Markets May Remain Volatile

The Indian markets may open slightly on the higher side in the positive territory, taking cues from the global markets. The SGX Nifty is trading up by 7.50 points at 5,279.5, indicating a neutral to positive start-up for the markets today.

According to Business Line, India’s manufacturing sector witnessed the weakest growth rate in nine months in August because of shrinking export orders and disruptions caused by power failures, an HSBC survey said. The HSBC India Manufacturing Purchasing Managers’ Index (PMI), which is a measure of factory production, eased to 52.8 in August from 52.9 in July 2012. Further, yesterday Morgan Stanley cut India’s growth forecast to 5.1 per cent from 5.8 per cent, citing high fiscal deficit, weak external demand and declining private investment. Both the above issues may create some sort of pressure in today’s market trade.

Overnight, Europe closed comfortably higher in the positive territory. Some of the major European indices also moved higher with FTSE, CAC and DAX closing higher in the range of 0.6 to 1.2 per cent. This was due to a report by the Moody’s Investors Service that warned of a possible cut to the European Union’s ‘Aaa’ debt rating, changing its outlook to negative in line with concerns about the core members of the bloc. Moody’s said that the negative outlook was due to similar action against the four largest contributors to the EU’s budget viz. Germany, France, the U.K. and the Netherlands.

Meanwhile, markets participants speculated that the European Central Bank (ECB) meet on Thursday might consider a further rate cut and there might be some hint by the leaders on the subject of long-term refinancing option (LTRO). According to Economic Times, one should today watch out for a consolidated financial statement of the entire ecosystem by the ECB which will impact the trading partners, especially the emerging markets. One should note that the U.S. markets yesterday were closed on account of a public holiday. However, the market participants will watch out for the U.S. employment data expected to be released on Friday. This may indicate whether the Federal Reserve will unleash a fresh round of asset purchases.

Ignoring cues from the developed markets, the Asian indices have opened on a mixed note and are trading in a very narrow range with Hang Seng and Nikkei trading lower by 0.15 and 0.20 per cent respectively. The Chinese index, Shanghai, is trading marginally higher by 0.08 per cent in the green zone. Accordingly, Australia’s seasonally adjusted current account deficit narrowed to 11.8 billion Australian dollars (USD 12.1 billion) in the second quarter of 2012 from 13 billion Australian dollars in the previous period.