Expect A Soft Opening For Indian Equities

A few months back no one would have thought of Indian equity markets witnessing such a strong up-move. There were many worrying factors like rising inflation, increasing CAD and the weakening INR against the USD kept the equity market under pressure. The sentiments in the market were quite negative. However the sentiments change very fast and the way Indian equity indices have made an up-move vindicates the same. Flurry of FIs money in to the Indian equity markets took the indices to the new high levels. Yesterday also the strong FII inflow resulted in indices surging to the new high. While the Nifty reached psychological mark of 6800 on intraday basis, even the Sensex is fast approaching the 23000 mark.

If we take a look a look at the movement of Indian indices, there was good amount of consolidation that happened in preceding trading sessions. However there were many factors that suddenly perked up the indices. The first and the foremost factor was the release of FOMC meet which indicated towards the factors that the US Government would not be in a hurry to increase the interest rates. This very factor would now help Indian equities attract more FII inflows.

Another factor was that the IMF increased the GDP growth rate for India in FY15 and FY16. IMF expects the growth to pick up in FY15 to 5.4 % and subsequently to 6.4% in FY16. This provided a positive booster to the markets as now most of the research houses expect the growth to pick up pace.

Another important factor of yesterday rally was the strong up-move of the Banking index. The Banking stocks had underperformed in the last month owing to the factors like rising NPAs. However the road to recovery on the GDP growth front is likely to recede the pressure going ahead.

While this was on the domestic front, yesterday the Global markets also witnessed a good amount of positivity. The European markets surged and so did the US equity indices. While the Dow closed in green with gains of 181 points (1.10%), the S&P closed in green with gains of 20 points (up 1.08%).

The Nikkei has also started on a positive note. With the Japanese Yen weakening against the USD the Nikkei is trading in green with gains of 105 points (up 0.75%). But the certain other indices like Hang Seng, Shanghai and Straits Times are trading in red with significant losses. The Hang Seng is down 0.60% and he Shanghai Composite is also Trading with losses of 0.15%.

The basic reason is disappointing macro data from the Chinese markets. China March Trade surplus stood at UASD 7.7 billion against the expected USD 0.9 billion. Apart from that the March exports down 6.6 % against the expectations of 4%. As a result the markets remained under pressure.

Now coming back to the Indian equities, there are two major factors today. First and the important one is the election at the 91 seats. Everyone on the street would keep a close watch on how the polling process pans out. Further the second factor which is related to the markets is Volatility index. The VIX has actually witnessed an up-move and Stands at 26.91. Though this is much lower than 51 witnessed in 2009, the up-move may make some of the intraday players a bit cautious.

As for the Indian indices, the markets may witness a sport of soft opening. SGX Nifty is trading in red with loss of 22 points. However as he trading session progresses, one can expect some amount of recovery.