Markets Likely To Open On A Weak Note

Markets have been following a combination of global and domestic cues to move downwards. The global sentiment has been worrisome; the domestic macroeconomic situation has been subdued due to concerns over the fiscal cliff, negative employment data from the U.S. and Europe falling back into recession. This has been added to by domestic concerns highlighted by weak IIP numbers, high CPI inflation and rising worries over the government not achieving its targeted fiscal deficit reduction. Due to these factors being sticky all week, we expect markets to see a weak opening today as well.

The U.S. saw a further fall as investors moved their eyes towards employment data yesterday. The after-effects of Hurricane Sandy showed up in data as initial jobless claims rose from 361,000 to 439,000. Continuing jobless claims too came in negative at 3,334,000 as compared to the previous 3,163,000. However, manufacturing data was mixed with the NY Empire State Manufacturing Index at -5.2 (previous reading: -6.2) and the Philadelphia Fed Manufacturing Index at -10.7 (previous reading: 5.7). This overall resulted in an increased negative sentiment in the U.S. causing the Dow, S&P and Nasdaq to close lower by 0.23 per cent, 0.18 per cent and 0.34 per cent.

Europe too was low on the back of negative data. Data for the Euro zone indicated that the economy shrank by 0.1 per cent. Being the second consecutive fall, this marks a recession in the region. Spanish and Italian economies shrank as well with their GDPs declining QoQ by 0.3 per cent and 0.2 per cent respectively. At the same time, France and Germany saw a QoQ expansion of 0.2 per cent each. However, due to the region falling into recession, worries increased, leading to European indices ending the day lower in the range of 0.53 per cent and 0.83 per cent.

The above factors are of global concern and have been taking a toll on markets worldwide. Even the Asian opening today was weak on account of this.

Although equity markets have been weak, the rupee saw some recovery as it snapped three consecutive sessions of losses. This mild recovery was a result of a slight upside to the euro, dollar sales by foreign banks and an inflow of approximately USD 100 million from a state-run utility.

Another positive came in on the announcement of a cut in petrol prices effective today. Exclusive of taxes, petrol prices were cut by 95 paise in Delhi making the revised price Rs 67.24.

Equities however are not expected to see any positive movement today. On account of a highly subdued global environment caused due to gloomy U.S. data, worries over the fiscal cliff and a worsening European economy, markets are likely to open on a weak note.