Global Markets See Hefty Gains. Will India Follow?

The markets yesterday opened with hopes of an uptick because of a global macro environment that was conducive of resulting in gains. Though the day started positive, it gradually dragged the markets lower after the first half of the trading session. The day ended with the Sensex lower by 135.85 points at 18577.70, down by 0.73 per cent and the Nifty lower by 39.25 points at 5,648, down by 0.69 per cent. The markets appear to be in a consolidation phase and there seems to be much activity ahead of the Q2FY13 results. Among the heavyweights, eyes are today on the results’ announcement of HCL Tech.

The global macro cues seem to be in a better position today than yesterday. We have seen gains of around 1 per cent and more in markets worldwide, again forming a perfect backdrop for the Indian markets to be supported at. However, since the fundamentals and corporate results have taken over the sentiment decisiveness, though the markets are expected to open positive, the sustainability of that direction later would be questionable.

The American indices have seen a profound upward movement with the Dow, S&P 500 and Nasdaq ending the day with gains of 0.95 per cent, 1.03 per cent and 1.20 per cent respectively. These gains are a result of robustness seen in the earnings of several companies announcing their quarterly results and due to reports that Spain is mulling over a request for a line of credit from the European Union. This has been the largest one-day gain for the Dow Industrial since the day the Federal Reserve announced QE3.

Optimism over Spain requesting for a bailout increased after the budget spokesman for Merkel’s party said that it ‘would be a possible move’ to go for a precautionary credit line. Moreover, the German investor confidence increased for the second consecutive month, adding further boost to the markets. There was also indication of a reversal in Germany’s resistance to provide for a full bailout for Spain. All these factors together had the FTSE, DAX and CAC rising by 1.13 per cent, 1.58 per cent and 2.36 per cent respectively. These factors also provided for a boost in the global markets, including a strong Asian opening in the range of 0.10 per cent and 1.42 per cent.

Gold has touched its lowest level since two weeks, weighed down by a stable rupee. The demand is now expected to pick up as the country braces up for the festive season. Though there has been a revival in silver prices, gold seems to be determinable based on the trend the currency follows.

The rupee has fallen for two consecutive sessions due to a disturbed outlook on the release of inflation data that marked a 10-month high. The possibility of a hold by the central bank on action with regards to rates has been keeping the markets rather subdued and low. Whether the RBI sees a scope for rate cut will only be seen on October 30, 2012.

The global trends for the day are positive and domestically the markets seem to be in an uptrend. However, being in a consolidation phase may keep the markets from seeing significant gains. We expect the markets to start off on a positive note but the continual of that upward trend would only be firmed up as the day passes. Moreover, HCL Tech’s results are also likely to decide the sentiment for technology stocks and may add to downward pressure on the markets.