Slated For A Negative Opening

Indian markets may open in the negative taking cues from global markets. The SGX Nifty is trading 3.5 points down at 5636 this morning.

A day after the RBI left key policy rates unchanged, Governor D Subbarao was reported to be admitting that the request of the government to bring down rates did hold merit but there was also a requirement to expedite projects that will revive the growth. He has also hinted that there is a scope of cutting the rates in the fourth quarter of the current fiscal.

Meanwhile, investment bank Morgan Stanley is of the opinion that the RBI, if at all it does, may cut repo rates only by 50-75 basis points due the persistent inflationary pressures that the economy faces. It also said that the macro stability indicators for the Indian economy remain very challenging and monetary policy easing is a less effective tool to revive growth in the current cycle.

Yesterday, Indian markets managed to close in the green after slight recovery in the afternoon session. The Sensex closed 74 points higher while the Nifty gained 22 points.

The US markets had opened after having seen a gap of two sessions following a closure on account of the perceived threat that hurricane Sandy held. The S&P 500 and the Dow Jones Industrial Average closed on a flat note, while the Nasdaq closed down 0.36%. On Thursday a host of economic indicators ranging from consumer confidence to construction spending are expected to be released in the US. Friday will see the release of employment data ahead of the presidential election due on 6^th November. We expect volatility to remain in the US markets over the remaining part of this week due to this array of economic data that will be published.

European stocks on Wednesday closed in the negative over mixed corporate earnings. The high uncertainty over the bailout for Greece and Spain has kept the markets unpredictable over the last couple of months.

Euro zone finance ministers held a teleconference yesterday that failed to make any decision on the bailout for Greece. Meanwhile, Greece is reported to be saying that it will overshoot its deficit and debt targets again next year because of a deeper-than-forecast recession. The markets reacted to this by declining; the FTSE was down by over 1% while the CAC was closed with a 0.8% loss. The DAX was down 0.33%.

Trading in the Asian markets remains mixed at the moment. In the early trades, markets were gained on fresh hopes of growth in China. The country’s official PMI was the key data point today. Its reading came in at 50.2, lower than 50.3 forecast from a Dow Jones poll. Any reading above 50 indicates an expansion in the economy. The markets turned volatile even though this reading is bit lower than expected. The Hang Seng and the Nikkei are trading flat while the Shanghai Composite is up 0.67%.

All in all, expect a good dose of volatility in the Indian markets today.