Market May Open Negative Over QE3 Criticism

Indian markets may open negative in line with the global markets. The SGX Nifty is currently trading 23.50 points down to 5656. Earlier yesterday in a volatile session, Indian markets managed to close with marginal gains.

Meantime the Chief economic advisor Raghuram Rajan yesterday said that the country is nowhere near the 1991 crisis. He has also said that the recent reforms have changed the perception about the country outside. He also said that the recent reforms will help the private companies to increase their growth forecasts. On the inflation he said that the FDI in retail will help to curb the inflation by addressing the logistics related issues.

We however do not expect any impact of his optimism today as markets will try to contain the fresh criticism on the Fed’s monetary policy. One should remember that markets have been growing after the Fed announced the QE3 in this month.

Over night the US markets tanked heavily. The nonvoting Federal Reserve member, Charles Plosser who opposed the QE3 program of Federal Reserve said that the program aimed by the Fed is unlikely to boost the employment levels in US. He also said that the US needs a very strong fiscal policy. On September 13, Fed announced its plan to buy USD 40 billion of mortgage backed securities every month.  Earlier yesterday, the US stocks had shown gains over the news that the consumer confidence has rose to seven month high, but the fresh comments erased the gains and the markets tanked about 1% by closing.

The European indices managed to close in green yesterday as the comments came after the European trading sessions. The Spanish government yesterday said that it will raise pensions in 2013 but will defer the bailout package.

The Asian markets at this moment are trading in negative with Hang Seng and Nikkei showing decline of about 1% each. Markets in Shanghai are also in red with 0.3% losses. Markets in South Korea and Australia too are trading in red. The Asian markets are reacting to the criticism of the US monetary policy.

In conclusion, we expect the market to open negative and show volatility in today’s sessions.