Flat Trades Expected

Last week the markets saw huge volatility on the back of the negative news flow from the global markets. The Fed acted a key catalyst behind this as its Chairman Ben Bernanke said the Federal Reserve will stop its stimulus program. The manufacturing data from China was also poor as it showed a contraction in the manufacturing activity for the first time in the last seven months. The exports orders declined while labor market conditions also have remained very tight.

Owing to these negatives the Japanse markets tanked more than 7% on Thursday. The overseas funds have poured nearly USD 80 billion in the Japanese equities so far this year taking the Nikkei to multi year high in 2013. The weak macro data however lead to heavy sell off in the Japanese equities. The Japanese markets have not yet recovered as in the morning they have started with a 3% decline. The portfolio managers had hedged their positions against the yen, as Japanese equities were sold heavily, the fund managers are now buying Yen due to which Dollar has depreciated against the Yen which is why the markets there are showing a negativity.

The big news in the domestic markets is the public float of the listed companies. As per the SEBI guidelines, the listed companies are required to increase the public shareholding in the company to minimum 25% for private sector companies. The securities regulator is also expected to take it very seriously for those companies which fail to do so. With the deadline just five weeks away, there is likely that all such companies will now come with one of the prescribed route. The market would see over USD 2 billion worth of the liquidity going in these issues. The market may also get worried due to these liquidity constraints.

Track of the global markets show that the domestic equities are most likely to show a flat to negative start of the day. While Nikkei is down more than 3%, Shanghai and Hang Seng are showing flat trades. Earlier on Friday US as well as European markets closed in flat to negative trades indicating that the market there too are worried on the macro cues.  Owing to these, we expect the market to shown lackluster trades today.