US and China Soothe Nerves. Will The Nifty See Gains?

Economic data from the US has been upbeat and comments from China have soothed nerves. Put together this has led to a positive sentiment across markets in the US, Europe and Asia. Domestically, the SEBI has approved various measures to attract a larger number of foreign investors to Indian capital markets. Together, these seem to set a backdrop for the Indian markets that is conducive of gains. How will the markets react?

In the US, the Commerce Department said orders for goods built to last at least three years (consumer durables) rose 3.6% in May 2013 to a seasonally adjusted USD 231 billion. At the same time, another report said new home sales rose 2.1% in May 2013 to an annual rate of 476000. Also, the S&P/Case Shiller Index of home values rose 12.1% in April 2013, the fastest annual pace since 2006. Moreover, the consumer confidence index by The Conference Board increased to 81.4 in June 2013 from 74.3 in May 2013.

Clearly, there were multiple data points released in the US. All of them have been positive and caused a natural positive reaction on the bourses. The Dow, Nasdaq and S&P 500 rose by 0.69%, 0.82% and 0.95% respectively. The substantial indication towards recovery also spread positive sentiment in the European and Asian markets.

In China, a People’s Bank of China official said the central bank will guide interest rates to a reasonable range. This suggested a prospective end to the credit crunch that has been worryingly gripping on the Chinese markets. The official also said the recent volatility in money market interest rates is temporary.

These factors brought considerable relief in the markets and added to the positive sentiment globally. European markets ended the day positive in the range of 1.21% and 1.54%, showing strong gains and a rebound from a five-day sell-off. The Asian markets too have seen a positive opening. Japanese stocks too have seen a tepid boost because of a weakened yen.

Domestically, with an aim to attract a larger number of foreign investors to Indian capital markets, the SEBI approved wide-ranging changes in the way they operate here and made their registration and compliance requirements much simpler and easier. The SEBI board also approved merging different classes of investors such as FIIs, their Sub Accounts and Qualified Foreign Investors (QFIs) into a new category, Foreign Portfolio Investors (FPIs), to put in place a simplified and uniform set of entry norms for them.

Overall, global markets have been cheering to upbeat economic data from the US and some easing on account of the comments from China. The Indian markets are likely to follow suit and show some gains today. However, it is important to remember that today’s trading session is ahead of expiry and volatility is bound to persist. Although the start for today seems positive, volatility can lead to swings in market direction later in the day.