Markets To Remain Volatile

The Indian equity markets finally managed to witness a positive move after witnessing a continuous decline in the five trading session it had witnessed in the preceding week.  As stated in our few of preceding morning market reports we had stated that the market participants are cautious and hence there will be some amount of profit booking taking place. However yesterday good news from the US markets and some amount of weakness in China macroeconomic factors helped the Indian equities gain some strength. Along with that some of the good corporate results also helped the Indices to close on a positive note.

The Sensex closed at 22445 (Up 41 points) and the Nifty Closed at 6699 (Up 5 points). One noticeable factor here was that the markets opened on a positive note then again moved upwards during the mid Sessions and then witnessed marginal profit booking towards the end of the sessions. As regards the sectors that helped the markets close in green were metals and Oil & gas. We feel, this sort of trading pattern would be witnessed till the poll results are announced. No one on the street would be taking the positions home and hence most of the traders would close the position on the day itself. This would make the markets more volatile though out the trading session.

Investors would be confused then how to trade at current levels. We feel it would be better to trade in small lots rather than taking heavy exposure. This is a market which is very useful for the traders as they can use the volatility to make profits. However those who usually invest for short term should make a cautious move.

If investors think that only Indian equities are quite volatile, then they are wrong. Even the US markets remained volatile. Yesterday the US markets opened under pressure as geo political factors from Russia - Ukraine played on the investors mind. However, it was the better than estimated macro data and few good corporate earnings helped the US equity indices move northwards. While the Dow closed at 16531 (Up 18 points) the S&P 500 closed 1885 (Up 3 Points). While the US markets closed with some gains, even the European markets closed in green except Dax as the macro economic data disappointed there.

As for the Asian markets, we had yesterday mentioned about the China manufacturing gauge arriving at 48.1 against the preceding 48. This was still indicating towards contraction. So there is hardly any data which is indicating towards positivity for the Asian indices. Nikkei is closed today on account of holiday; other indices are trading in a range. Straits Times is up with miniscule gains and Shanghai Composite is in red with marginal losses.

As for the Indian markets, the SGX Nifty is showing gains of 25 points and is trading at 6745. This would help the Indian equities open in green. However the overall scenario is cautious ahead of the elections. Most on the street who were quite confident about the BJP Government are now discussing about the number of seats. And as the markets have already run up in the past few months on the back of BJP forming the government, any lower mandate to the BJP Government would spook the markets. Hence there is a cautious scenario which is likely to prevail till poll results are announced. We expect the markets to remain volatile on intra-day basis till then.