US recession fear sinks stock markets while defensives gain

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Pharmaceuticals gain while stock market crashes

By S Jha

New Delhi, September 4: Global equity markets were spoofed by the weak manufacturing data of the US. The manufacturing data came at a five-month low.

The US bourses went into a tailspin with the rise of the recession fear. More macro data from the US economy are expected on Friday.

Sensex took a cut of over 200 points on Wednesday. The 30-share index recovered about 250 points from day’s low.

Nifty went down by 81 points to close at 25198. The 50-share index also recovered by over 90 points from day’s low.

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Bank Nifty also took a cut of about 300 points. The banking index was the biggest loser on the street.

The chartists have begun saying that the indices may go for big cuts in September. The US economy cues may give clues for the direction of the market.

Nifty posted a gain of 1200 points in 14 sessions. This is being counted as an alarm. The steep rise in quick sessions may trigger retracement, claim market participants.

The chartists are arguing that Nifty must hold the level around 25030. If the pivot is lost, then there may be deeper cuts, claim the market participants.

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The recession alarm in the US has arisen within a few weeks’ gap. The timing of the rate cut by the US Federal Reserve may also hold further cues for the equity markets.

Yet, all was not lost on the street. The traders and investors are seen shifting to defensives.

The pharmaceutical sector is buzzing for past few days. It was the top gainer on Wednesday.

Piramal Pharma, Jubilant Ingrevia, and Morepan Labs posted over 10 per cent gains in their share prices. Marksan Pharma and IOL Chemical also posted gains of over six per cent each.

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Conventionally, bearish signs in markets trigger shift investors’ loyalties to defensive bets such as pharmaceuticals. The sectoral rotation is also not ruled out, claimed market participants.

Overnight, crude oil had crashed by over five per cent. This triggered a rush for the paints’ stocks.

Asian paints led the rally with steep gains. Indigo Paints also rose by over six per cent.

Market participants claimed that convention on the street links to crash in crude oil to gains in share prices of paints’ stocks. Market participants also claimed that crude oil is weak on the chart.

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The decisions of the Defence Acquisition Council brought a rally in the defence stocks. Mazagaon Dockyard Shipyard was the top gainer.

BEML, Garden Reach, and others also posted gains on Wednesday. Recently listed IPOs of Ola Electric and Premier Energies saw profit bookings.

Disclaimer: This article makes no recommendation for bur or sell of shares of any company.

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