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US Markets ended last week on a weak note after dismal jobs data. Continuous negative news on credit crisis coupled with worst data on the economic front pushed wall street to the lowest level from the last 18 months. Market is currently discounting a 75 basis point rate cut by Fed on March 18. There are no major events for the next 3 days. Credit crisis news flow is likely to take charge of the direction of the wall street.
Japanese Index was currently down by 140 points on weak US cues. The Machine orders data today morning surprised the market analysts growing the fastest in 7 years. Expectations of a rate cut started building up as Yen continued to move up against the US Dollar. IMF expects India and China to lead the world economic growth this year.
Indian Markets continued the slide given the weak global markets and lack of retail participation. Budget is definitely a wasted opportunity and now the ruling party is indicating early elections. Market never likes uncertainty and the above factors are likely to arrest any upsides the market has to offer. Large cap stocks joined the stockfall, which mostly comprised of the mid cap and small cap stocks till date. There are no signs of weakening economy at the domestic front though Crude and Inflation is likely to continue the up move.
Subprime drama was enacted on dalal street courtesy ICICI Bank’s exposure to collateralized debt obligations (CDOs) in the International market. The bank should have proactively announced the same during Q3 numbers.Banking stocks were under severe pressure given the the Rs 60000 crore farm loan waiver announced in the budget. Brokerage stocks were beaten to death due to increase in STT in the budget and lack of volumes on the bourses suggesting tough times ahead for the brokerage firms.
IT Sector and the Pharma Sector comparatively sustained the carnage to certain extent. Market once again proved it is supreme where analysts were expecting a huge fall in the stock prices of these two sectors due to the recession in US. Realty and Infrastructure stocks continued to fall. There were questions about valuations of GVK, GMR Infra and others. The same analysts were betting on very high PE’s during the bull run.
Technically the Sensex bounced back from 15,880 levels. We expect a bounce back today after an initial slide. The selling is way over done but there are very few positive triggers and one being aggressive short covering. The Left parties, the ruling party’s ally and the stock market’s foe started threatening a pull out from the government.
Interest cut by RBI might attract some lost interest back to equities. India story is here to stay but given the global scenario and rise in commodity prices might hinder the growth to certain extent. There are always opportunities for long term investors and it is not advisable to get out of equities at this point of time.
— Review written by Research Team @ www.indiabears.com