Indian Markets To Open On Positive Note

The Indian markets have shown a fantastic performance in last few days. Easing of the core inflation has increased the hopes of a 50 bps rate cut which has acted like a catalyst for the markets. Considering last 10 trading sessions, Sensex has added  more than 6% in its value just on the hopes of the rate cut. RBI will be meeting on 3rd may, that’s just 2 trading sessions away, and hence market is likely to show further some positive bias.

Overnight in the US and Euro markets the sentiment was positive over the formation of the government in Italy which has eased the concerns over the political uncertainty in the country. Owing to this, the Italy was also  able to lower the borrowing cost as it auctioned its 10 year and 5 year bonds. All the three leading US indices added more more than 0.7% in their value yesterday. Euro markets too closed on positive note. The concern however remain whether the new Italian government will survive.

Yesterday the price data showed that the inflation remained in USA has remained quiet suggesting that the Fed may not end its accommodative monetary policy any time soon. Earlier the US GDP data came in last Friday indicated that the US economy grew by 2.5% in the January to March quarter of this year, slower than expected. This means that Fed will have to continue pumping money in the economy to increase the rate of the economic recovery.

Ahead in the week, both Fed and ECB are expected to meet. Economist expect ECB to cut the lending rates by about 25 bps which will further increase the business confidence there.

The Japanese markets have again found place in the FII. The liquidity is now flowing towards Japan markets. The EPFR data shows that the  global fund managers have withdrawn USD 2 billions from their India focused and BRIC funds and have invested in the Japanese and US markets. The recent Japan data also has suggested that the the economy is doing well.

In the domestic markets, the data suggest that the FII inflows have declined in April to about Rs 4785 crore against average of Rs 16000 crore seen in prior eight months. The global fund managers are not fully convinced about the reforms undertaken by the government. As we move towards the general elections the volatility is expected to rise in the equity markets.

Among the markets, all leading Asian indices at the moment are trading in green. Japan markets have opened in red and have continued to trade with negative bias as its retail sales data disappointed the investors. Hang Seng is up nearly 0.7% at this time. Other markets are also up sending positive signals in the domestic markets. SGX Nifty is trading up  0.4% which means that the Indian markets will most likely open on positive note.