Mixed Global And Domestic Cues May Lead To A Flat Opening

The Indian markets yesterday saw a heavy downfall of more than 1 per cent. The markets started off on a dull note due to increasing concerns over China and profit booking. This was pushed down further once the European markets opened in the red due to a worsening Eurozone situation. With a weak global economic situation playing in the background, the Sensex closed lower by 229.48 points at 18,708.98, down by 1.21 per cent and the Nifty closed lower by 70.95 points at 5676, down by 1.23 per cent.

While the Eurozone issues continue, China took some measures today to ease its monetary policy. However, the IMF cut the global growth forecast for 2012 to 3.3 per cent from 3.5 per cent and its 2013 forecast to 3.6 per cent from 3.9 per cent. On the domestic front, P Chidambaram’s move to shift to single goods and services tax and the announcement of the coming of a credible and feasible fiscal consolidation policy are likely to support the markets. The Indian markets may therefore probably see a flat opening today.

The People’s Bank of China today announced measures for easing a tight monetary situation and provide stimulus to growth after the recent growth forecast cut by the World Bank, predicting the slowest rate of growth for the region since 2011. The growth estimate for 2012 was cut from 8.2 per cent to 7.7 per cent yesterday, thus sending the stocks plunging worldwide. The People’s Bank of China today said that they would offer 265 billion yuan in reverse repurchase agreements in an open-market operation. This move is likely to ease the currently tight liquidity conditions and thereby boost growth. With this in play, the Shanghai Composite and Hang Seng are currently trading higher by 0.75 per cent and 0.94 per cent respectively. The Japanese stocks though are trading lower due to a narrowing in Japan’s current account surplus from 625.4 billion yen in July to 454.7 billion yen in August.

In the U.S., investors have been cautious over quarterly earnings with the street expecting the worst earnings’ season since 2009. Some companies have already warned investors of their financials being lower than analyst estimates, sending the stocks to a lower level. Pressure was also added by the European crisis, thus sending American stocks lower in the range of 0.19 per cent and 0.77 per cent. Meanwhile, investors are increasingly keeping an eye on the probability of Spain asking for financial aid. There has also been a long wait for a report by Greece’s creditors on how the country’s economy is doing. Concerns have been going higher with Spain denying the need for aid, which is contrary to the opinion at large.

On the domestic front, there was strength seen in the rupee and this was followed by a cut in petrol prices by IOC (Indian Oil Corporation). It remains to be seen whether a similar move will be followed by HPCL and BPCL in the near term. While the international front looks gloomy on the U.S. and European shores, it took a positive turn for China with the stimulus announcement. At the same time, on the domestic front, the strengthening rupee and flagging off of various measures by Chidambaram, from the divestment in RINL to the promising of a new fiscal plan has lent some positivity to investor sentiment. Yesterday, as part of the surveillance mechanism and to protect the interest of investors, BSE and NSE suggested extra due diligence in trading of illiquid stocks and the BSE listed out 2135 such stocks where addition due diligence is required. The cues overall are mixed and the markets are likely to open flat today.