Some of the financial sectors stock made a comeback on Monday, helping the markets to stay largely in the green territory from the very beginning of the trading session. But in the last 45 minutes, the broader market indices witnessed volatile moves once again.
From a high of 11,420, NSE’s Nifty slipped sharply to close at 11,329 which is just a gain of 25 points or 0.22 per cent from Friday close. BSE’s Sensex slipped from a high of 38,515 to close at 38,214, retaining gains of only 0.23 per cent or 87 points. What appeared to be a trending day turned into a volatile one.
The initial upbeat mood of the market was due to the good news on US-China trade talks which seems to indicate achievement of a temporary truce. But during the last part of the trading day reports from China suggested that it might want to have some more rounds of talks with the US before signing on the dotted line, even if it is for the first phase of the agreement. When this report trickled in, some of the European market which had opened for the day, slipped southward. Same was the case with the Indian markets, as they lost weight very quickly.
One set of stocks, though, gained after reports on China came -- top among them being Tata motors, which gained 5.32 per cent to close at rupees 127. The company draws almost 20 per cent its Jaguar Land Rover Automotive sales from china. The sales numbers which had earlier been dwindling showed recovery for the second month in a row in September.
Dalal Street interpretation of the Chinese authorities taking a tough stand on talks was that the growth slowdown in China may have bottomed out. As a result, some of the Indian companies, whose bottom line is dependent on what is happening in the Chinese economy, might start to look better. For that reason, some of the metal stocks also witnessed an upward movement on Monday.
The festive season sales growth too dominated the mood on the Street. While these numbers might look bad on a year-on-year basis, they seem be have been better than what the Street observers were projecting for one month.
If the festive season is able to take care of the inventory that had been stuck in system, production levels in future would start getting back to normal. When those production numbers start looking better over the next quarter, some of the macro numbers which had been troubling the Bulls on the Street would also start looking up. Because sentiment on the Street tends to bottom out before economic numbers do, there is a chance that volatility might increase sharply before broader market indices start upward on a sustained trending move.
(Shilpa Nagpal is an analyst at Market Wizards Securities Pvt Ltd)