Not A Very Confident Day For The Markets Today

Yesterday the markets opened as were expected and for a better part of the day did trade strongly. However, the post-lunch session was something of a kind that wasn’t really expected. It began slipping and slipped beyond control, eventually ending negative. What was the reason for the markets to react so badly in the last hour of trades? Profit booking! Doesn’t that sound very simple?  Well, there are some red flags that we would rather like to raise. Why didn’t market participants think of profit booking at the beginning of the day? Why did they wait out for the day to draw to an end and then sell if they anyways had to? Were positions built only during the day squared off to book profits? It all looks so senseless at times. But that is how the markets are. You could find them reacting to the smallest of negative factors with a greater force than to the biggest of positive factors at times.

Anyways, reality is, the markets gave away their entire gains and went down further to close the day in the red yesterday. If you closely look at the developments that have followed, there is one that needs particular mention. Ratings major S&P has reiterated a negative outlook on India citing its high fiscal deficit as a factor that is worrisome. Our Finance Minster has fiercely combated this contention and in fact, gone on record to make a case for an upgrade rather than a downgrade. Will the rater take this call seriously and relook at its workings? Well, that could be a point of debate and will be sorted out in the time to come. But the point that we are trying to make here is, the market does not tank for no reason at all. Were there some market participants in the know who could have reacted to the ratings agency’s probable call to downgrade India? Worth analyzing, isn’t it?

Coming back to what will drive the markets today. Here are the global cues. The FTSE 100 closed at its highest level since 2000. Now that summarizes what the European markets have been up to. Markets there were closely following the US and ended higher yesterday too. It has been a completely liquidity driven market with central banker’s monetary easing policy measures injecting a higher level of confidence among market participants. Meanwhile, in the US, stocks returned from their life time highs on comments from monetary policy shapers that an improving US economy still faces headwinds. This hot and cold game of a threat that monetary stimulus provided by the government through its bond buying programme may be over sooner than later could well continue for some time. The point remains that the US markets are in an uptrend and a reversal from these levels will take some time.

Closer to home, Asian markets are not looking good today. it is a rather mixed day out there. Japan is just about scratching the surface to be in the green while Taiwan is the only one which is decisively up. All others are either in the red or hovering very close to the borderline.

Where does the Indian market start its journey today? Well, cues emanating from the Asian markets and the overnight action in the US aren’t suggesting a very comfortable day for the markets today. Moreover the hangover of yesterday’s negative trade will probably remain. Do not expect the markets to be on a joy ride. It could be a rather subdued open with a negative trading bias for today. There are more of roadblocks on the upper side. Better to be cautious on an uncertain day than be overconfident and lose out.  Take a stock specific approach and play the safe bets.