Some Respite In Sight. But Indices To Remain Range Bound.

After witnessing some amount of respite in trading session on Tuesday, the Indian equity markets slipped on Wednesday tracking weak global cues amid uncertainty ahead of election results on May 16. While this was the reason on the domestic front, the Investors worldwide remained wary of US Federal Reserve Chair Janet Yellen's congressional testimony later today. Apart from that Ukraine fears also weighed on the sentiment with Russia rejecting a peace proposal amidst civil war-like situation in the former Soviet Union republic.

It was no wonder that the Sensex slipped 184 points or 0.8% to close at 22,324 levels while Nifty index shed 63 points at 6,663 levels. Strengthening rupee pushed BSE IT index slipped 2.5% to hit multi-month lows. Heavyweight IT stocks such as Infosys and TCS shed 1-3% pulling the benchmark stock indices lower.

While this was the scenario on the equity Front, the rupee was trading at 60.06 versus its previous close of 60. Foreign institutional investors (FIIs) bought shares worth a net Rs 45.93 crore on Tuesday, as per provisional exchange data. While the FIIs are buying one needs to understand the pattern in which they are trading in the options market. Data suggests that the FIIs have been selling a good amount of stock in the options market.

In addition another noticeable factor is the trading volumes in the past few days have declined significantly. This is a clear indication of investors being cautious ahead of the event. Our sources suggested that, all the key institutions and major trading accounts are on a wait and watch mode. And most of the research houses have also recommended trading in smaller quantity. Even trading in options is not been advised as premiums are already touching sky.

Even we are of the opinion that this time the election results would not make an impact the way it made in preceding two times. The markets have been discounting the election reasons and have already moved northwards significantly. Hence rather than taking a bold step ahead, prudent strategy would be to stay on the sidelines with good amount of cash.

While this is a story on Indian markets, the Asian stocks today are trading in green to recover some of yesterday’s largest decline in seven weeks.  This is Mainly backed by the fact that FOMC Chairperson  Janet Yellen said the Federal Reserve will continue to support the U.S. economy. Apart from that the geopolitical risks evaded as Russia stated that it withdrew troops. As a result the US markets closed in green with Dow closing at 16518 (up 0.71%). The Asian Indices are also trading in green With Nikkei is trading up by 0.81%. Even the Hang Seng and Straits Times are also up by 0.31 % and 0.38 % respectively. Shanghai Composite is however witnessing pressure.

It is been reported by Bloomberg that China may report that exports fell 3 percent in April from a year earlier, a third straight month of declines, according to the median of 47 economists’ estimates compiled by Bloomberg. Imports are expected to have dropped 2.1 percent, following an 11.3 percent retreat in March that was the biggest drop since February 2013. A private gauge of Chinese services industries in April fell yesterday, adding to signs that a slowdown in Asia’s largest economy is gathering pace.

As for the Indian equities, the SGX Nifty is indicating towards a possible positive opening for the Indian equities. The SGX Nifty is up by 32 points, trading above the crucial 6700 levels. With positive news flow from the Asian peers and even the US markets, we are expecting the Indian markets remaining in positive zone. However expect a range bound trade throughout the trading session.