Ahead of FOMC Meet Global Equity Indices Remain Range Bound

Tracking weakness among Asian peers the Indian equity markets ended lower, amid a range bound trading session yesterday. While the Asian peers remained volatile, uncertainty of the election outcome despite opinion polls indicating victory for the BJP-led NDA government weighed on market sentiment. While Sensex ended down 56 points at 22,632 and Nifty ended down 22 points at 6,761.While this was the reason for Indian markets to remain under pressure, the global markets remained under pressure on account of re-emergence of Ukraine worries.

However while everyone on the street is worried about Ukraine – Russia worries, Templeton Chairman Mark Mobius stated that “The rewards for Templeton Emerging Markets Group's equity investments in Russia and Ukraine outweigh the risks, despite more Western sanctions coming into force against Russia”. Just to put the things in perspective, recently, the United States froze assets and imposed visa bans on seven powerful Russians close to President Vladimir Putin on Monday and also sanctioned 17 companies in reprisal for Moscow's actions in Ukraine. A U.S. official stated in an announcement that European leaders were also considering more measures to punish Russia. But the companies in which Templeton has invested in Ukraine have largely shrugged off the East-West standoff, Mobius told Reuters in an interview in the Romanian capital Bucharest on Monday. His emerging markets fund holds about USD 200 million in Ukrainian stocks and USD 500 million in Russian equities. He was quoted "Right now our calculation is that reward is better than the risk for both the Russian and Ukraine investments”. So it is quite positive for the markets that one of the leading fund managers is considering the rewards better than off risk.

As for the performance of the global equity indices, Dow closed on a positive note with gains of 0.53% (87 points). U.S. stocks rose, with the Standard & Poor’s 500 erasing an earlier slide, as Internet and smaller companies pulled back from a selloff amid optimism over merger activity.  Apart From that the experts opined that, a busy calendar this week will give investors more clues about the strength of the economy and the pace of the Federal Reserve’s stimulus program. The government’s initial tally of first-quarter gross domestic product on April 30 may show the slowest expansion in a year. Federal Reserve policy makers, who on the same day conclude their third meeting of the year, will probably, reduce the pace of assets purchases designed to stoke the economy.

As for the Asian Indices, the markets are still trading flat. While the Nikkei market is closed, the Hang Seng and Shanghai Composite are trading in green with miniscule gains.

Coming to the Indian markets, there are two factors one needs to look at. First and the foremost is improvement on the macroeconomic front as the Government expects fiscal Deficit at 4.5% as against the earlier budgets 4.6%. This is positive news for Indian markets. Another factor is, while we are only talking about the BJP government coming to power, one needs to think beyond. There are quite a few challenges ahead of new government after the election. First and the foremost would be lower rains and its impact on the inflation. So amid all positivity there are few challenges ahead of the new Government.

As for the opening of Indian markets today, we are expecting another flat or negative opening. SGX Nifty is trading in red with loss of 8 points. Ahead of the FOMC meet most of the global indices are likely to remain range bound.