Indian Markets May Open On Negative Note

The Indian markets may open on a negative note losing yesterday’s gains ahead in line with the global cues. The SGX Nifty is down by 29 points at 5,326, indicating a negative gap down opening to the markets today.

The Indian markets witnessed a strong trading session yesterday in the last few hours and the broader indices closed with significant gains of nearly 1.3 per cent. Nifty closed at the 5,345 level mark while the Sensex closed above the 17,500 mark level. The rally was led after the European leaders announced extension of help for the ailing Spanish banks and also indicated that there will be more such announcements ahead if needed. Although no decision is expected on Tuesday, investors were hopeful of an approval and the Spanish and Italian bond yields dipped.

The Asian markets yesterday closed in the negative territory due to growth concerns across the globe. The weak economic situation in the U.S. is hurting the Asian markets the most which are highly interconnected with the U.S. region for exports. The nervous trades are also owing to the disappointing U.S. corporate earnings’ season.

Overnight, the U.S. stock markets closed sharply in the negative zone for the fourth consecutive day as investors looked worried about the rising uncertainty over Europe. Also, weak corporate earnings added woes to the market and led to a downfall as investors traded cautiously over poor corporate numbers. The European markets, after a choppy performance in the opening session, gained momentum and turned positive because the European leaders are thinking of extending support for the ailing Spanish banks. It was also perceived by the investors that the euro zone is moving closer to putting its rescue fund into action for other nations such as Italy. However, keeping a lid on investor optimism was the uncertainty ahead of the second quarter earnings’ season, which is slowly taking off.

On the Indian turf the rupee continues to hover around Rs 56 per USD, which continues to be a big worry since this will increase the import cost of the oil companies. The import cost will rise further as London Brent crude has again moved northwards from the lower level of USD 89 to USD 98.42 per barrel. This is after the global central banks have taken a dovish stance in order to boost their economies. If crude continues its upward trend and again reaches the USD 125 level, then it would again make inflation inch higher and worsen our balance of payments, thereby affecting the economy

This week the earnings’ season will take off and investors will look at the earnings for cues to market direction. We believe that the earnings’ season for June quarter will remain muted on the back of the various negative factors such as a weakening domestic and global economy, depreciated rupee value and higher raw material prices that will continue to dent the performance. However, on the global front we may see an announcement of some stimulus packages which may provide triggers to the markets.

In conclusion, for today we expect the markets to open on a negative note on the back of disappointing cues, especially from the Asian region. The Asian markets have opened today on a negative note on the back of concerns over growth across the globe which is hurting the investors’ sentiments. With more revenue warnings from the U.S. companies, including engine maker Cummins Inc, the scenario has begun to weigh heavy on investors’ sentiments