With US uncertainty over, focus back on local issues

Last Updated: Thu, Nov 08, 2012 03:48 hrs

After two days of lacklustre trading, the market gained some direction on Wednesday after Barack Obama won a second term as President of the United States of America. The outcome came as a relief for both global and Indian markets that were grappling with uncertainty ahead of this event.

The Sensex and Nifty ended the day 0.45 per cent and 0.62 per cent higher, respectively, after rising as much as 0.9 per cent in intra-day deals.

The BSE benchmark Sensex was up 85 points to close on Wednesday at a one-month high of 18,902.41.

The NSE 50-share Nifty also firmed up by 35.70 points to 5,760.10.

Top 5 Sensex gainers
  Nov 7,’12 % Change*
HDFC 797.35 1.92
SBI 2214.35 1.91
BHEL 236.40 1.70
Hindalco 113.70 1.02
ICICI Bank 1092.25 0.96
Top 5 BSE sectoral gainers
Index Nov 7,’12 % Change*
Realty 1,898.71 2.76
Bankex 13,397.49 1.07
IT 5,817.46 0.66
Auto 10,651.63 0.62
Capital Goods 11,122.22 0.51
* Over Previous Close            Compiled by BS Research Bureau

Gains were visible in information technology, whose fortunes depend on key US and European policies. Financial Technologies, MphasiS, Infosys, TCS, Tech Mahindra and Wipro moved up in the range of 0.4-2.8 per cent.

Among the sectoral indices, the BSE Realty index was the top gainer at 2.76 per cent, followed by the bankex and IT index, which rose 1.07 and 0.66 per cent, respectively.

Says Saurabh Mukherjea, head of institutional equities at Ambit Capital, “The benchmark indices have given a muted reaction to this event, which I feel is a sensible thing. With this event out of the way, the element of uncertainty since the past few days relating to the outcome will disappear. Obama is a familiar face for the Indian markets and I feel the markets will be relieved he is back at the helm.”

Most Asian markets also gave a thumbs-up to the development and ended the day in the green after a nervous start, with gains ranging between 0.5 and 0.8 per cent. The reaction from the European markets was, however, guarded ahead of the key vote in Greece for an austerity package, needed to secure a fresh injection of aid and avert bankruptcy. Gains ranged between 0.5-1 per cent after a firm start.

Analysts say the key focus will now shift to how the US tackles spending cuts and tax increases that are set to be automatically triggered at the end of the year, also termed the “fiscal cliff”.

Says Nandkumar Surti, managing director and chief executive officer, J P Morgan Asset Management, “The overall global economic temperament will be boosted by the growth of the US economy, so the developments in the next few months will be important to watch out for. Overall, the stock market has a natural affection towards certainty. The clean re-election clearly puts a big uncertainty behind us, and that in itself is a positive for the global markets.”

On the policy front, Sonal Varma, India economist at Nomura suggests that the outcome will translate into continuity of monetary and fiscal policies. “We expect some moderation in US growth next year. For India, the outcome is broadly status quo as regards the key policies,” she said.

“Our markets will remain driven by global economic issues, liquidity, uncertainty and our own corporate performance,” Saket Misra, MD-strategic equity solutions, RBS Global Banking & Markets, points out.

“For fixed income, an Obama victory is arguably supportive, both in terms of likely mounting concern over the fiscal cliff and relief that the way remains open for additional Fed stimulus (Romney having been critical of QE). For risky assets, such as equities, the implications are somewhat more mixed with the prospect of surging fiscal headwinds clearly negative but with this counterbalanced to some degree by hopes of a monetary offset,” notes a rates strategy report from Rabobank International.

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