Markets Likely To Open Lower On Negative Global Sentiment

The Indian markets may see a soft negative opening today on account of no improvement in global cues post elections after which the market direction is likely to be defined by corporate earnings. Post election outcome, investors turned their eyes towards worries over the fiscal cliff. Barack Obama’s re-election and the divide between the Congress with the fiscal cliff scheduled for January 2013 unless lawmakers reach a long-term deficit reduction agreement caused a massive slide of more than 2 per cent on Wednesday and more than 1 per cent on Thursday in the U.S. markets.

To add to the negative global sentiment were reports saying that the European Union ministers would delay a Greek aid call for weeks. Bloomberg cited a European Union official, speaking on condition of anonymity, as saying that EU finance heads would not move to unleash another round of funds for Greece when they meet on Monday. This report came in right after Greek Prime Minister Antonis Samaras managed gaining parliamentary support for taking on austerity moves to obtain rescue funds.

Moreover, the European Central Bank (ECB) held interest rates steady on a worsened economic outlook and maintained that the central bank was ready to continue with the bond buying program if the respective governments met with conditions.

The above factors resulted in a negative sentiment across the globe. The U.S. markets traded significantly lower with the Dow, S&P and Nasdaq ending the day lower by 0.94 per cent, 1.19 per cent and 1.41 per cent respectively. The European markets took a hit as well with the FTSE, DAX and CAC down by 0.27 per cent, 0.38 per cent and 0.05 per cent respectively.

With these global factors in play, it is highly unlikely of the Indian markets seeing a positive opening today. Downward pressure is expected to be added to the markets, pushing them lower significantly. However, there is a tinge of positivity spread about in China on account of data release. China’s consumer price index (CPI) and wholesale price index (WPI) came in better than expected. Although the CPI for October rose 1.7 per cent YoY, it was lower than the expected 1.9 per cent increase. It, however, eased from a reading of 1.9 per cent in September, providing some relief to markets. At the same time, WPI dropped 2.8 per cent YoY in October. This slowing down was lower than September’s 3.6 per cent tumble. However, easing on both fronts leaves the central bank with more space for easing to boost the economy. However, pressured by global factors the Asian stocks are lower in the range of 0.02 per cent and 1.17 per cent.

Along with a drop in equities came a fall in the rupee, which had gained consecutively for two days, getting off the two-month low. The sentiment on the rupee turned bearish once again after some signs of optimism in the last two months, as per a Reuters’ poll of currency strategists. Gold however saw strong demand as a result of the festive season and due to a robust and steady trend globally. The wedding season and Diwali have pushed the prices upwards.

At the same time, there have been no major market-moving domestic cues. Corporate results and global sentiment have been part of direction-deciding all week and this trend is expected to continue today as well. Among the major companies to announce their Q2FY13 results today are Apollo Hospital, Aurobindo Pharma, BPCL , Coal India, Eicher Motors, Fortis Healthcare, HDIL, HPCL, Indian Oil Corporation, Jindal Steel, Lanco Infra, OMDC, Pantaloon Retail, Power Finance Corporation, SBI, Sun TV Network, Suzlon Energy, Tata Steel and United Spirits. These too are likely to add to the directional trend of the markets depending on what results they post.