Given the decline which markets in the United States saw on Wednesday when Dow Jones industrial average (DJIA) fell by 494 points or 1.86 percent, the Indian markets opened on a weak note on Thursday and witnessed a volatile day of trade. The expiry of weekly options contracts too added to declines on Dalal Street.
Financial sector stocks continued to witness selling pressures though the declines were less than what they had seen in Tuesday’s trade. Part of this stability in financial stocks came because of short covering.
The Yes Bank stock topped the list of those which witnessed short covering as it gained 22.19 percent, its highest-ever single day gain to close at 39.10. The rise in the share came on the back of disclosure by the management (after market hours on Tuesday) that an asset management company, which had loaned money to the promoter of the bank and was holding shares as collateral, had sold the bank scrips.
After this clarification and a conference call by the company on Thursday morning, it was clear that the fall in bank’s shares was not because of any operational issue, making Bears run for cover.
Yet, the gains in some of the financial stocks were not enough to make the broader market indices to move into the green territory. The NSE’s Nifty 50 ended the day at 11,313.10 a drop of 46.80 points or 0.41 per cent. The BSE’s Sensex 30 ended the day with a cut of 198.54 points or 0.52 per cent at 38106. HDFCBank helped drag Bank Nifty down which ended the day down 307 points or 1.07 per cent at 28,418 .
Adding to the pressure of downward draught were some metal stocks which witnessed declines on worries that the US manufacturing numbers had come below expectations which essentially means that both demand and prices of metal would remain under pressure.
A marginal hope for Bulls came in the form of Indian monthly auto sales, with many companies announcing their number after market close on Tuesday. While year-on-year basis numbers were lower for all companies, some -- especially in the two-wheeler segment – showed an increase in the month-on-month figures. The growth in August-September ranged between 5 and 12 per cent.
However, the fact that it had come before the festive season may be seen as another positive by the markets. That may indicate that the October auto sales figures are likely to show higher growth. This led to a marginal rise in the Nifty Auto Index which ended the day in green at 7,481, a gain of 17 points. The direction of the index and mood of the market on Friday would be decided by what RBI announces after its policy meeting.
(Nagpal is an analyst at Market Wizards securities private ltd)
