Markets May Consolidate Near Current Levels

Indian indices extending their record-breaking bull run, with the Nifty closing for the first time above the 8,400 level due to the narrower trade deficit in October as compared to the previous month and an increased hope of a rate cut by the Reserve Bank of India.

The Sensex touched a new intra-day peak of 28,205.71 before registering its record closing high of 28,177.88, up 131.22 points i.e. 0.47% with robust gains logged by SBI and Tata Motors. The rally was mainly led by auto, power, refinery and public sector banking shares. Trade deficit in October fell to USD 13.35 billion compared to USD 14.2 billion in September. Trade deficit during the seven month period of 2014-15 stands at USD 83.75 billion as against USD 87.31 billion in the same period last fiscal.

While attributing a dip in exports to subdued demand from European and the US markets, FIEO President Rafeeq Ahmed said, “Markets are not getting better. EU is going bad. The numbers are disappointing. The government is also not announcing any measures to help us.” Top exporting sectors that registered negative growth in October include engineering (-9.18%), pharma (-8.33%), gems and jewellery (-2.25%), cotton yarn/fabrics (-13.84%) and petroleum products (-0.16%).

The Reserve Bank of India (RBI) is in talks with the government to increase curbs on gold imports, Deputy Governor S S Mundra said on Monday, reflecting policymakers concerns that a jump in inbound shipments will worsen the country's trade deficit. Trade data showed India's gold imports in October surged nearly four-fold to USD 4.18 billion from a year ago.

Globally, The U.S. stock market was open with under pressure and ended with mixed, as news that Japan fell into recession, as well softer-than-expected manufacturing data weighed on sentiment. The S&P 500 managing to set another closing high, of 2041.32. That's about one and a half points above its previous high set in the previous session. The Dow Jones industrial average ended up 0.1%, a scant five points below its record closing high of 17,652.79 set last week. The Nasdaq composite lost.0.4%.

European stocks swung higher Monday, with the prospect of further monetary stimulus for the eurozone. The European Central Bank is willing to take additional easing steps including purchases of government bonds if needed to keep inflation from staying too low for too long, ECB President Mario Draghi said Monday. Therefore, Stoxx Europe 600 index up by 0.48% closed at 337.25, led by telecom, tech, resources and financial issues. Mr Draghi's remarks to the European Parliament also helped Germany's DAX close 0.6% higher, while France's CAC 40 made similar gains to end at 4,226.

Japan's benchmark Nikkei average rose 2.03% to 17,317.60 in today morning, while the broader Topix gained 1.87% to 1,391.67as investors await a decision by Japanese Prime Minister Shinzo Abe to put off a unpopular sales-tax increase, add stimulus and call an election two years before, after data yesterday showed the economy entered recession. However, The Shanghai Composite and Hang Seng Index open in red and fell by 0.3% due to falling home prices added to concerns that an economic slowdown will deepen. The SGX Nifty is trading with marginal fall of 0.02%. Today we expect Indian equities open on a flat note and markets may consolidate near current levels.