Worries about the slowdown in the US roiled markets across the world
The local market is likely to open on a cautious note as the Asian pack was down in early trade on Wednesday on not-so-good economic news from across the region. The US markets closed lower for yet another day overnight on hawkish comments from Federal Reserve chairman Ben Bernanke about growth in the world’s largest economy. The SGX Nifty was 38.50 points down at 5,524.50 against its previous close of 5,563.
As we have been expecting, the market continued its upward move yesterday on support from select blue-chips like Jaiprakash Associates, Reliance Industries (RIL) and Infosys. The main indices, the Sensex and the Nifty, were up for the second day.
The sell-off in US stocks for the fourth day in a row on Monday and weak opening by Asian markets resulted in the domestic bourses opening lower. The Sensex was down 65 points at 18,355 and the Nifty opened at 5,509, 23 points lower from its previous close. The indices fell to their day's low in initial trade, with the benchmarks at 18,351 and 5,508, respectively.
The market was range-bound, hovering on both sides of the neutral line till noon trade, when buying in select heavyweights pushed the indices into the positive. The gains were also supported by European markets that mostly opened in the green. The Sensex and the Nifty crossed their psychological levels of 18,500 and 5,550. The market hit the high-point of the day in the last hour with the indices at 18,546 and 5,570.
The Sensex finished 76 points up at 18,496, marginally off its psychological level, and the Nifty added 24 points to close at 5,556.
The gains over the last two days have covered up last Friday's losses. After a range-bound performance for most of the day, the Nifty managed to keep itself above the first resistance of 5,550. If the Nifty maintains a higher high and stays above 5,550 it could reach 5,620.
Wall Street closed lower for the fifth straight day following hawkish comments from
Fed chief Be Bernanke about the economy. While he acknowledged a slowdown in the US economy, he did not outline any new plan to spur growth. Recent disappointing data along with fresh comments from Mr Bernanke led to a late sell-off with the markets settling down for the fifth day.
Banks turned lower following Mr Bernanke’s speech with Bank of America and Wells Fargo down almost 2% each. On the gaining side, exploration companies including Halliburton and Baker Hughes advanced after a forecast from Dahlman Rose & Co stating that global spending on oil and gas exploration and production may grow 14% in 2011.
The Dow declined 19.15 points (or 0.16%) to settle at 12,070.81. The S&P 500 fell 1.23 points (0.10%) to 1,284.94 and the Nasdaq lost one point (0.04%) to close at 2,701.56.
Markets in Asia were lower in early trade on Wednesday as comments from Fed chief Mr Bernanke LG Electronics declined 1.5% in Seoul, Nissan Motor Co that gets about 34% of sales from North America, fell 1.5% and Tokyo Electric Power Co plunged 5.1%.
In economic news, South Korea revised its gross domestic product growth for the January-March period to 1.3% from 0.6% in the previous quarter but slightly down from an earlier estimate of a 1.4% gain released in April. Japan’s current account surplus fell 69.5% in April from a year earlier, less than analysts’ forecast for an 84.3% annual decline.
The Shanghai Composite declined 0.81%, the Hang Seng slipped 0.95%, the Jakarta Composite fell 0.26%, the Nikkei 225 was down 0.40%, the Straits Times fell 0.37%, the Seoul Composite tumbled 1.30% and the Taiwan Weighted shed 0.13%. On the other hand, the KLSE Composite gained 0.06%.
Back home, the government yesterday said it will commit more funds to meet the oil subsidy bill.
“If there is any requirement of additional (fuel) subsidy, funds would be committed with least impact on the fiscal deficit,” finance minister Pranab Mukherjee said.
The government has budgeted petroleum subsidy payout of Rs23,640 crore for the current fiscal. It has fixed the fiscal deficit target for 2011-12 at 4.6% of the GDP.
So far this year, Brent oil prices have soared by about 21%, largely as a result of the spreading unrest in the crude-producing Middle East and North Africa region. Global crude oil prices, which had topped $125 a barrel, are currently hovering around $115 a barrel.