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India down despite Dubai bailout
Mon, 14 Dec Closing

Asian markets, which looked down and out for most part of the day today, suddenly sprang back to life as news that Dubai will eventually be bailed out by Abu Dhabi gained ground. Indian indices however, refused to toe the line and closed marginally in the red today. While BSE Sensex edged lower by around 20 points, NSE Nifty closed lower by around 12 points. BSE Midcap and Small cap indices also lost marginal ground, ending lower by 0.7% and 0.5% each. Amongst index heavyweights, cement and IT counters traded strong today while telecom stocks bore the brunt of profit booking.

As mentioned, while majority of the Asian indices closed strong today, Europe is also witnessing significant buying activity currently. The rupee was trading at Rs 46.7 to the dollar at the time of writing.

It was a day of inverse relationship for the Indian and global stock markets right from the beginning today. In the morning, while Indian indices were trading in the green, presumably on the back of strong industrial growth numbers, its Asian counterparts were reeling under selling pressure. However, the tide turned as the day wore on. With news that Abu Dhabi will finally bail out Dubai flashing across the world, Asian markets sprung back to life with most of them completely reversing the losses and ending the day in the green.

Indian markets on the other hand came under fresh selling pressure during the latter half of the day, which eventually took them in the red. The selling seems to have been triggered by the release of the latest monthly data on inflation by the Indian government. As per the report, inflation more than trebled to 4.8% during November as rising prices of food items like potato, sugar and pinched consumers in a big way. This led the investors to speculate that a rate hike or a liquidity tightening measure could be in the offing, which in turn could also apply brakes to the Indian GDP growth.

IT heavyweights were among the few stocks on the Sensex that managed to hold on to their gains today. Infosys, Wipro and TCS all closed in the positive. The buoyancy in these counters seemed a result of strong economic data coming out from the country these IT majors get their maximum revenues from, the US. As per reports, retail sales came in stronger than expected in the US and consumer sentiment also showed a significant improvement on a month on month basis. It should be noted that consumer spending accounts for nearly 2/3rd of the US GDP and hence, positive reports on this front does raise expectations a great deal of a economic recovery in the US and thus, higher sales for Indian IT companies. Furthermore, a strong US economy also means a stronger dollar, another positive factor for Indian IT companies. Little wonder, sector heavyweights saw strong buying interest today. It remains to be seen though whether the trend will persist or not.

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Feb 21, 2018 03:25 PM