Markets To Be Volatile Ahead Of Rates Decision

Volatility has been constant in the markets since the last few trading sessions. From tracing global cues to worrying about the depreciation in rupee, the markets have swung drastically. While global cues still remain important, today is the scheduled policy review meet of the RBI. Till the decision on interest rates is announced, markets will be driven by speculation and uncertainty. It is given that trading will be volatile and direction will beef up only on announcement.

A similar situation, more in gravity, is being played upon in the US wherein equities have been dancing to the tunes of speculation around monetary policy. The FOMC (Federal Open Market Committee) holds a two-day policy gathering this week. The meeting will be followed by a press conference held by Fed Chairman Ben Bernanke. Investors have been eyeing for clues on whether the economy is strong enough to hold a drawback of quantitative easing and whether the tapering down will take place and when. This led to US stocks falling for a third weekly loss in four.

The uncertainty around this has been seeping into European markets as well. And amid anxiety over a reduction in the QE programme, came in employment data in Europe. A report showed that the number of people employed in the euro area dropped 0.5% in the first quarter of 2013, which marks the lowest level in more than seven years.

While the week ended in the red for the US and Europe, it has been a positive start for Asia. The Asia Dow, Nikkei, Hang Seng and Singapore are trading higher by 0.42%, 1.45%, 1% and 0.56% respectively. The SGX Nifty however was trading flat, higher by 2 points at 08:00 AM today.

Global markets are jittery over the status of quantitative easing. This is going to affect the Indian markets till some settlement occurs. Till then, volatility and uncertainty are likely to continue. Moreover, India’s rates will be decided upon today which will add to the volatility. Expect the day to be loose on direction and high on volatility till RBI’s decision is announced.