Nifty may see 100-point gap down amid global meltdown

KS Badri Narayanan Chennai | Updated on October 05, 2021

Nikkei slumps about 1,000 points, as inflation worries keep market under pressure

It appears that the strong recovery witnessed on Monday may not sustain as global markets signal bearish mood. Equities across the Asia Pacific markets slumped at least one per cent in early deal on Tuesday. Led by tech companies, the US stocks too tumbled overnight due to Internet outage. Ten-year US Treasury yields held a climb toward 1.5 per cent and the dollar remained lower.

SGX Nifty at 17,600 indicates a 100-point gap down opening for Nifty futures, which on Monday closed at 17,706. Led by Japan’s Nikkei, which slumped almost 1,000 points in early deal, equities in Taiwan and Australia dipped sharply. Korea’s Kospi slumped over 2 per cent.

The growing power outage across-the-globe may impact the economy, say analysts. A global selloff in stocks continued on fears that surging raw material prices will stoke inflation and sap economic momentum.

“Global markets remained on back foot, weighed by ongoing concerns over the health of property giant China Evergrande Group and ahead of an OPEC meeting,” said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.. However, investors started the fourth quarter of 2021 on a cautiously optimistic note, thus capping the downside. Dollar stayed close to one-year highs on concerns that higher inflation, supply shortages would put global economic recovery at risk, he added.

Analysts at rating agency ICRA have revised the country’s energy demand growth outlook for the ongoing fiscal upward to 8.5 per cent on a year-on-year (y-o-y) basis, from 6 per cent estimated earlier.

“The expectation of higher power demand growth is based on electricity requirement rising 12.7 per cent y-o-y in the first six months of the fiscal. Power demand in April-September 2021 was 2.9 per cent higher than the corresponding period in FY20, when there was no impact of Covid-19.”

According to market experts, though the market may see a gap-down opening, downside is limited. All eyes on TCS that will set the tone of Q2 performance of Indian IT companies and the outcome of RBI monetary policy meet on October 8 .

On Monday, volumes on the NSE were higher than normal with realty, power, metals, capital goods and healthcare indices gaining the most. S&P BSE MidCap rose 1.5 per cent and S&P BSE SmallCap gained over 1.7 per cent, signalling broad-based recovery, said analysts.

“In our view, festive demand, recovery in rural demand, Covid-19 positivity rates, vaccination ramp-up, September quarter earnings and RBI policy meeting outcome will be in focus in the near term. Further higher government’s capex and revival in industrials’ capex should continue to aid economic recovery in the medium to long term,” said Binod Modi of Reliance Securities.

Published on October 05, 2021

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