Negative data brings fear back on d street

1. Negative Data Brings
Fear Back on D Street
Hopes rest on MAT cheer as Sensex begins
September on a weak footing after frail data from
China and India. Fall in US stocks may impact
sentiment in India today

2. Contd..
The Sensex plunged to a one year low on Tuesday but Finance Minister Arun
Jaitley's late-evening press statement on minimum alternate tax (MAT) is
likely to lift the markets out of the doldrums on Wednesday . He said the
government had accepted a recommendation that MAT shouldn't be levied
on overseas investors prior to April 2015, a widely anticipated move but a
comfort to them nevertheless, experts said.
But that news broke well after the markets had closed. Stocks got a mauling
on weak Chinese data and the prospect of a sharp drop on Wall Street -
markets indeed opened sharply lower in the US -with the Sensex falling to a
one-year low, led by formerly high-flying private banks and commodities
companies.
At the close, the Sensex had given up all the gains it made after the August
24 t made after the August 24 crash, when it fell nearly 6%, the most in more
than six years.

3. Contd..
On Tuesday, it dipped to a level not seen since September 2014 as Chinese
manufacturing contracted and Europe an markets cracked at the opening. But the
decision on MAT will buoy foreign institutional investors (FIIs), market experts said.
“This is a positive move for markets and will definitely revive FII sentiment,“ said
Alex Mathew, head of research at Geojit BNP Paribas. They “have been sellers in
the recent past. I think a lot of ambiguity will be removed regarding FII investment“.
The MAT move will have a beneficial knock-on effect, said G Chokkalingam, founder
& managing director, Equinomics Research & Advisory. “FIIs not only influence the
markets but also the economy,“ he said. “This will definitely send positive signals,
thus improving the investment climate in the country. I expect the news
announcement to have positive impact on both currency and stock markets.“
To be sure, the positive effect may be offset with the Dow down more than 350
points in early trade.

4. BANKS LEAD FALL
On Tuesday , banking shares led the selloff after HDFC Bank's steep base rate cut on
Monday sparked fears that other lenders may be forced to follow, hurting margins.The
Sensex fell 586.65 points, or 2.23%, to end at 25,696 while the Nifty fell 2.33% to end at
7785, below the crucial support level of 7,800. The BSE Midcap and the BSE Smallcap
indexes fell about 2% each.
Industrials, commodities companies and banks such as ACC, And hra Cements and Federal
Bank slumped to 52-week lows while pharmaceutical firms such as Dishman and Torrent
Pharma hit 52-week highs. Steel and metal companies melted with Hindalco falling 5.1%
and Tata Steel 4%. Engineering and manufacturing company Bhel slid 3.8%. Bajaj Auto,
Ambuja Cements and Sun Pharma were among the leading gainers.
Tuesday's drop meant a bad start to September for the Sensex after a disastrous August,
during which it fell 6.5%, its worst monthly performance since 2011 amid global turmoil
following the yuan devaluation. FIIs, the mainstay of the Indian markets for more than two
decades, sold more shares in Au gust than in any other month since the global financial
crisis of 2008.

5. CHINA SLUMP, FED UNCERTAINTY
“Concerns over a China-led slowdown in the global economy and uncertainty
regarding the US Federal Reserve interest rate hike spooked sentiment across Asia,“
said Sanjeev Zarbade, vice-president (private client group research) at Kotak
Securities. “Indian equities were further buffeted by lower-than-expected GDP
numbers and disappointing sales numbers of Maruti and M&M (Mahindra &
Mahindra).“
India's first-quarter GDP rose 7% while core sector growth advanced by a meagre
1.1%. This hurt mar ket sentiment as many fear growth is unlikely to revive this year
to the extent of the 8% estimated by the government amid global economic
uncertainty.
“We expect GDP growth to accelerate gradually and inflation to remain below 5%
over the next two years,“ said Chetan Ahya, co-head of global economics and chief
Asia economist at Morgan Stanley. “We expect GDP growth recovery to be driven
by a pickup in capex, urban consumption and stabilisation of exports.“

6. Contd..
The weakness in local markets was also due to a fresh bout of selling across Asia
and Europe, where equities took a knock on Tuesday.Japan's Nikkei closed nearly
4% lower. European markets traded nearly 2.5% down while Dow futures indicated
a lower opening for the Wall Street, which was subsequently borne out.
The already disappointing growth figures were being queried in some quarters.
“There is some scepticism about these GDP numbers coming out of India,“ said
Sanjeev Sanyal of Deutsche Bank. “It has not entirely been laid to rest. That aside,
you will get numbers which will show that more or less, the growth momentum of
the previous quarters is maintained.“
Brokerage houses such as Macquarie, Barclays, Ambit Capital and Edelweiss have
reduced their Sensex and Nifty targets, and have downgraded their outlook on
markets. There is concern about corporate earnings remaining muted.

7. MORE VOLATILITY AHEAD
“I think there is more volatility ahead for global markets. We have to be
watchful, especially in terms of further currency volatility in the Asian
region, and that may well be something to look out for in the next
month or two before we can say that the volatility has truly subsided,“
said S Naganath, president and chief investment officer, DSP BlackRock
MF. China's giant manufacturing sector in August contracted at the
fastest pace in three years, rattling Asian markets on Tuesday .

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