Will The Markets Be Able To Pull Off A Leap Today?

The Indian markets have seen a downward trend and a negative closing for six straight days now. The last couple of days have been worse due to heavy selling that led to a closing of more than -1%. Global macroeconomic cues and worldwide worries of central bank action formed the perfect backdrop for the Indian markets to not see gains. Moreover, domestic cues led by a weak currency, worries over the current account deficit, higher-than-expected 

Inflation and lower-than-expected industrial production led to consistent losses.Overnight, the US markets have jumped by more than 1%, European markets saw a similar trend and Asia has seen a positive opening. Will India take some cues from global markets and stage a positive day?

Well, what has changed drastically overnight in global markets is sentiment. In the US, the Labor Department said applications for unemployment benefits fell by 12000 to 334000 last week. Also, the Commerce Department said retail sales climbed 0.6% in May 2013, the largest jump in three months and higher than the 0.1% rise we saw in April 2013. So economic data was positive but what also bolstered sentiment was some easing on worries of the Fed tapering its bond-buying programme. We have seen how sensitive the markets have become over comments, views and expressions towards anything surrounding quantitative easing.

In Europe the World Bank cut Europe’s growth forecast to 2.2% in 2013, down from an earlier projection of 2.4%. This led to some downfall in European markets. However, the markets were pulled back up by upbeat economic data from the US.

The Nikkei has recouped some of its losses seen yesterday. The index is trading higher by more than 2% as the minutes of Bank of Japan’s meeting suggested some members of the policy-setting board expressing their view on how the current monetary policy framework doesn’t exclude the possibility of taking further steps thus leaving more room for further action.

Global cues are definitely positive and the rupee saw some stabilisation on Wednesday and gained 0.33% yesterday. It closed the day at 58.1050 to the dollar. Although the mood seems positive, there will be some amount of uncertainty persistent in the markets on account of the proximity of RBI’s monetary policy review that is scheduled to be held on June 17, 2013.

Overall, the start seems positive but volatility will exist.