Markets Lower On S&P's Downgrade Warning

The Indian markets opened negative today, and have been dragged lower by ratings agency Standard & Poor's statement that there is a significant chance of India seeing a credit rating cut in the future. This warning has come in right after a growth forecast cut for the country for 2012 by the International Monetary Fund, which cut it from 6.1% to 4.9%. These developments have dragged the Sensex lower by 106.45 points or 0.48% to 18702.9 and the Nifty lower by 38.6 points or 0.53% to 5674.15.

S&P included in its report that the "Eurozone instability is still a risk to Asia-pacific sovereign ratings. Only Asia-pacific nations will see negative outlook post Eurozone instability. Political, economy, fiscal or external factors may lead to downgrade". All eyes are now on the upcoming quarterly results that would kick off on Friday with the Q2 results announcement from biggies like HDFC Bank and Infosys.  Friday is significant because of the scheduled announcement of the IIP data (this had dipped for July). These factors are likely to better define the current economic standing of India.

Asian stocks have mostly gone lower because of a slide in Japan, which is currently trading lower by almost 2%. IMF's revised growth forecast figures have hit investor sentiment worldwide. Moreover, the pessimism has been increasing with the quarterly results on the brink of a kick-off. Asia has been witnessing heavy losses in the technology and steel sectors. This cautious trend over the results was seen in the US too, which ended negatively yesterday. The Shanghai Composite, however, recovered from its early losses and is now trading higher by 0.23%. The European indices also opened negative, and the FTSE, DAX and CAC are currently trading lower by 0.3%, 0.2% and 0.3% respectively. The downbeat sentiment is a result of growing concerns over Spain and Greece.

Domestically, the rupee has weakened after the moves by IMF and S&P. After a strong directional move for the currency over the last 2 weeks, it has hit the 53 mark to the dollar. With this overall weakness in both the equity markets and in currency, the sentiment has turned quite dismal for the day. While the broader Sensex is down 0.48%, midcaps and smallcaps are lower by 0.87% and 0.91% respectively. Only 1 of the 13 sectoral indices is trading positive at the moment, i.e. Consumer Durables, which is up by 0.24%. The highest losses are being seen in Realty, Power and Capital Goods, which are trading lower by 3.31%, 1.59% and 1.08% respectively.

We expect the markets to remain subdued over the day because of the overall gloomy mood. There are no signs of positivity or revival, at least for the day.