The rout in the domestic equity markets caused by a trading shutdown in China has given investors and traders in India the jitters. The benchmark index closed 2.18 per cent down, losing 555 points at 24,851.83. But experts recommend that you keep calm and carry on.
Sahil Kapoor, Chief Economic Strategist, Edelweiss Financial Services :
Domestic markets have fallen sharply led by global cues. Continuous weakness in Chinese markets coupled with deterioration in European and US stocks has dented the sentiment in local shares as well. With two trading halts this week and a currency depreciation of more than 1% in the last 4 sessions Chinese markets remain the leading source of nervousness for global markets. The driver of nervousness seems to be the uncertainty regarding the impact of yuan devaluation on other export-oriented economies. A sustained fall in crude oil is adding to negativity as major oil producing economies face challenges on managing their fiscal situation.
For domestic markets, the primary driver in the long-term would continue to be the underlying macroeconomic factors. Various indicators like rising fuel demand, increasing MHCV and passenger vehicle sales, under control inflation levels are suggesting that Indian economy is witnessing a slow but steady improvement. However in the short-term markets continue to seek direction from global markets. At present the troubles brewing in China seems to be the key driver that is setting the market direction and would continue to do so.
In terms of levels, Nifty Index has an excellent support at 7,500 to 7,550 range which continues to remain the decisive level for short-term traders. In case the markets breach this range, the index may see a steady decline towards 7,450 levels. However, short-term indicators for Nifty Index has turned oversold and this may lead to a bounce back towards the levels of 7,770 to 7,800. At present, the short-term trend continues to remain down and bounce back towards the above mentioned resistance is expected to meet supply.
Paras Bothra, VP Equity Research at Ashika Stock Broking Ltd:
The recent China devaluation of yuan only raises fears for further devaluation in coming months and stroke fears of currency depreciation in other emerging nations to protect competitive edge. With domestic consumption in China not up to the mark, the yuan devaluation will imply dumping of Chinese products in other countries. Although, this will exert further pressure on global commodities, nevertheless this is positive for India considering that it is a net importer, thus improving its balance of payments position and domestic consumption. Besides, with Rajan at the helm of RBI, the rupee has already emerged as one of the safest currencies in the emerging market space. Thus, India is relatively insulated from these negative developments happening in China with right policies like anti-dumping duty to safe guard own industries.