Wobbling About

Ahead of monetary policy decisions, investors and traders feel a rush of uncertainty. This is the feeling that is currently common across the globe. This week is a crucial one for global markets as the Fed, ECB, BoE and the RBI will all announce their monetary policy decisions. Cues will be picked up from their commentary and markets will see copious amounts of volatility, pre and post the respective announcements.

The Indian markets yesterday saw high amounts of volatility and drastic movement in rate-sensitive sectors. This trend is likely to continue today as well. There is much talked about the prospective moves of the RBI today. The central bank may choose to increase monetary tightening to curb the depreciation of the rupee, keep the status unchanged or ease some of the pressures that it recently added on the economy. The views are multiple and in various directions and speculation will result in directionless trading across the markets. However, the real short-term trend will be determined only once the policy is announced later in the day. We can, at this time, expect a firm trend to develop on the markets and continue through the day.

But this will not be the end of the story. Global markets have been excessively sensitive to the monetary policy adopted by the Federal Reserve and also to all kinds of speculation around it. For long, markets across the globe have been wobbling around, battling between the hawkish and dovish stances of various members of the Fed. Fed policy makers are scheduled to meet later this week and it is of no doubt that the markets will show some big moves post this.

Central banks in Europe and in the UK would also be meeting later this week, on Thursday. Yesterday, we witnessed jittery trading taking place in the US, Europe and in Asia. This trend is expected to continue today as well. Volatility will be high and a firm directional trend on the Indian markets can only be expected in the Indian markets post the announcement made by RBI. Till then, expect the markets to pointlessly wobble around.