Mixed Global And Domestic Cues May Lead To a Flat Opening

The Indian markets may open on a flat note today. Some major events in the US have led to global equities throwing up an initially positive reaction but then settle on a flat note. The Federal Reserve has outlined a plan wherein long-term Treasury bond buying worth USD 45 billion per month would take place. This is in addition to the Feds existing programme of buying USD 40 billion per month of mortgage-backed securities which it has said will continue as it is.

The street had been expecting this move, but the central bank unexpectedly set targets for unemployment and inflation, giving the market some guidance on when it will raise interest rates. In accordance with this, the Fed will keep rates unchanged and close to zero as long as the unemployment rate is above 6.5% and inflation below 2.5%.

Markets rose as soon as this announcement was made. However, gains were erased when Fed Chairman Ben Bernanke said that the Fed doesn’t have the ability to shield the economy from the fiscal cliff. He said, the impact of the fiscal cliff is too big to be offset by the Fed.

With an open display of inability to help the situation, equities saw a fall and closed the day on a flattish note. The Dow and the S&P ended the day down 0.03% and up 0.01% respectively. The Nasdaq closed lower by 0.27%. European indices saw steady trading ahead of the Fed decision and ended the day up in the range of 0.02% and 0.35%. Asian indices are seeing a mixed opening. The Hang Seng and Shanghai Composite are trading lower by 0.03% and 0.56% respectively while the Nikkei is trading higher by 1.23%.

On the domestic front, IIP numbers were released yesterday. They surprised the markets with the index showing a rise of 8.20% in October. However, the markets’ reaction was not very favourable considering a diminished possibility of a rate cut in the RBIs monetary policy review meet on December 18, 2012.

Oil prices saw a steep rise on the back of Fed’s decision and coupled with the International Energy Agency’s increased forecast for crude demand for the final three months of 2012. It also said, demand is expected to expand by 865000 barrels a day in 2013 to 90.5 million barrels a day. Meanwhile, the OPEC maintained its official quota at 30 million barrels a day, a level it now exceeds by 1 million barrels a day.

The rupee saw some stability as inflows continued to be strong on account of the stake sale of NMDC and the IPO of Bharti Infratel. Moreover, the dollar remained weak as a result of the Fed stimulus.

Overall, equities today are expected to see a flattish opening as a result of mixed global and domestic cues.