Markets To Open Flat With Negative Bias

The Indian markets may open on a flat negative note ahead in line with the global cues. The SGX Nifty is marginally down by 0.2 points at 5,326, indicating a weak flat opening to the markets today. Today investors will watch out for the IIP numbers which will provide some cues on market direction

The Indian markets witnessed a dull trading session yesterday on the back of some profit booking and weak global cues. In the late hour of the session the broader indices closed with significant losses of nearly 0.73 per cent. Nifty closed at the 5,306 level mark while the Sensex closed near to the 17,500 mark level.  There was selling pressure among the broader indices after a single rally witnessed by the market on Tuesday. The absence of positive triggers and weak global markets along with a muted earnings’ season dented the market sentiments.

The Asian markets yesterday closed on a mixed note during the last hour of the trading session. This was due to growth concerns across the globe and a weak economic situation in the U.S. which is hurting the Asian markets the most due to a correlation through exports. Any slowdown in the U.S. impacts sentiments globally. The nervous trades are also due to the disappointing U.S. corporate earnings’ season.

Overnight, the U.S. stock markets continued to trade in red, extending their longest downwards streak since May 18 after the Federal Reserve failed to offer a more decisive signal of further stimulus. However, in the last trading session the markets pared some losses on the hope that the Fed will soon announce another stimulus package to boost the economy. However, the weak corporate earnings prompted a downfall as investors traded cautiously over the poor corporate numbers.

The European markets, after a choppy performance in the opening session, steadied themselves with a weak start to the second quarter reporting season from the automotive and luxury sectors. The technical support levels put a cap on the losses in thin and jittery summer holiday trading. Investors are, meanwhile, keeping a lid on buying at lower levels, waiting for the second quarter Fed open meeting which may have the potential to boost risk appetite if there is a hint of a third round of quantitative easing.

On the Indian turf the rupee continues to hover around Rs 55.36 per USD. It has eased a little but continues to cause concern over the rising fiscal deficit since this will increase the import bill 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 100 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 levels, it would push inflation to a higher level and worsen our balance of payments, thereby affecting the economy.

This week the earnings’ season has kick-started and investors and corporate earnings, as expected, have shown weakness. This will keep the market sentiments negative. We believe that the earnings’ season for the June quarter will remain muted on the back of various negative factors such as the weakening domestic and global economy, depreciated rupee value and higher raw material prices. However, on the global front we may see some stimulus packages which may provide triggers to the markets.

In conclusion, for today we expect the markets to open on a flat note and may turn negative on the back of cues from the global markets, especially the Asian and European regions. Also, the IIP numbers will be announced today and this will provide us with a clue to the health of our industry and economy. On the global front, Japan will announce its policy decision. Economic data is also expected from China and Europe which may signal a deeper slowdown in the global economy.