Analysts feel the recovery seen in the markets does not indicate a change of trend. Globally, the mood remains that of risk-off. The recovery could be owing to the fact that rupee has remained stable and government's attempt to bring down the fiscal deficit could benefit from the strong response to the spectrum auction, said Sonam Udasi, head (research), IDBI Capital. On Monday, the rupee closed at 62.575 against the dollar. On the first day of the auctions on Monday, telecom operators put in bids worth around Rs 40,000 crore, much higher than government's expectations of Rs 11,300 crore.
FIIs have sold $240 million worth of Indian equities since January 30, after US Fed said that it will cut its stimulus package by $10 billion. The first cut for the stimulus package was seen in December, 2013, reducing US Feds monthly bond-buying to $75 billion. On Monday, FIIs sold $118 million worth of equities.
Among sectoral indices, BSE IT (-1.78%), BSE Metal (-0.50%) and BSE Healthcare (0.62%) were the major losers. IT and pharma stocks were under pressure owing to weaker-than-expected US manufacturing data.
US manufacturing in January expanded at its slowest pace in eight months as new order growth slumped the most in 33 years, while spending on construction projects barely rose in December. US is a major market for Indian IT and pharma companies.
Among individual stocks, Mahindra & Mahindra (-3.47%), Dr Reddy's Laboratories (-2.02%), Bhel (-2.45%) and Gail (-3.01%) were the major losers on the Sensex.
Experts feel reduced interest rates would be major trigger for markets, going ahead. So far as the medium-to-long term market outlook is concerned, initiatives to improve domestic growth rate and reduce interest rates will be important triggers. Fiscal initiatives from the government will be important to achieve these objectives and from that perspective, political developments will be closely watched, Kotak Securities said in a research note.
Among Asian indices, Nikkei was down more than 4%, while Kospi was down 1.72%. On Monday, Dow Jones Industrial Average was down 2.08%, while Nasdaq Composite wad down 2.65%.