Global growth weakens wary markets

Worries of sluggish growth in the European and Chinese economies played spoil-sport in the Indian markets on a day when technology-giant Infosys posted impressive second quarter numbers.

Even as the index-heavyweight Infosys rose by 7% on Friday, the benchmarks Sensex and Nifty fell by over 1.3% as investors booked profits following negative cues from the global markets.

On Friday, the NSE Nifty closed at 7,859 down 100 points. The BSE Sensex fell by about 340 points posting its third week of losses. It closed at 26,297 down about 2.9% for the last three weeks. During that period foreign portfolio investors have been net-sellers at Rs 2,791 crore.

Participants said that foreign investors having bought heavily in the rally of the past few months are carrying forward lighter positions and booking profits at every rise. On Friday, foreign portfolio investors were net-sellers at Rs 719 crore. Domestic institutions were net-buyers at Rs 558 crore.

Even as the outlook for India remains unchanged, Indian markets have been displaying signs of weakness because of the high valuations in the system, analysts said.

"Market is significantly exuberant in terms of valuations. Results in this and the following quarters will disappoint because of the expectations built into valuations," said Dhananjay Sinha, co-head (institutional research), Emkay Global Financial Services.

Barring the IT and Teck sectors, most sectoral indices on the BSE ended the day in the red. The BSE metal index was down the most at over 4% followed by the BSE auto and FMCG indices which were down over 2.5%.

Dipen Shah, senior vice-president of Kotak Securities believes that the long-term outlook for the country remains positive but events in the global markets would have a higher impact on Indian equities in the short-term.

"General sentiment in the market is negative because of global weakness. The slowdown in the European and China continues to be a worry," said Shah.

On Friday, major Asian indices fell on reports of lower growth in the Europe region and also on cancelation of talks in Hong Kong between the pro-democracy protestors and government. The Hang Seng, Hong Kong's benchmark index, fell by about 7%. Other Korean and Japanese benchmarks were down about 5% each.

European indices witnessed sharper declines of 6-10% after the IMF cuts its growth forecast for the region and differences emerged between the European Central Bank and Germany over the continuation of the stimulus programme for the regions. Further, the German industrial output fell the most since 2009.

Among the Sensex stocks, the BSE Tata Motors declined the most, by 5.3%. Hindalco and Sesa Sterlite were shed about 5% while Tata Steel and Mahindra&Mahindra were down 4 and 3.5% each.