FOMC Minutes Have Set Up a Negative Market Mood

The stage will begin setting for the next big trigger for the markets today. The Parliament convenes for the Budget Session from today. Macro factors will once again acquire precedence over stock specific action from today. Financial prudence or political compulsions, what will the Finance Minister choose? Given his track record, P Chidambaram will in all probability come out with a balanced budget. Neither side can be ignored in the present circumstances.

Government finances have remained a key focus area on the global front over the past couple of years. The way the Euro zone is struggling today, is enough to explain why financial prudence is of utmost importance in the context of the Governments’ Balance Sheet. On the other hand, the Budget is the last of UPAIIs’ opportunity to come closer to the electorate. A series of governance mishaps over the past two years have seen alienation of support for it. Covering lost ground may be too much to ask for, but an attempt will nevertheless have to be made by them.

While the Union Budget keeps us hooked on over the next couple of weeks, Minutes of the Feds’ meeting which were out yesterday spooked US markets. There seem to have emerged varied views on whether to continue with the stimulus program. Many concerns have been raised over the USD 85 billion bond buying program of the government. There have been talks about ending that, in turn keeping markets on the tenterhooks. After all, it was the easy monetary policy of the Fed which has acted as a main catalyst in  markets scaling multi-year highs since the beginning of 2013 until now.

Earlier yesterday, European market too reeled under pressures on two counts. One, data reflecting the consumer confidence in the European region came in lower than expected, and two, of course was the anticipation of what could come out of the Fed minutes.

Surprisingly, the FOMC meet minutes seem to be weighing heavy on the Asian markets this morning. Except for Indonesia, all markets are trading in the red. Japan comes as a major surprise. Despite talks of a huge monetary easing out there, the market is deeply in the red this morning. The Nikkei was trading down by almost a 100 points at the time of writing this piece. The worst seems to be happening in Hong Kong. The Hang Seng is trading down by almost a percent and a half having declined by a whopping 355 points. China isn’t any different, the Shanghai Composite having lost 47 points in early trades.

Now all this sets up the Indian market for a negative open and flat trade through the day. As pointed out earlier, the beginning of the Budget session sets in a new band of expectations. There surely is surely is going to be a whole lot of pandemonium in Parliament House before the Budget gets presented on the 28^th. The markets would be keenly following the developments on various issues to seek future direction. However, for today, markets seem to be set for a hugely volatile trading session taking cues from its international peers.