Tough times ahead for Indian equities markets

August 7th, 2011 - 4:55 pm ICT by IANS  

Pranab Mukherjee Mumbai, Aug 7 (IANS) Indian equities markets are expected to start the week’s trade with a negative bias Monday as a fallout of the US economy downgrade continues to pull down bourses across the world, say analysts.

“Needless to say, the markets could remain weak in the short term and will move in line with the global markets and fund flows, which could be negative for all emerging markets,” said Dipen Shah, senior vice president, private client group research, Kotak Securities.

“The immediate trigger for the markets could be the US Federal Reserve meeting on Tuesday. It will be watched very carefully to get any message on what does Fed think about further stimulus. Markets are expecting some comments about further stimulus looking at the recent spate of weak economic data from that country,” he added.

Policymakers, however, put up a brave face in the wake of a crisis.

“Our (Indian) growth story is intact and our fundamentals are strong. The markets have shown that they can withstand external pressures,” Finance Minister Pranab Mukherjee said at a lecture on 20 years of reforms in India organised by CII.

Friday saw the 35-scrip benchmark index of the Bombay Stock Exchange market dip 700 points in the intra-day amid mayhem globally, followed by a ratings downgrade of the US economy by Standard and Poor’s (S&P;) for the first time in its history.

The international credit rating agency late Friday night downgraded the top notch AAA credit rating of the US government’s ability to pay back its creditors and investors to AA+.

The US treasury bond has traditionally been considered as one of the safest avenues for investments. World over, governments and central banks have invested heavily in these treasury bonds.

For the week, the Sensex and the benchmark of the National Stock Exchange lost 4.9 percent and 5.19 percent respectively.

Another major stock broking firm, Angel Broking said that both benchmark indices could slip further in the coming week.

“If Friday’s lows are breached after a minor bounce, then strong negative momentum is likely to be witnessed in the coming trading sessions, which can drag indices to lower levels of 16750-16650 (for the Sensex) and 5050- 950 (for the Nifty),” said Angel Broking in its outlook for the coming week.

“In a worse-case scenario, if our markets fail to hold these support levels, then the benchmarks may test 16,000 or 4,800 level. We advise traders to stay light on their positions and trade with proper stop losses,” it added.

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