Markets May Open Lower

The Indian markets may open lower in the negative territory, taking cues from the other global markets. The SGX Nifty is trading down by 29 points at 5,272.5, indicating a negative start-up for the markets today.

According to Business Standard, with the revenue loss on diesel sales rising to a record Rs 17 a litre, the central government is likely to soon go for a fuel price rise. The Ministry of Petroleum & Natural Gas has circulated a note, making a case for such an increase. The government-controlled oil marketing companies (OMCs) expect a political go-ahead after the parliament session ends this week.

After the telecom scam, the Central Bureau of Investigation (CBI) has turned the heat on the allocation of coal blocks. It has registered FIRs against 20 accused, including five private companies, their directors and unknown government officials for misrepresentation of facts during the allocation. The agency is likely to register more FIRs. After three months of preliminary inquiry, which started in June, the CBI registered FIRs against AMR Iron & Steel, JLD Yavatmal, Navbharat Power, Vini Iron & Steel and Jas Infrastructure under Section 120 B and 420 of IPC for criminal conspiracy and cheating.

Overnight, the U.S. markets closed on a mixed note as trade resumed after the Labour Day holiday on Monday. With Dow and S&P closing their trades in the red zone, Nasdaq closed its trading higher by 0.26 per cent. This was due to media reports which said that the U.S. manufacturing contracted in August for a third straight month. According to reports, The Institute for Supply Management yesterday said its manufacturing index fell to 49.6 per cent in August from 49.8 per cent in July, a third straight month of declines and the worst reading since June 2009.

Meanwhile, the European markets moved in tandem with the major indices moving southwards. Indices like FTSE, CAC and DAX plunged lower in the range of 1.2 to 1.6 per cent. The European markets closed lower after the disappointing American manufacturing data. Also, market participants in Europe hope that Mario Draghi tomorrow will detail an ECB’s bond-buying plan at a news conference after the central bank’s meeting.

Taking cues from the overnight closing of the global markets, the Asian indices have also opened lower in the red zone. Major Indices like Hang Seng, Nikkei and Shanghai are trading lower in the range of 0.2 to 1.2 per cent. This was in the wake of media reports which said that the Asian shares slid in early trades today with declining commodity prices and fresh signs of weakness in the U.S. economy hitting the stocks. Australia’s economy grew by 0.6 per cent in the second quarter of 2012, which was below the economists’ expectations of 0.8 per cent. The first quarter gross domestic product growth was revised to 1.4 per cent from a previous reading of 1.3 per cent.

Globally the market participants are tracking the European Central Bank (ECB) meeting which is scheduled tomorrow and the monthly U.S. employment data which is expected to be released on Friday. These triggers will drive the markets in either direction. Ignoring the cues from the developed markets, the Asian indices 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. Further, 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    

The depreciating rupee continues to be a major headwind for the Indian economy and is currently trading at 55.536 against a dollar. Further, from the low of USD 89 per barrel, Brent crude has again started moving northwards and is currently trading at USD 114 per barrel which is not a good sign for the economy.

In conclusion, we expect the markets to remain volatile in today’s trade and would advise investors to adopt a ‘wait and watch’ approach.