Market May Open Side-Ways

The Indian markets may open sideways in line with the global cues. The SGX Nifty is trading down by a meager 1.5 points at 5,377, indicating a neutral start-up in the markets today.

The Indian market yesterday ended almost at its lowest point, with the broader indices closing lower by almost 0.4 per cent. This was after it seemed that the market was into a consolidation phase and not moving significantly in either direction.

Overnight, according to Economic Times, capital market regulator SEBI has taken the first step to revive the fortunes of mutual fund houses, tweaked rules to step up retail participation in IPOs, and made it easier for companies to raise funds as well as for promoters to dilute stake. An expected 30 basis points of expense ratio would be allowed, which will help fund houses to manage their expenses better. Further, the minimum application for an IPO for a retail individual has been increased from Rs 5,000 to Rs 7,000 and from Rs 10,000 to Rs 15,000. On reducing the promoters’ stake to 75 per cent, the market regulator would allow rights and bonus issues by the company to cut the stake. In our opinion, this move will a positive impact on the markets though the broader issues of inflation, rupee depreciation and widening deficit are major headwinds not allowing the bourses to have a smooth ride.   

Overnight, the U.S. markets closed on a positive note with major indices like Dow Jones, S&P 500 and Nasdaq closing lower in the range of 0.6 to 1.10 per cent. This was after a Bloomberg report said that Cisco Systems Inc.’s sales had topped estimates as also the U.S. building permits had surged and speculation had increased about Spain getting a bailout. Commodities rallied and the euro strengthened.

The Bloomberg report also said that the shares of Facebook Inc. (FB) fell to a record low after freeing up an additional 271.1 million shares, boosting by 60 percent the number available to trade and compounding concerns that have depressed the stock since the initial public offering. Its shares declined by 6.3 percent to USD 19.87 at the close in New York. The shares haven’t closed above the IPO USD 38 price since the first day of trading.

The European markets also closed higher with FTSE, CAC and DAX in the green zone after a Bloomberg report stated that German Chancellor Angela Merkel backed the European Central Bank’s insistence on conditions for helping reduce borrowing costs in indebted countries, saying that Germany is “in line” with the ECB’s approach to defending the euro.

Taking cues from the overnight global markets, the Asian shares have also opened higher with major indices like Hang Seng, Nikkei and Shanghai trading higher in the range of 0.20 to 0.7 per cent. This was in the wake of a Bloomberg report which said that the U.S. housing permits reaching a four-year high had helped temper concerns about the strength of a global recovery.