Expect The Markets To Vacillate

Trading has been rather lacklustre in the last few trading sessions. In the week, we have either seen the markets end on a low note or end with negligible gains. Global macroeconomic conditions have been rather weak, caused by uncertainty over the sustainability of monetary policy or because of data points that have been indicative of weakness. The eyes of global markets have now shifted to some key data points that are to be released later today. These will define how the short-term outlook for global equity markets would be. We thus expect high amounts of volatility in the markets for today.

One of the major drivers of the volatility we have been seeing is the US. Federal Reserve Chairman Ben Bernanke indicated last month that the monetary easing in the US may see some tapering down in the next few months. All eyes are thus on the jobs report scheduled to be released on Friday. This will determine the Federal Reserve’s near-term policy outlook. Till then volatility will continue to rule the markets.

Europe saw a major drop as the Bank of England left its rates unchanged and the ECB cut its forecast for 2013 to a 0.6% decline in GDP. The ECB too left its rates unchanged. At the same time, German manufacturing orders dropped 2.3% in April on a month-on-month basis.

This shows how the mood globally is either subdued or highly uncertain. Anxiety has been persistent and this is expected to cause volatility and uncertainty in the Indian markets too.

Domestically, the rupee continued to remain weak and breached the 57 to the dollar mark yesterday. India, being highly dependent on inflows from FIIs and FDIs, faces tremendous pressure on its currency when the inflow becomes jittery.

Overall, the mood definitely seems weak. This weakness is coupled with copious amounts of volatility in global markets that is very likely to seep in on the domestic bourses as well. Out and out, we expect a weak start for the day and a volatile session ahead.