ECB Disappoints, Markets May Open Negative

The Indian markets may open negative in line with the global cues. The SGX Nifty is trading lower by 27.50 points at 5,220, indicating a negative opening in today’s trade.

There were expectations about the ECB deciding on a rate cut and provide details about the buying of euro bonds but there were no positive steps forward. Media reports suggested that Mario Draghi, president of the ECB, had just talked big but finally did not take any action. Also, there was disappointment about the outcome of the Federal Reserve’s meet too since no concrete steps were announced for improving the global economic situation.

The disappointment from the ECB meet resulted in a bloodbath across most of the European indices. Some of the major indices like DAX and CAC closed the day lower by 2.20 and 2.68 per cent respectively. Further, the Spanish index, IBEX 35, plunged by over 5 per cent. Most of the European bonds moved northwards as did the Spanish and the Italian ones.

The American markets also had a disappointing day, though there was some recovery from the day’s earlier trading sessions. Major indices like Dow, S&P and NASDAQ closed lower in the range of 0.4 to 0.8 per cent. This was in the wake of media reports stating that the U.S. had added new jobs in July but the pace of hiring was far too slow to lower the nation’s high unemployment rate.

Further, the Asian markets are currently trading on a mixed note with Nikkei, Shanghai and Hang Seng in the green zone. The Chinese markets are trading on a higher level because The People’s Bank of China has assured that it would bigger priority to stabilising economic growth. Another positive trigger for the Chinese market is that it has reduced the transaction fees on equity trading by 20 per cent.

Back home, one of the major announcements made yesterday post the market hours was that Prime Minister Manmohan Singh has approved of relaxations in the transfer policy for government-owned land. To speed up the public-private partnership (PPP) projects in the infrastructure sector, the government has decided to do away with the mandatory Union Cabinet clearance for land transfer. This may speed up the project development cycle by around six months. On the back of this news one may see a positive move in some of the stocks related to the infrastructure sector in today’s trade.

For today, watch out for stocks like Abbott India, Jet Air India, Marico, Moser Baer, Sun TV, TV Today, City Union Bank, BGR Energy, SKS Microfinance, United Bank, etc as these companies are going to announce their June quarter numbers.

In conclusion, we expect the markets to remain volatile with a negative bias and investors would do well to tread with caution.