Markets May Open Positive, Despite IMF Revising Growth Downward

The Indian markets may open positive in line with the global cues. The SGX Nifty is trading up by 35 points at 5,237, indicating a gap up opening to the markets today.

The Indian markets yesterday ended their trading session in the negative territory with the broader indices closing down by almost 0.7 per cent. This was after traders and investors on D- Street looked at the WPI data and speculated that there may be no rate cut in the RBI meet which is scheduled for July 31. The WPI for the month of June 2012 stood at 7.25 per cent, while for the month of April it was revised upwards by 27 basis points to 7.5 per cent.

Overnight, the International Monetary fund (IMF) came out with global growth projections which were revised downwards, signalling a serious slowdown going ahead. For 2013 the global economic growth was revised downwards to 3.9 per cent against the earlier projection of 4.1 per cent. For India the projections were revised heavily downwards and from the earlier estimate of 6.9 per cent the growth is predicted at 6.1 per cent for FY13.

Further, the U.S. markets yesterday closed their trading session in the red zone with major indices like Dow Jones, S&P 500 and Nasdaq closing lower in the range of 0.2 to 0.4 per cent. This was after IMF reports reflected a gloomy picture about global growth. Further, there are media reports stating that there might be quantitative easing or other stimulus measures in the offing which would be adopted by the Federal Reserve to boost growth. The European markets closed in a mixed form with FTSE and CAC closing lower in the red while DAX closed marginally higher in the green zone.

However,  ignoring the U.S. and the European markets’ closing, the Asian markets have opened in the positive territory with Hang Seng and Nikkei trading higher while Shanghai is trading with minimal losses. This is after media reports stated that investors are looking towards an upcoming testimony from the Federal Reserve chief. With this our own Indian markets would also open positive, taking cues from the other Asian markets.

The depreciating rupee continues to be a major headwind above our economy. The rupee is currently trading at 54.918 against a dollar. Brent crude has again surged and crossed the three digit mark. From the lows of USD 89 per barrel it has again started moving northwards to USD 103.57 per barrel, which is again not a good sign for the economy.

With the IMF revising the growth downward, coupled with global apex banks like European Central Bank, Bank of England, People’s Bank of China, etc taking a dovish stance and creating some kind of stimulus measures to boost their economy, the RBI may be forced to take similar steps in its meet to revive India’s growth curve. However, looking at inflation which still remains sticky above the comfort zone, we at Dalal Street Investment Journal believe that the RBI should once again maintain a status quo in its monetary meet.

Investors should watch out for stocks like Axis Bank, Bajaj Finserv, Jindal Hotels, Automotive Stamp, GIC Housing, etc which are going to announce their June 2012 quarter numbers. One may see some volatility in the prices of these shares in today’s trade. In conclusion, we expect the markets to remain volatile as investors are jittery in this uncertain environment. We would advise investors to play with caution.