FOMC, China PMI, RBI: How Will The Markets Open?

DSIJ Intelligence / 02 May 2013

Markets globally have been riding to the outcome of the FOMC (Federal Open Market Committee) and to economic data from China. These factors will also affect the way Indian markets open.

Markets globally have been riding to the outcome of the FOMC (Federal Open Market Committee) and to economic data from China. These factors will also affect the way Indian markets open. Moreover, markets will be excessively volatile today and sentiment-driven ahead of the RBI monetary policy review meet which is scheduled to be held on May 3, 2013. Overall, these cues are expected to cause a weak opening on the Indian markets, and a volatile day ahead.


Tuesday turned out to be a good day for the markets although the start was weak. The indices were driven by heavy gains on HUL, after parent Unilever said it would make an offer for an additional 22.52% stake in the company at Rs 600 per share. The offer represented a premium of 20.5% to Monday’s closing price of Rs 497. This had shares of HUL riding upwards and ending the day higher by 17.28%. This also helped the markets take a complete u turn in direction and end the day higher. The Sensex closed up by 0.60%, or 116.68 points at 19504.18 and the Nifty ended the day higher by 26.10 points at 5930.20, up by 0.44%.

In the US, the FOMC said that the US central bank would continue with its USD 85 billion per month bond buying programme, but may raise or cut the programme, subject to market conditions. This led to the Dow, Nasdaq and S&P falling by 0.94%, 0.89% and 0.91% respectively.

Asia has seen a very weak opening as well. Data released by the National Bureau of Statistics indicated that China’s manufacturing activity fell to 50.6 in April 2013. This figure was weaker than expected. A similar trend was seen in HSBC preliminary reading of the April PMI which fell to 50.5 in April 2013 from 51.6 in March 2013.With this, the Shanghai Composite, Hang Seng and Nikkei are trading lower by 0.26%, 0.66% and 0.36% respectively.

These global factors are likely to affect the Indian markets today in a negative way. The markets would anyway be fragile due to the sentiment-driven nature and the usual volatility ahead of RBI’s monetary policy review meet. Due to negative global markets, we think the Indian markets will have a weak opening. However volatility will be seen through the day.