Markets may open with mild pullback rally amid positive Asian cues

The SGX Nifty in early action is indicating a mild pullback on D-Street on Wednesday and helping the cause are positive cues from Asian peers. But we doubt that the markets will be able to sustain the pullback rally. We say so because weighing on sentiments will be consistent selling by the FPI camp. In the month of August, FPIs sold shares worth of Rs 14,828.76 crore. They were net sellers in yesterday’s session too, as they sold shares worth over Rs 2000 crore.

The Asian stock markets are trading in the green on Wednesday shrugging off depressing cues from Wall Street in overnight trading. Sentiments turned bullish as a private survey showed China’s services activity jumped to a three-month high in August. Hong Kong’s Hang Seng has surged 1.4 per cent, while China’s Shanghai Composite and the Japanese stock index Nikkei 225 have added 0.24 per cent and 0.03 per cent, respectively.

Back home, India’s economic growth slowed down for a fifth straight quarter to over six year low of 5 per cent for Q1FY20 and the weak auto sales numbers weighed on traders' sentiments on Tuesday. The key benchmark indices witnessed a bloodbath and ended the day with losses of over 2 per cent each. The Nifty closed below the important psychological mark of 10,800 and BSE Sensex settled at 36,563. The broader market indices Nifty Midcap and Smallcap dropped 1.77 per cent and 1.85 per cent, respectively. All sectoral indices witnessed heavy selling pressure, with Nifty PSU Banks declining the most after the announcement of mergers followed by Nifty Metal and Nifty Media. The volatility index, India VIX, jumped 11.43 per cent to 18.15.

On the Wall Street, traders returned to trading desk after a long weekend on Tuesday. Markets were greeted with a gap-down opening and remained under pressure throughout the day, though some buying interest was seen late in the session at lower levels. At the end of the day, the Dow fell 285 points, the S&P 500 index slipped 20 points and the Nasdaq Composite plunged 89 points. On the economic front, the ISM US manufacturing Purchasing Managers’ Index (PMI) sank to 49.1 per cent in August, which is lowest point in three years. Anything below 50 per cent is labelled a contraction.

The European indices ended lower on Tuesday amid Brexit uncertainty and a lack of clarity with regards to resumption of trade talks between the US and China. The UK’s FTSE 100 shed 0.19 per cent, while Germany’s DAX and France’s CAC 40 lost 0.36 per cent and 0.49 per cent, respectively.