Dalal street feels tremors

MUMBAI: Morning sunshine was short-lived as Chinese clouds moved over the markets in the afternoon. The sharp fall in the Chinese stock market - with many shares hitting the 10% lower circuit - dampened sentiments on Dalal Street as well.

The Bombay Stock Exchange Sensex ended the day with a 75-point loss. The Street expects a weak market in the coming days, with the March bloodbath still fresh in punters’ memories.

Deepak Jasani, head of research at HDFC Securities, feels that the key difference between now and the crash that happened three months ago is that the correction was expected and largely factored in.

The roll-on effects of the Chinese crash are expected to be limited because Beijing keeps its markets largely isolated from global financial flows. Most Chinese shares are off-limits to foreign investors. The overheating which the government is trying to cool down has mainly happened in ‘A’ list shares, where foreign investors (FIIs) are not allowed to punt.

But one cannot rule out a positive fallout for India. “I think the Chinese correction will definitely have an impact on other emerging markets. Our expectation is that if some unwinding happens in FII holdings in China, the Indian market may see some inflows,” says Ketan Karani, head of research, Kotak Securities.

Drops in Chinese prices last week caused brief declines in Tokyo, Hong Kong and elsewhere. But most other Asian markets shrugged off Monday’s plunge. Five markets - Australia, Indonesia, Singapore, South Korea and the Philippines - rose to record highs. Tokyo’s Nikkei 225 index edged up 0.1%, while Hong Kong’s benchmark index rose 0.6%.

India’s domestic markets seem to be under pressure from their own fears, rather than global pressure. Says Karani of Kotak,” Our markets have also run up considerably in the last two months. Going ahead we may be in for a consolidation phase.”

Jasani of HDFC Securities agrees. He says: “The market will probably continue to show some weakness. There could be some support at 14,300-14,350 levels for the Sensex. If we don’t see support there, then the fall could be a little sharper.”