Given the spike in oil prices, which touched the highest increase since the 1980s, Monday’s trading session started off on a weak note with both Nifty 50 of the National Stock Exchange and BSE Sensex of Bombay Stock Exchange showing a half a per cent cut.
The drop in Indian market indices was pretty much in line with other Asian markets, except KOSPI, the South Korean index which was able to end Monday’s trade in the green territory.
The red ink all over the indices was largely because of the decline in the stocks of oil marketing companies, which are likely to face pressure on their margins in the short term. Not helping the broader index was the weak opening of European markets, which traded with a drop of the half to one per cent, till the close of Indian markets.
While indices may have ended the day in red with Nifty 50 closing with a cut of 0.65 per cent or 72.40 points at 11,003.50 and Sensex shedding 261.68 points or 0.70 per cent at 37,123.21, the market breadth, or a total number of shares in the red or green was positive during a large part of the day.
This would have been heartening for a large number of traders and investors.
The mid-cap segment, which was making a come-back attempt for the last few sessions, continued to show strength as declines were much less severe. This indicates that once the over-all global sentiment improves, mid-cap stocks are likely to gain more weight in the near term.
Among the factors which probably helped the markets on Monday was the marginal rise in the wholesale price index or WPI inflation number for August. At 1.08 per cent, it was a bit higher than the estimated 1.04 per cent, but the increase was not seen as negative, keeping in view the sharp slowdown indicated by other macro numbers. This is taken by the market as an indication that some part of the economy might be witnessing an improvement, which would get reflected in other numbers in the coming months.
If, over the course of the week, there is no escalation in the tension between Iran and United States and the US Federal Reserve follows a loose monetary policy, as indicated, the likelihood of equity markets regaining lost ground would be high. The only spoiler could be the GST council meeting. If the council declines to cut the GST rate on any product, some specific stocks might end up shedding weight.