Fed, IMF and OECD To Weigh On The Markets

The mood has been negative on the global markets. Comments and reports from various ends have caused a heavy downfall in sentiment. A sharp fall was seen in global indices after the markets made sense of the perception of global macroeconomic health displayed by the Fed, IMF and OECD.

The Indian markets too saw a volatile session that stayed pressured for most of the day. However the Indian markets pared some of the losses and ended the day lower in the range of 0.07% and 0.11%. With the prevailing sour mood on global indices, will the Indian markets follow suit?

Recent takeaways from the minutes of the Federal Reserve (Fed) meeting and comments by Fed Chief Ben Bernanke have indicated that the bond-buying programme in the US may come to an end soon. This caused a little pause in the gaining spree we had witnessed so far that led to multi-period highs on markets. Yesterday turned into heavy losses as Federal Reserve of Boston President Eric Rosengren reiterated testimony last week by Bernanke, saying ‘significant accommodation remains appropriate at this time.’

At the same time, the International Monetary Fund (IMF) cut its estimate for China’s economic growth in 2013 and 2014, sparking off fresh concerns over the recovery of the world’s second largest economy. With this the IMF cut China’s growth forecast from 8% to 7.75%.

Also, the Organisation for Economic Cooperation and Development (OECD) warned that withdrawals by central banks from monetary easing programmes are likely to cause spikes in bond yields and pose a risk to the outlook of the global economy. It said the global economy is moving forward. However, growth between countries remains divergent and uneven. It also revised downwards, the forecast of global growth and growth in the euro zone.

Together, the three factors mentioned above hit out to bring out the weakness/prospective weakness in the US, Europe and China. The global sentiment was bound to go bad and equity markets bound to be weighed down. The opening on Asia too has been negative and the SGX Nifty was seen trading lower. We expect today to be volatile due to expiry and with a downward trend caused by global sentiment.