Markets To Open Sideways with Negative Bias

DSIJ Intelligence / 08 Jul 2012

The Indian markets may open sideways in line with global cues

The Indian markets may open sideways in line with global cues. 

Benchmark Indices
IndexClosing% Change
SENSEX 17521 -0.1
NIFTY 5320 -0.19
Dow Jones 12772 -0.97
S&P 500 1354 -0.95
NASDAQ 2937 -0.36
Bovespa 56379.06 0.54
FTSE 5662 -0.53
DAX 6410 -1.96
CAC 3168 -1.91

Last week markets remained quiet uncertain on the back of mixed global news. However it gained strong momentum once when the Foreign Ministry of Mauritius said that India had assured the country that its economic interest would not be harmed sending positive signals for the FII,s. Though this was weighed down dried out on Friday as markets ended lower by 17.55 points and closed at 17,521.12 because of growing worries from the global economies. Weak data from China, and then from US region intensified the worry over the growth of the global major economies.

Meanwhile the US markets closed with strong losses with the Dow industrials and S&P 500 suffering the losses for the week after a report on the U.S. labor market showed muted, and below-forecast growth in payrolls last month.

The European markets also closed with strong losses last Friday as worries are still persisting over euro zone debt crisis and weakening economic growth in the US region. This was further worsen from the increasing payroll losses data in US. Weaker-than-expected U.S. jobs growth in June and a rise in Spanish bond yields back above 7 percent weighed on sentiment. With weakening economic growth investors are therefore expecting global leaders from Europe and Us for the stimulus measures following the recent move by from the Bank of England this week.

The ECB of Friday has reduced its benchmark rate by 25 basis points to a record low of 0.75 per cent and took its deposit rate to zero from its earlier 25 basis points. However, the president remained silent on the Long Term Refinancing Option (LTRO). He further guided that the euro zone growth is a serious question and a rate cut would probably help the countries to see some amount of economic growth. About the economic environment, he said that the European economy is going through tough times and there are concerns which still hover above the economy.

The U.S. employment data showed a marginal improvement however the service industry data showed expansion at a slower pace in the month of June 2012, further highlighting Federal Reserve’s concern that economic growth isn’t strong enough to reduce unemployment. The above news coupled with the ECB  announcement resulted in the U.S. markets to close lower.  Now the all eyes will be set on the earning numbers which is expected to bear the scars of a battered global market.

The rupee has recovered from its all-time low however it is still trading above the comfort zone at Rs 55.41 against the USD.  The RBI is taking certain measures which seem to be not very effective. And we believe it should go for some strong measures and bolder moves otherwise it will continue to impact the corporate profits and making our imports costlier.

Currency Rates
 Rs/$Rs/EuroRs/GBPRs100/JYP
RBI Rate 55.41 68.6 86.04 69.39
Future 55.73 68.92 86.93 69.68

Brent crude has again started moving northwards from the lower level of USD 89 to three digits i.e. USD 98 per barrel. This is after the global central banks have taken a dowish stance in order to boost their economies. If crude continues it upward trend and again reaches the USD 125 levels, then it would again make inflation inch higher and worsen our balance of payments, thereby affecting the economy.

Key Global Indicators
 Gold (Rs/10gm)Crude ($/bbl)
Spot 29668 98.15
% change   2.5
Future 29627 84.12
% change 0.11 -0.34

This week earning season will kick start and investors will look at the earnings for the market direction.  We believe the earning season for June quarter will remain muted on the back of the various s negative factors such as, weakening domestic and global economy, depreciated rupee value and higher raw material prices will continue to dent the performance this June quarter 2012.

In conclusion, for  today we expect the markets to remain volatile as they would react to the world’s central banks’ moves which could further turn the market in either direction. We would advise investors to play with caution. 

BSE Institutional Turnover
  FII   DII  
Trade Date Buy Sales Net Buy Sales Net
6-Jul-12 1915 1344 571 995 1198 203
5-Jul-12 2659.08 2229.86 429.22 995.17 1198.2 -203.03
4-Jul-12 2,135.30 1,896.11 239.19 1185.24 1347.01 -161.77
June , 12 11,047.13 8,626.95 2,420.18 4,674.59 6,233.85 -1,153.26

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