Street closed lower, reacting negatively to the US Government’s decision to scrap plans to buy toxic assets, and further evidence that the US economy was deteriorating rapidly. The benchmark American index, Dow Jones Industrial Average fell 4.73 per cent or 411.3 points while the technology-dominated Nasdaq Composite index fell 5.17 per cent or 81.69 points in Wednesday’s trading session.
Japan’s benchmark Nikkei 225 plunged 5.25 per cent or 457 points while Hong Kong’s Hang Seng dived 5.15 per cent or 717.74 points. In Asia, only Shanghai Composite traded in the positive territory, up 3.68 per cent or 68.503 points as the Chinese government’s $586 billion economic stimulus package announced on Sunday continued to underpin sentiment.
Crude oil prices have also shown a sharp decline as crude oil for December delivery dropped as much as $1.13, or 2 percent, to $55.03 a barrel, and traded at $55.71 at 10:13 a.m. Singapore time on the New York Mercantile Exchange today. Prices have tumbled 63 percent since reaching a record $147.27 on July 11.
Markets such as Brazil, Russia and Kuwait are reeling from the effects of a fall in crude oil prices. On Thursday, Russia’s benchmark index, Micex fell as much as 17 percent and had to be suspended for trading for 30 minutes. The Kuwait Stock Exchange halted trading after a court ordered its closure to protect investors from further losses. The bourse’s main index slid 31 percent this year.
In India, the wholesale price index (WPI) data indicated that inflation fell to 8.98 per cent for the week ended November 1 compared to 10.72 per cent a week earlier. However, marketmen feel that a dip in inflation has already been factored by the market and tomorrow’s market movement would depend on how global markets do overnight. Reacting to the global cues, the Nifty futures listed on the Singapore stock exchange (SGX) today closed at 2820.5 points, down 33.5 points or 1.17 per cent.
Meanwhile, US stock-index futures fell on Thursday as Wal-Mart Stores Inc., Intel Corp. and National Semiconductor Corp. slashed profit or sales forecasts and the OECD cut its estimate for global growth next year. This points to a weak opening for the US equity markets.
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“The markets are likely to remain in the range of 9000 and 11,500-12,000. We expect consolidation in the markets till February and things could start getting better from then,” said Harindra Kumar of Centrum Stockbroking.
The other factor that is likely to influence the trend in the near-term is hedge fund redemption. November 15 is the cut-off date for reporting of redemption requests to hedge funds for this quarter. Interestingly, foreign institutional investors have bought equities worth Rs 524 crore in the Indian market since the start of November, as per data provided by markets regulator, Sebi.
“Oil prices have gone down. So has inflation. However, hedge fund redemption is a factor that will have to be watched out and will determine how much selling will come in the next couple of days. Overall, we feel that the market should see a decent rally of 15 to 20 per cent over the next couple of months,” said Hemang Jani, senior vice-president-advisory at domestic brokerage Sharekhan.