How Will The Markets Open Today?

The markets yesterday gained some traction after eight consecutive days of losses. Will the upward trend continue today? Are global and domestic cues conducive for gains on the markets today?

Fed Bank of Dallas President Richard Fisher said investors should not count on the Fed to continue its USD 85 billion bond purchase programme indefinitely. This resulted in some downfall on the US markets, which had been seeing a wave of optimism after last week’s announcement by the FOMC.

This was followed by the Institute for Supply Management announcing the non-manufacturing index which came in at 56% in July 2013 against 52.2% in June 2013. The economy has been showing consistent signs of recovery and the earlier comments of Fisher only got some validation, resulting in a rather lacklustre end for the US markets.

It was positive in Europe as the final reading of the purchasing managers’ index (PMI) came in at 50.5 for July 2013. This is higher than the preliminary reading of 50.4 and June 2013’s reading of 48.7. This gave a considerable boost to the European markets.

What also added to the optimism was the PMI from UK, where the index rose to a six and a half year high of 60.2 in July 2013 against 56.9 in June 2013.

While Europe has been positive and the US has been worrying, Asia has seen a weak opening. Japanese stocks are being weighed down by a strong yen, Australia has been lower ahead of the Reserve Bank of Australia’s policy meeting and Hang Seng is being weighed down because of poor results by HSBC.

Overall, global cues don’t seem very conducive of a strong session of gains. Yes, data from Europe is positive. But the US markets are clearly tiring out of their consistent gains. The Indian markets too saw gains yesterday with no major triggers in place.

One positive for the markets is the optimism that is likely to be created from the data released by the Department of industrial Policy and Promotion (DIPP) yesterday. According to the data, Foreign Direct Investment (FDI) into India increased by 24.2% year-on-year to USD 3.95 billion in April-May. The country had received USD 3.18 billion of FDI in April-May 2012. FDI inflows have a positive impact by supplementing domestic capital, technology and skills of existing companies as well as through establishment of new companies, Commerce and Industry Minister Anand Sharma said.

However, with larger macroeconomic problems and structural issues, we doubt this will prove out to be a positive trigger for the markets today. The rupee continues to remain sticky at higher levels and liquidity continues to remain tight.

The Indian markets, on account of no major triggers for the day, and on account of a strong bearish grip, are likely to see flat to negative trading today. Volatility is expected to continue on the same trend it has seen in the last few days.