Nifty decline will end only if it goes above 7,860
We had mentioned in Monday’s closing report that Nifty, Sensex are headed lower and that Monday could be the start of a several days of decline. The major indices in the Indian stock markets were moving sideways in Tuesday’s trading and closed with losses. The day’s trends of the major indices in the markets are given in the table below:
Negative global cues, coupled with disappointing macro-data, subdued Indian equity markets on Tuesday. This led the Indian equity markets provisionally closing the day's trade in the red a day after it plunged to a new four-month low. Initially, the bellwether indices opened on a firm note in sync with their Asian peers. However, they soon receded on the back of negative international cues from the US, rising geo-political tensions in the Middle East and disappointing macro-data. Besides, investors were seen cautious regarding the upcoming macro-data on industrial output, retail inflation and the third-quarter earnings results which start from January 14. Nevertheless, some value buying and mildly positive Asian markets soothed investors' nerves.
Chinese stocks closed lower on Tuesday, with the benchmark Shanghai Composite Index down 0.26%, at 3,287.71 points. The smaller Shenzhen index lost 1.36% to close at 11,468.06 points, Xinhua reported. The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, dropped 2.99% to close at 2,416.73 points.
Japan stocks closed lower on Tuesday in choppy trade as the indices switched between positive and negative, with a further drop in Chinese shares and concerns about escalating tensions in the Middle East eventually pushing investors into a risk-off mood. The 225-issue Nikkei Stock Average lost 0.42%, from Monday at 18,374.00, Xinhua reported. The broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 0.33%, to close the day at 1,504.71.
Economic activity of the US manufacturing sector in December contracted further, as the impact of a strong dollar continue to play out. The manufacturing index, also known as the purchasing managers index (PMI), fell to 48.2 in December, the lowest since June 2009, after registering 48.9 in November, Xinhua cited the Institute for Supply Management (ISM) as saying on Monday. A reading above 50 indicates the sector is generally expanding, while a reading below that level indicates contraction. Contraction in new orders, employment and raw materials inventories accounted for the overall softness in December, said the ISM. The ISM's new-orders index rose 0.3% from the previous month to 49.8 in December, while the employment index dropped 3.2% to 48.1. The dismal data show that the strong US dollar and a weak global economy continue constraining factory activities. Of the 18 manufacturing industries, only six reported growth which included printing, textile mills, paper products, miscellaneous manufacturing, chemical products, as well as food, beverage and tobacco products.
The central parity rate of the Chinese currency, renminbi (yuan) weakened by 137 basis points to 6.5169 against the US dollar on Tuesday, according to the China Foreign Exchange Trading System. The yuan hit its lowest level in more than four years in both onshore and offshore trade on Monday, as bad news about the country's manufacturing activity unnerved investors, Xinhua reported. The Caixin General China Manufacturing Purchasing Managers' Index (PMI), an indicator of manufacturing activity, edged down to 48.2 in December from November's 48.6%. The reading was the lowest since September. A reading above 50 indicates expansion, while a reading below 50 represents contraction. The yuan has largely been trending down since China's central bank revamped its foreign exchange mechanism last August to make the currency more market-based. The yuan has been losing ground as the Chinese economy hit its slowest pace in a quarter century due to outstanding issues such as housing overhang and excess capacity. Meanwhile, the US raised its interest rates in December and more hikes are expected in 2016. The PBOC said in August that there is no basis for steady depreciation of the yuan.
The US stocks slumped on Monday, the first trading day of 2016, as heavy sell-offs in global markets and geopolitical tensions between Iran and Saudi Arabia rattled nervous investors. The Dow Jones Industrial Average tumbled 276.09 points, or 1.58%, to 17,148.94. The S&P 500 dropped 31.28 points, or 1.53%, to 2,012.66. The Nasdaq Composite Index shed 104.32 points, or 2.08%, to 4,903.09. European equities also suffered big losses following Asian stocks' sharp decline Monday, with Germany's benchmark DAX index at Frankfurt Stock Exchange diving 4.28%. Meanwhile, Saudi Arabia cut off diplomatic ties with Iran over the weekend and asked all Iranian diplomats to leave the country within 48 hours. Analysts said the heightened geopolitical tensions in the Middle East sent traders scurrying from stocks to safe haven assets. On the economic front, the U.S. December ISM Manufacturing Index moved down from November's 48.6 to 48.2, missing market expectations of 49.2, said the Institute Supply Management Monday. The US construction spending data also came out disappointing. The Commerce Department announced on Monday that construction spending during November 2015 was estimated at a seasonally adjusted annual rate of $1,122.5 billion, 0.4% below the revised October estimate.
The top gainers and top losers of the major indices are given in the table below:
The closing values of major Asian indices are given in the table below: