Indian Markets May Open Sideways Ahead of ECB Meet

The Indian markets may open sideways ahead of the crucial meet of the ECB and Bank of England. The SGX Nifty is currently trading down by 9.5 points at 5,315.

The Asian stocks, after initial gains, have come down in the early trades. The markets are looking forward to the decision of the European Central Bank and the Bank of England which are expected to unveil more easing benefits. Hang Seng and Shanghai are currently trading with 0.23 and 0.71 per cent losses. Nikkei is flat to negative at this hour.

The cues from the European markets are mostly negative. The U.S. markets were positive on Tuesday but were closed on Wednesday for Independence Day holiday. In the U.S. weekly jobless claims and non-manufacturing data will come out later today while the crucial monthly employment report would be available on Friday, thereby giving cues about the U.S. job market recovery. Yesterday FTSE and DAX closed in the red while the CAC was marginally positive.

In Europe, the ECB is widely expected to lower its lending rate due to slower growth across the region. A Reuters’ poll of economists showed that a wide majority of economists expect 25 – 75 basis points rate cut by the ECB. The markets are currently overhung on the same as there seems a lot of scope for disappointment if it won’t go for the rate cut. Indian investors have witnessed this scenario when last month the RBI did not go for the rate cut despite lower growth in the country.

Oil has further widened its losses with the U.S. crude futures down by 0.9 per cent at USD 86.79 per barrel.

Meanwhile, president of NASSCOM, Som Mittal, has said that if the Bring Jobs Home Act is passed by the U.S., it may not necessarily have a huge adverse impact on the Indian IT sector. Back home the government seems to be in a mood to carry out reforms in the country and it may go ahead with the FDI in retail as per the latest media reports. If this comes true then the markets may take positive cues, thus leading to forward action in the stocks and indices.

Yesterday the government bonds saw a lower response from the foreign investors. Of the total government bonds worth Rs 28,496 crore which were set for auction, bids were received for only Rs 20,469 crore, or 72 per cent of the total offer. The bids for the corporate bonds were also lower at Rs 19,777 crore while Rs 31,387 crore worth of bond permits were on offer.

In conclusion, we expect the markets to open sideways with a negative bias. Some cheer may be seen over the FDI news. Positive news from ECB would show a small rally in the markets.