Markets Likely To Be Flat Till CPI Data Release

The Indian markets opened on a firm positive note on Friday morning and then turned negative on the release of the CAG report over the coal benefits given to top Indian companies. Overall, the markets again gained some momentum and the Sensex and Nifty closed higher by 0.19 per cent and 0.06 per cent respectively. Overall, this positivity was seen on the back of WPI numbers which came in positive for the month of July. The markets’ concentration today will be on the CPI data that would be released later in the day. With the WPI data showing some unexpected easing, today’s market direction would be mainly decided by these numbers.

The Asian markets today opened on a higher note but slowly shifted to the negative. These moves came in after the U.S. stocks ended Monday’s trading session in an extremely flat mode. The U.S. markets have been unmoved because investors have been waiting for minutes from the U.S. Federal Reserve to be out later this week. Dow Jones, S&P 500 and Nasdaq all ended flat by -0.03 per cent, 0 per cent and -0.01 per cent. Announcements on the third round of quantitative easing are due on Wednesday but investors think this may not take place due to improvements seen in the recent data.

In Europe, with the debt crisis still being the centre of attention and the key driver of market direction, the markets closed negative in the range of 0.1 per cent and 0.22 per cent. There has been some positive sentiment over reports that the ECB had been considering a program of aggressive government bond buying at a time when the yields moved above the Bund yields. However, this was seen to erase with the Bundesbank reiterating its opposition to the ECB buying more government debt. With attention returning to Greece, investors are now looking towards a week of meetings revolving around the zone’s debt issues.

The Asian stocks, which opened higher, were weighed down in Japan due to machinery firms going lower because of poor sales from China. Though there has been some support from banks, auto firms and gaming firms, among others, overall the markets are turning lower. The Hang Seng too was weighed down because of its largest constituent, HSBC Holdings Plc, falling by 0.9 per cent, tracking a 1.2 per cent loss for its London shares. The energy firms too were trading lower. Overall, in the Asian markets we are seeing a number of individual stocks and sectors driving the market direction and not the macro economic cues. The Hang Seng, Nikkei and Shanghai Composite are trading lower in the range of 0.12 per cent and 0.57 per cent.

The oil prices have come back into focus after Brent crude hit a three-month high, thereby raising concern about domestic inflation and about the higher possibility of a fuel price hike in India. After inaction on this front on the fortnightly review of fuel prices held on August 16, investors will keep a close eye on the next meeting as the OMCs turn higher on the burden they face from the non-easing dollar against the ever increasing Brent. Brent crude is currently trading at a price of USD 113.87 per barrel. The rupee at the same time is currently at 55.7023 per dollar making the situation a little tight.

The markets today are likely to open flat to positive due to the lack of major global cues that would weigh the market down. Moreover, oil is likely to act on the markets but the real volatility and directional moves will be seen coming in on the release of the CPI data.