Global Cues To Add Friction To Markets’ Up-Move

Globally the sentiment looks negative. While a slew of US data underpinned gains for markets in the US and Europe late last week, China seems to be adding downward pressure with the release of its manufacturing data. Moreover, the markets have again started to worry about the Fed’s tapering move. Amid these negative global cues, the mood domestically was definitely positive. The clearance of gas pricing norms and the government’s efforts to increase the inflow of foreign funds triggered heavy gains on the bourses.

With these factors in play, how does the day look for the Nifty? What will be the major cues affecting the markets?

In the US, the mood was positive last week as weekly jobless claims fell, personal spending and incomes increased and pending-home sales jumped. However worries around the monetary policy returned to weigh on the markets. Federal Reserve Governor Jeremy Stein suggested the central bank could start tapering its quantitative easing programme starting in September. This led to a downfall in US markets and European markets on Friday.

In China, an official gauge of manufacturing activity showed a slowdown in June 2013. Government data indicated the monthly Purchasing Managers’ Index (PMI) for June 2013 drop to 50.1 from 50.8 in May 2013. The HSBC PMI showed a trend no different with the June 2013 level dropping to 48.2 from 49.2 in May 2013. This data is likely to add to considerable downward pressure on global markets.

While global cues are negative, domestically the sentiment was positive due to measures taken by the government. The pressure from the currency front also seemed to ease a little with the rupee closing last week at 59.39 to the dollar.

While domestic cues seem supportive of an upward movement for today, uncertainty around automobile numbers will add to jitters. Moreover global cues will cap the amount of gains possible on the bourses as they will add to considerable friction.